Commonhold

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Chapter 10 Commonhold

10.1 THE COMMONHOLD SYSTEM

Commonhold is a statutory structure designed to enable positive covenants to run with freehold land. It is a system of communal ownership, influenced by the condominium system in the United States, by strata title in Australia, and by other similar structures, some called commonhold, elsewhere, but adapted to English practice. It is designed to apply to any arrangement for shared maintenance, whether of a block of flats or offices, a housing or commercial estate or a parade of shops. To date it has not been widely adopted and the government has asked the Law Commission to advise on ways in which the system could be improved; it is now under review by the Commission.¹

The scheme is comprised in the Commonhold and Leasehold Reform Act 2002, Part 1, together with the Commonhold Regulations 2004²and the Commonhold (Land Registration) Rules 2004.³A standard articles of association and standard Commonhold Community Statement (CCS) are scheduled to the Regulations.

The commonhold comprises two types of property, both freehold with registered titles. One is the individual unit such as a flat or house or warehouse or shop or office. That is owned by one or more individuals or by any entity capable of owning land.

The other is the common parts which are owned by the commonhold association and are used for the benefit of the members of that association. That could include the roof, foundations, entrance hall, landings and corridors of a block, any shared facilities, such as a meeting room or restaurant, a car parking area, communal

¹Reinvigorating commonhold: the alternative to leasehold ownership (Law Com Consultation

Paper 241) (2018).

²SI 2004/1829, as amended by the Commonhold (Amendment) Regulations 2009 (SI 2009/2363).

³SI 2004/1830.

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116 Positive Covenants and Freehold Land

gardens or a swimming pool. The association is a limited company whose members are the owners of the units in the commonhold. The CCS and the articles of association of the company have to contain certain obligatory provisions laid down in the Regulations. They will also include other provisions specifically drafted for the circumstances of the particular commonhold. These together constitute the governing documents and create a local law for the block or estate. The legislation provides for maintenance of the common parts and for a service charge.

The commonhold will normally be designed as such by the initial developer. Although it is possible for an existing, usually leasehold, arrangement to be converted to commonhold, that needs the consent of everyone affected including mortgagees, so it is unlikely to take place. There has been very limited uptake of commonhold⁴partly because it is unfamiliar but partly because of some defects in the scheme. It is understood that many lending institutions are unwilling to take mortgages on commonhold units until there is evidence of a market and a market is unlikely to emerge until buyers can be confident that mortgages are available.

10.2 MAINTENANCE AND INSURANCE

Obligations on the unit holder and the association in the nature of positive covenants are enforceable under the Commonhold and Leasehold Reform Act 2002, s 14. It is headed ‘Use and maintenance’ and provides:

(1) A commonhold community statement must make provision regulating the use of commonhold units.

(2) A commonhold community statement must make provision imposing duties in respect of the insurance, repair and maintenance of each commonhold unit.

(3) A duty under subsection (2) may be imposed on the commonhold association or the unit-holder.

Regulation 15(1) says, ‘The commonhold community statement must be in the form in Schedule 3 (commonhold community statement) or a form to the same effect’. The standard CCS, paragraphs 4.5 and 4.6 provide that the association must maintain the common parts and not alter them. Paragraph 4.5.2 says, ‘The duties imposed by this CCS in respect of the repair and maintenance of the commonhold unit are specified in paragraph 7 of annex 4’.

⁴Law Commission, Commonhold: A Call for Evidence (22 February 2018) at para 1.12.

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Section 26(b) and paragraph 4.4 provide that the association must insure the common parts. The CCS, paragraph 4.4.6 provides, ‘The duties imposed by this CCS in respect of the insurance of the commonhold unit are specified in paragraph 6 of annex 4’. Annex 4 is headed ‘Local Rules’, and contains box 6 headed, ‘Insurance of commonhold units – duties’ and box 7 headed, ‘Repair and maintenance of commonhold units – duties’. These boxes seem to be the paragraphs in question. In the text the boxes are blank, leaving it to the draftsman of each CCS to devise suitable wording.

Unlike the detailed provisions for the service charge, the drafting of positive covenants to take action has been assigned to the private sector. As well as maintenance and repair these might include obligations such as to keep a nameplate or, for a parade of shops, to open at specific times. If commonhold ever becomes acceptable there is likely to be a long evolution of these provisions.

There is however government guidance. The Department for Constitutional Affairs issued Guidance on the drafting of a Commonhold Community Statement including Specimen of Local Rules in February 2005. It suggests various forms of wording such as:⁵

7. Repair and maintenance of commonhold units – duties
The unit-holder must repair and maintain the unit. This includes decorating it and putting it into sound...