We are beginning to see substance put on the bones of what Sajid Javid meant in December 2017 when (as Secretary of State for Communities and Local Government at the time) he said the government will “create a system that actually works for consumers“, with proposals being worked on by the Law Commission to change the residential leasehold system.
The Law Commission has created discussion proposals which are currently very much in the design phase, to enable commonholds to be created on mixed use developments. This would resolve the difficulties currently presented by this form of tenure which include:
- standard form affordable housing tenures not being available;
- commercial lettings not being viable within a commonhold; and
- concern over the effects of insolvency of a commonhold association.
The Law Commission’s proposals include layered commonholds, where one commonhold could sit above another so splitting management of different parts of a building or development, and also a commonhold with different levels of membership to allow different occupiers to contribute only towards those services they use within a development.
We are very supportive of these proposals. They are not a universal panacea for all the shortcomings of the current residential leasehold structure. For example it remains to be seen whether the reforms will address lender concerns over the effect on security of the insolvency of the Commonhold Association. They are however the start of a sensible and workable response that must be combined with other elements of reform such as the regulation of managing agents and reforms to unfair practices involving event and notice fees.
We are gathering views from interested stakeholders and will be commenting further as the Law Commission provides more details on its proposals. If you have any comment or would like to discuss how the proposals could affect you, we would be delighted to hear from you.