UK: Reinvigorating Commonhold

Last Updated: 8 March 2019
Article by Emma Ridge

Suggested response for community-led housing groups on the consultation paper – submissions due by 10 March

The Law Commission has issued a formal consultation paper on commonhold to which you will no doubt respond "what is commonhold?". Commonhold was introduced in 2002 as an alternative to leasehold and was expected to be the next big thing. It allowed for the creation of individual freehold units, with common parts owned communally. It offers several advantages over leasehold, but the original legislation contained a number of perceived problems that meant it was never taken up in practice.

As a result, only a handful of commonhold properties have been created since 2002 and the Law Commission is looking to address the issues, or assumed issues, that prevented the largescale take-up originally envisaged. This is being done in conjunction with the work on the proposed ban on new leaseholds and the simplification of enfranchisement. It seems the government is looking to update property law for the twenty first century!

Commonhold ought to be a good option for community-led housing (CLH) groups as it allows for property to be held communally. However, we think that without greater flexibility on the governance structures, it may not be a workable option for all CLH groups. We have prepared a suggested response and anyone who would like to respond is welcome to send in a similar response. Comments should be sent to propertyandtrust@lawcommission.gov.uk

Consultation question

Response

Question 36

We provisionally propose that event fees should be prohibited within commonhold except for any specific circumstances expressly permitted by statute.

Community-led housing (CLH) groups some times make use of events fees, not to profiteer, but to put money back into the group so that the group can provide financial support/affordable housing to its members.

It would be a shame to prevent this public good because of a blanket ban. Please see our response to question 68 as to why we think CLH groups should be an exception to the proposed ban on leases over seven years – the same reasons hold good for providing an exception to the ban on event fees.

Question 37

We invite consultees' views as to whether any further restrictions should be put in place to limit which local rules may be added to the CCS.

We do not believe that there should be any further restrictions put in place in respect of the local rules.

The current prescription in respect of both the commonhold association and the local rules is one reason why CLH groups often find it difficult to make use of the commonhold structure. We understand that a prescribed form is a good thing in many circumstances, not least because it simplifies processes and provides uniformity. However, CLH groups are very rarely uniform!

For instance, the requirement that there should be no restrictions on the transfer of a unit by an owner can cause particular problems for some CLH groups. Although some CLH groups do not wish to restrict who can join them, others do. Some groups require, for example, the ability to restrict the sale of a commonhold unit to those who wish to positively join their community. To give an example, any LGBT+ community would soon face destruction if occupiers could sell to anyone. We would urge greater flexibility if commonhold is ever to work for CLH groups. As it stands, the prescriptive nature of commonhold makes it difficult to work for them.

Question 68

We invite consultees' views as to whether an exception to the ban on residential leases over seven years is needed to accommodate better community land trusts and co- operatives within the commonhold model.

We believe that a complete exception on the ban on leases over seven years for co-operative societies and community land trusts is necessary if the commonhold model is to work for them.

Both community land trusts and co-operative societies need the ability to control who their members will be if they wish to; if they could not do so, they would no longer be co-operative societies or community land trusts (see the Co-operative and Community Benefit Societies Act 2014 for the requirement of a co-operative society and section 79 of the Housing and Regeneration Act 2008 for the requirements of a community land trust).

Many community land trusts are set up with the intention of providing affordable housing in perpetuity – if they cannot prevent a resident selling on their unit to whoever will pay the highest price, then they will fail in their whole purpose. They need to have the flexibility to allow people to occupy the housing they provide and to be able to offer them long term occupation for security's sake. How can this be achieved within commonhold without a lease? Other CLH groups will have similar issues.

We struggle to see how the necessary control can be achieved through commonhold alone; so unless the model of the commonhold association is fundamentally changed then such control can only be through leasehold covenants. Unless community land trusts and co-operative societies can create leases within a commonhold structure, without restriction, we believe commonhold will be unworkable for them.

We also believe that any exception should cover a broader range of CLH bodies, not only the community land trusts and co-operative societies mentioned in the consultation paper. Rather than repeating submissions already made in relation to the ban on new leaseholds and the proposed changes to enfranchisement, we would suggest that if an exception is made, it should be consistent with any exceptions for CLH groups in relation to the proposed reforms for new leaseholds and enfranchisement.

We applaud the removal of the evils that commonhold seeks to address. However, these evils do not affect CLH groups:

  • The landlord is democratically controlled by the residents in a CLH group, so there is no landlord/tenant tension.
  • The residents can fix their own ground rent so there is no opportunity for profiteering.
  • Although the right of forfeiture exists, this is a remedy that could only be used via the democratic process involving all residents. We have never known it be used and although it is theoretically possible, it would be remedy of last resort and only done to protect the very community that a tenant had chosen to join.

It is for all these reasons that we feel all CLH groups should be granted exceptional status. They should not be forced to use a model that could undermine their community and offers no benefits.

The commonhold model does not cater for the fact that CLH groups are more than mere land ownership vehicles. Members and residents buy into a whole community with all its quirks and humanity. The commonhold model as proposed is too narrow to accommodate this and would prevent these groups from creating the community theywish to.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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