The government is being urged to make commonhold ownership compulsory on all new apartments - and the move could even begin a long-term phasing out of the increasingly controversial leasehold tenure.
The call comes from the Leasehold Solutions Group, ahead of the upcoming publication of the Law Commission’s report looking at alternatives to leasehold ownership.
“Freeholders currently make billions from the leasehold system, whereas if flats were built as commonhold there would be no ground rents due, no fees for licences and permissions, no finders fees for building insurance, no admin fees to pay and no fees for lease extensions; in short, no pay day for fat cat freeholders” says Louie Burns, Leasehold Solutions Group managing director.
Burns says that when developers build a new block they often sell the freehold to investors, who may significantly hike charges.
“Developers and freeholders are the architects of the onerous leases that allow them to make vast profits and blight the lives of millions of leaseholders. Commonhold would reduce freeholders' capacity to profit from the exploitation of leaseholders, therefore unless commonhold is made compulsory it will never become a workable replacement for leasehold” Burns continues.
Commonhold allows the purchaser of a property to own a freehold unit, such as a flat, without any kind of time limit on that ownership - as opposed to leasehold properties, which are leased for a set period of time from the freeholder.
Commonhold properties are exempt from ground rent and, according to the Leasehold Solutions Group, owners enjoy more direct control over how service charges are paid for and spent.
This kind of tenure also avoids the expense of having to extend a lease, or the problems of selling a property which doesn’t have many years left on its lease.