Ultimate guide to commonhold

Major shifts are incoming for the property management and flat ownership sectors. Commonhold represents a significant departure from traditional leasehold, offering unit holders ownership of their individual properties and collective responsibility for shared spaces and the land the building sits on. 

While commonhold theoretically offers the promise of greater control and democratic participation in building management, albeit it akin to Right to Manage or enfranchisement, its adoption has historically been limited in the UK. However, with recent legislative changes and a renewed governmental push to make it the standard for new-build flats, understanding commonhold is more crucial than ever.

Ultimate guide to commonhold

What is commonhold?

A commonhold is a type of homeownership developed in place of a long leasehold. Introduced in 2002, the intention  was  to improve rights and conditions for flat owners by replacing third party landlords. 

Owning a commonhold to a property (or unit) within a house or block was equivalent to owning the freehold to it. Unlike leaseholds, there was no limit to how long someone could own a commonhold for. A commonhold automatically made a person part of the building’s commonhold association (CA) and the freehold of the building’s communal areas were split equally between CA members.

How commonhold works

A commonhold, which can be a new or existing building or undeveloped land, is established when freehold land or a freehold building is registered at the Land Registry as a commonhold. 

Commonhold land's freehold estate is divided into units and common areas. Units can be flats, business premises (offices, restaurants or shops), or even garages and parking spaces. The Land Registry will issue a registered title for each unit and the common parts. 

Unit holders will own the freehold of their individual units, allowing unrestricted sale or transfer. That said, the sale of the unit can be enforced by the CA for non payment of debts, somewhat similar to forfeiture in leasehold. Forfeiture refers to the termination of a lease and the reversion of property ownership to the landlord, but a crucial feature that can be improved in leasehold legislation is that the funds received from forfeiture should be used to pay any outstanding debts, but the balance should go back to the unit owner, which isn’t always the case at the moment.

In a commonhold, the common parts encompass all areas of the building not part of an individual unit. For instance, in a commonhold block of flats, these typically include the building's structure (walls, roof, lift, stairs), shared spaces like corridors and entrance halls, gardens, pathways and the car park. The commonhold association holds the freehold of all these common parts.

The commonhold association operates as a limited company, registered with Companies House, and is governed by its articles of association. These articles, which can be inspected at both Companies House and the Land Registry, are mandated by the Commonhold Regulations 2004, as updated by the Commonhold (Amendment) Regulations 2009, and outline the responsibilities of the commonhold association. 

The commonhold association is bound by the Commonhold and Leasehold Reform Act 2002, the Commonhold Regulations 2004, and the commonhold community statement (CCS). The CCS serves as a comprehensive document, similar to a lease for traditional freeholds and leaseholds, but applies to the entire building rather than individual units. 

Key elements defined within the CCS include:

  • The physical boundaries of each unit and the common areas. 
  • The percentage of running costs each unit-holder is responsible for. 
  • The duties and obligations of both the commonhold association and each unit-holder.
  • Upon registration of the commonhold association's title, the CCS will also be registered at the Land Registry.

The commonhold assessment, determined by the CCS, represents the estimated total cost for the management, maintenance, repair, and insurance of the building. This assessment may also include contributions to one or more reserve funds. 

In certain commonholds, unit holders contribute additional fees to a reserve fund. These funds are held until required for significant, infrequent projects like exterior redecoration or the replacement of a lift, boiler, or roof. This approach allows the cost of major works to be distributed over several years and is the same as reserve funds found in leasehold. 

The commonhold association will request payment from unit holders in accordance with the percentage outlined in the CCS. 

The owner of a freehold flat’s property rights will be subject to limitations. They are required to follow the rules specified in the CCS. These rules, which are similar to standard lease restrictions, may include provisions on letting, alterations, and nuisance. This control is important as commonhold still concerns communal living, and alterations such as removing load bearing walls or fitting wooden floors can negatively impact other residents. 

Commonhold owners will, if they choose, be able to have a direct say in decisions about the building's management. The commonhold association will manage the building, much like a landlord in a leasehold system. However, as a unit holder, they will be represented in this association, allowing them to express their views on management. 

Commonhold operates on the principle that unit holders collectively own and manage the shared asset, which is the building. Therefore, each unit holder is expected to engage in decision-making, attend, and vote at commonhold association meetings. This self-management approach means that unit holders will not have many of the legal rights and protections typically afforded to leaseholders. The administrative effect upon managing agents of having to run votes on all matters is a side effect of this democracy. 

 

The history of commonhold

First proposed as an idea in 1987 by The Aldridge Report, commonhold was introduced into English and Welsh law as an alternative to leasehold via the Commonhold and Leasehold Reform Act 2002. Its primary purpose was to enable the freehold ownership of flats, though it can also be applied in a commercial context, such as to individually-owned offices in an office block. 

Under commonhold, each resident owns their flat, or freehold unit in a building, with all freeholders in the building being jointly responsible for the management of the shared parts, such as corridors, lifts, stairs and entry hallways. 

Unit owners form a commonhold association, a private limited company in which each unit owner automatically becomes a member. Each member gets a vote on how the building is run. The association decides rules for the building and how it is managed, commonly by appointing managing agents and contractors. In a document called the “commonhold community statement” (CCS), the rights and obligations of the association and unit owners are set out. 

However, commonhold had previously not taken off in the UK. Only circa 16 buildings, all relatively small, have so far been registered as a commonhold, with the vast majority of flats in England and Wales being owned on a leasehold basis. 

 

Commonhold around the world

Australia

Similar ideas to commonhold exist around the world and have enjoyed much greater levels of uptake, most notably in Australia via the strata title system. Strata title was introduced in New South Wales in the 1960s as a result of an explosion in post-war apartment buildings to address housing shortages. It was quickly accepted due to there being no workable alternative system for outright apartment ownership. The other Australian states eventually adopted their own strata schemes, and as of 2020, 9% of the Australian population lived in strata apartments. 

United States

In the United States, commonhold residences are known as condominiums and have become one of the most popular ways to purchase apartments. Like in Australia, they arose from a need to address a housing shortage combined with high land costs. Prior to the introduction of condominiums, apartments could only be purchased in the United States through a cooperative structure. In this structure, a company owns the whole building, including its apartments and common areas. Individuals are granted the lease for their apartment and become stakeholders in the company. 

Legislation for condominium ownership was first introduced in 1958 in Puerto Rico. By 1966, all 50 states had adopted their own legislation. Due to a preference for outright ownership and their affordability compared to other property types, condominiums are now commonly found across the United States, though cooperatives remain prevalent in areas with high costs of living, such as New York City.

Scotland

Scotland uses the concept of heritable ownership, which is similar to freehold, for flats, often combined with rights of common ownership or servitude rights for common areas. While the Commonhold and Leasehold Reform Act 2002 introduced commonhold in England and Wales, it is not applicable in Scotland. 

A May 2019 Royal Institution of Chartered Surveyors (RICS) survey revealed that building stock in Scotland, operating under a form of commonhold, was in a poor state of disrepair. Consequently, measures were proposed to improve building maintenance. These proposals included mandatory owners' associations and provisions for adequate reserve funds, similar to those suggested for the new commonhold model in England and Wales.

Developments in the UK

A consultation by the Law Commission in 2016 identified commonhold as one of the areas of the law the public would like to see reformed as part of the Commission’s Thirteenth Programme of Law Reform. The first stage of this project, a call for evidence from existing commonhold unit owners, those who manage commonholds, developers and other property professionals, was published in February 2018. The survey asked these groups for their experience of commonhold and what shortcomings in the law could be making it unattractive to homeowners and the property industry.

 

Commonhold Council

On 13 May 2021, in light of the report, the Government formed a Commonhold Council for the purpose of advising on the implementation of a reformed commonhold regime and bringing forward solutions to prepare homeowners and the market for the take up of commonhold.

 

What is changing in legislation now?

The Government announced in March 2025 that it has plans to begin abolishing the “unfair feudal” leasehold system and create a law meaning all new-build flats will automatically become commonhold. 

It means buyers will own the freehold of their flat, while a commonhold association, managed by the owners, jointly owns and manages the shared areas. 

 

Pros and cons of commonhold from a managing agent perspective

Pros

Managing agents will be directly accountable to residents for how their money is spent.

The introduction of a consistent Community Charge Statement will replace unique leases, though minor adjustments may be needed for specific building amenities (e.g., a gym).

This approach may foster a more unified sense of community within residential blocks. 

Cons

It necessitates a significant learning investment. Staff proficient in commonhold will be highly sought after as the system expands. 

The process of converting to commonhold needs clarity. Will it be a sudden, complete shift or a gradual, hybrid approach with both commonhold and leasehold properties? 

Managing the intricacies of different property sectors within the new commonhold hierarchy will be a challenge. 

A potential period of landlord inactivity or the need for re-tendering could arise if the leasehold system collapses before commonhold is fully established. 

Commonhold associations will likely be governed by lay boards unfamiliar with the law, leading to slow decision-making due to members having day jobs, with meetings often held in the evenings and infrequently. 

A focus on short-term expenditure might lead to resistance on longer-term projects, such as communal boilers, potentially resulting in a build-up of larger, more costly expenses over time. 

Management associations will likely be responsible for overseeing the voting system and handling any resulting disputes or fallout among owners. 

There's a risk of owner disappointment if service charges don't decrease as anticipated. 

Conversion of existing buildings will require the building owner to be compensated. Although some people may be happy to pay for the right to manage their own building, that is unlikely to be a universal position. And what happens if someone cannot pay to buy out the freeholder? The Government has already stated that a mixed commonhold/leasehold model in a building is unworkable, but it has also made clear that taxpayers money will not be used to buy out landlords where leaseholders cannot pay. So the route for legacy stock to convert is unclear. See “Who pays to convert...” below. 

If commonhold proves to be more popular than leasehold, the latter will suffer a discount, negatively affecting the flat values of 5m leaseholders.

The proposal here is to establish “sections”, whereby any discreet part of the building (a separate block, the car park, common areas  etc) will have their own section, overseen by a commonhold committee. This enshrines the principle that only those who pay the bills for that section will have a say in what those bills will actually be. The likely issues here will concern finding enough people to staff the committees, plus the administrative cost of running a separate committee, along with separate budget, votes etc, for each section. 

Under leasehold, a tenant can choose to stay with a landlord looking after the block or they can choose to enfranchise and own the block themselves or even right to manage and just take over the operation. They could then choose to reverse each process if they want. However, under commonhold the tenant has no choice. They have to own and run it themselves and there is no backup.

Will the move to commonhold reduce service charges?

While there is a general assumption that by having a direct say in costs, tenants will be able to bring service charges under control, this is unlikely to be the case based upon current data. Buildings inevitably age, regardless of the ownership structure—commonhold doesn't prevent lifts from breaking down. The question then is whether third-party landlords impose unnecessarily high service charges on leaseholders. 

To investigate this, TPI analysed data from 250,000 leaseholders in blocks of 10 or more flats, comparing those with a third-party landlord to those with owner/occupier management groups like RMCs/RTMs. The findings showed little difference in cost between the two structures. Third-party landlord costs were marginally lower at £2,140 per year, compared to RMC/RTM costs of £2,190 per year. In essence, while commonhold may not necessarily lower service charges, it could provide greater transparency regarding how these charges are determined, although recent proposals in leasehold to legislate for a standard chart of accounts for service charges would provide the same.

 

Who will run the commonhold?

The Government's own research showed that most flat owners are not interested in spending their free time managing their block, and those that are wish to do so solely to reduce their service charges (but see above). Buy-to-let investors, which in urban areas quite often form the majority of the flat owners in a block, are typically even less interested than owner/occupiers. This raises the question of where directors will come from, especially given the potential for imprisonment under the Building Safety Act. Without directors, the company would collapse under Company Law. 

A common suggestion is to appoint external directors to run the block on the residents behalf. But unless the residents take an active role this rather contradicts the core arguments for commonhold in the first place and will likely prove expensive.

 

Commonhold community statement (CCS)

The Commonhold Community Statement (CCS) is the foundational document for commonhold properties, outlining the rules for their use and management. It mandates financial contributions from unit-holders for building upkeep and enforces restrictions and obligations regarding the use of individual units and common areas.

 

What does the CCS do?

The CCS is a legally binding document that outlines the rights and responsibilities of unit-holders, tenants, and the commonhold association. Its format and most of its content are prescribed by Commonhold regulations, with certain requirements that must be included in every CCS. The CCS defines the units and common parts of a commonhold by referencing a building plan. It also outlines the financial obligations of each unit-holder, specifying the percentage of both the overall running costs and any separate reserve fund charges they must pay. Additionally, the CCS assigns voting rights to each unit-holder and establishes the operational rules for the commonhold. 

While a commonhold association can add extra conditions relevant to the individual commonhold, these must not amend or delete any prescribed conditions. Any additional conditions must be clearly headed with "additional conditions specific to this commonhold" and placed at the end of the relevant section or part of the CCS. 

The CCS, along with the title documents for the commonhold, must be registered at the Land Registry to be effective. This registration ensures that all current and potential unit-holders have full access to the document. Similar to a lease in a leasehold property, owning a commonhold unit establishes rights, obligations, and responsibilities detailed within the CCS. However, unlike leasehold properties, a commonhold has no separate leases for individual flats; the CCS is a single document applicable to all units within the commonhold.


Who pays to convert a block to commonhold?

Acquiring a commonhold isn't free as it requires buying the freehold. Leaseholders may be compelled to pay, whether they wish to or not, to convert to commonhold.

 

How is a commonhold property managed?

When a property, such as a flat, is bought in a commonhold, the buyer becomes a ‘unit owner’. All unit owners are entitled to become members of the commonhold association, which owns and manages the common parts of the building or estate. These include the external and structural elements of a building, plus shared areas like roofs, lifts, and external walls. 

The commonhold association has at least two directors, which can be unit owners or external professionals. They decide how much money unit owners will need to contribute to cover the costs of repairing and maintaining the commonhold. As well as this, the directors can decide to manage the building themselves or appoint a managing agent to do this on their behalf. 

Unit owners can participate in the commonhold association and vote on decisions such as whether to make building improvements or who to appoint as a director. 

The commonhold association must have “articles of association” which govern how it operates. These articles, along with the CCS, define how the association is run and the obligations of both the association and unit holders. The articles are prescribed by the Commonhold Regulations 2004 and must comply with the Companies Act 2006. 

The CCS sets out the rights and obligations of a unit owner. While there is some flexibility to change these rules and update them over time, they are generally standardised across commonhold properties. 

Managing the finances and operations of larger residential blocks, especially those with complex structures like commercial offices, shops, or multiple buildings, presents a bigger challenge. The proposed solution of "sections"—discreet parts carved out of the commonhold—aims to address this by legally facilitating fractional living, ensuring everyone has a say in their specific costs. 

However, each section will require its own budget, decided by a vote. This means managing agents, who previously dealt with a single landlord or Right to Manage (RTM) company, will see their administrative workload multiply, leading to a commensurate increase in costs. 

 

How can it be ensured buildings are being maintained well?

The Government aims to improve residential building standards, focusing on aspects like safety and environmental efficiency. However, many blocks, especially in major cities, are predominantly composed of buy-to-let flats. A significant number of leaseholders, particularly buy-to-let landlords, prioritise short-term returns on investment. The introduction of commonhold-type structures in Scotland and Australia has been linked to a notable decline in building maintenance.

 

What is a commonhold association?

The commonhold association has at least two directors, which can be unit owners or external professionals. They decide how much money unit owners will need to contribute to cover the costs of repairing and maintaining the commonhold. As well as this, the directors can decide to manage the building or appoint a managing agent to do this on their behalf.

 

How are disputes resolved in commonhold properties?

If a dispute arises between unit owners, or between a unit owner and the commonhold association, parties must follow the commonhold dispute resolution procedure for commonhold. This is set out in the CCS and should occur before taking any legal action. Doing this encourages parties to engage in communication to resolve disputes rather than going straight to court, hopefully reducing the need for the latter. 

However, if it is an emergency situation such as the unit owner failing to make a payment, the dispute resolution procedure does not need to be implemented. Instead, the commonhold association can take direct action, which may include contacting the unit owner, issuing notices, and potentially pursuing legal action, including a forced sale, to recover the outstanding payment.

 

Final thoughts

As the legal landscape continues to evolve, commonhold is being set to become the standard for new multi-occupancy buildings in England and Wales. This transition promises to engage owners far more in the day to day running of their blocks.

Fixflo can help! Book your no-obligation quote today. 

 

Keep reading...

Be the first to hear about new content for Property Managers.

eBooks and webinars, always free

  • Data-driven industry insights
  • Compliance and legal updates
  • Property management best practices