There are several benefits to buying on a commonhold basis, most of which boil down to avoiding the negatives of leaseholds. Firstly, you don't have to pay ground rent, a charge imposed by freeholders, which has little purpose beyond the satisfaction of a contractual agreement. Many freeholders came under fire last year for imposing onerous ground¬ rent clauses in leasehold agreements which increased charges over the duration of a leasehold to unsustainable levels.
Next, you avoid 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. Finally, you get a say in the maintenance of the building, meaning you will (hopefully) know that you are not being overcharged for repairs, a complaint often levied at freeholders. (And if you'd rather not do this yourselves - coordinating such work in a block of flats can be tricky -you can always agree to outsource it to a managing agent.)
It was assumed that, once in place, commonhold would become the standard form of tenure for new-build blocks of flats, note Wendy Wilson and Cassie Barton in a government briefing paper on the subject. But "in practice, it has failed to take off". Why? Firstly, as conversion from leasehold to commonhold requires unanimity from everyone with an interest
the property, it has proved difficult to convert blocks. Secondly, developers have not been keen to build new commonholds, as there are no incentives to do so - indeed, the opposite is the case, as housebuilders can make a great deal of money from selling flats on a leasehold basis (through not only the service charge and ground rent, but also through selling on the freehold to a freehold investor).
Time For A Change
The Law Commission has appealed for anyone "with an interest in commonhold" to submit their opinions as to why the structure has failed to take off, and what changes to the law might make it more popular. We suspect that wider awareness would help -commonhold is clearly a superior form of tenure for the average homeowner. Yet it's unlikely that house hunters will see any big changes in the near future. Although the government plans to ban the sale of new-build leasehold houses and the use of ground-rent charges above zero, this won't stop developers from selling leasehold flats. The development of commonhold blocks is unlikely to rise until builders get an incentive or a legislative nudge from the government to do so.
If you are a leaseholder and also have part ownership of the freehold, or a freeholder of a block, we suggest you talk to your fellow owners and seriously consider a commonhold arrangement.