Commonholds are a relatively new way of holding property and will be attractive to some flat owners who wish to take the ownership and management of the freehold of their block of flats out of a management company. They may also become increasingly common in new developments of community housing and blocks of flats.
To set up a commonhold, a Commonhold Association (CA) (which is a company limited by guarantee) must be set up with a ‘Community Commonhold Statement’ (CCS) which sets out the rights and responsibilities of members. The CA must be registered with the Registrar of Companies. Only leaseholders are allowed to be members of the CA once the development is occupied. The CCS cannot restrict the right of any member to sell or mortgage their property, although there may be restrictions on letting a residential commonhold. Normally the CCS will be created by the developer and can be altered until the first unit is sold. After the first unit is sold, the CCS cannot be altered, so developers will normally reserve their rights in an annexe to the CCS.
A commonhold may only be set up if the land in question is registered land. Once the commonhold is formed, the CA becomes responsible for its management. Although this is normally contracted to property management professionals, the ultimate responsibility lies with the directors of the CA.
The complexdity of the law relating to commonholds has meant that few have been set up. That was one of the reaosns for the Government's December 2017 decision to launch a review of the commonhold and leasehold sector in the UK