The Benefits to Leaseholders from Commonhold Reforms | BRAC Developments

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The Benefits to Leaseholders from Commonhold Reforms

10.09.2020

On 21st July 2020, the Law Commission of England and Wales published a set of recommendations that could transform the homeownership status of millions of people across Britain. The new rules, if enacted, would change the nature of the leasehold relationship tenants have with landlords, moving them over to a commonhold model.

What Is Commonhold?

Currently, most flats that people buy in England and Wales are leasehold. This means that ownership of property reverts automatically to the landlord when the lease expires unless the tenant pays to extend it, which is expensive under the current rules. Commonhold is a different system where rented units, such as flats, are freehold, and then the general buildings and maintenance are the joint responsibility of the flat owners.

Why The New Recommendations Are Important

The new reforms complement the government’s fit-for-purpose homeownership initiative. Under the proposed regime, England and Wales would see a reinvigoration of commonhold laws, allowing people to hold on to their flats forever, receiving freehold title from the landlord. There would also be an option to replace the leasehold for new homes and apartments with freehold making it easier to convert to commonhold.

Potentially, therefore, we could see an elimination of the negotiation and payments many flat owners must endure when trying to extend the lease on their properties with their landlords. The proposed scheme would define individual flats within a larger building as units. The residents would then form an association for the upkeep of the structure as a whole, negotiating ongoing costs among themselves. Under the new regime, landlords would have significantly less power to set terms.

The Potential Benefits Of The New Recommendations

The Law Commission of England and Wales argues that many of these reforms are necessary. During the research phase for its report, the agency discovered leaseholders faced many problems under the current law. Public consultation revealed something similar. Nick Hopkins, the commissioner for property law, said that flat buyers feel like they do not truly own their property when it is leasehold. They take out a mortgage on a home – which is how freeholders gain permanent ownership status over their houses – but they still have to pay the landlord periodic fees.

Commonhold should, in his view, be the preferred system. Reforms would provide a better deal for leaseholders and make their homes work for them, instead of the landlord.

The proposed changes in the law could significantly alter the experience of the average leaseholder if they become law. For instance, leasehold extensions could be as high as 990 years under the proposed scheme, instead of the current 50 or 90 years. The changes would also protect leaseholders from procedural traps or from having to pay unreasonable ongoing payments. The Right To Manage report suggests that flat owners get more rights over how much they pay to manage buildings.

These changes mean that it is now easier than ever to use BRAC Developments’ services. Under the proposed laws, not only will unitholders have more decision-making power to choose when to refurbish existing buildings, upgrade external facades and communal areas, but they could even look at developing roof space.

Why not let BRAC Developments help you to release the biggest asset you have right now.

We realise the potential of your building’s roof space and specialise in the redevelopment of flat roofs above existing residential and commercial buildings.

Get in touch today to discuss your project. Why not call us on 01268 573933 or send a message to enquiries@brac-contracts.co.uk. Further information about our full service range can be found on our website.