Commonhold Reform: A Scottish Perspective

DOI10.3366/elr.2021.0675
Published date01 January 2021
Date01 January 2021
Pages94-100
Author
INTRODUCTION

Feudal abolition1 on 28 November 2004 is now receding into history. Yet in terms of the scale of its effect on Scottish land law, it came immediately to mind when I read of the Law Commission for England and Wales' recommendations for The Future of Home Ownership.2 These are contained in three separate but linked reports which in total run to nearly 2000 pages. They are:

Leasehold home ownership: buying your freehold or extending your lease;3

Leasehold home ownership: exercising the right to manage; and4

Reinvigorating commonhold: the alternative to leasehold ownership.5

On reading these titles, a Scottish property lawyer is likely to have a sharp intake of breath at the idea that a lessee can be said to have ownership. The glossaries to the three reports, however, explain that “freehold” is a “form of property ownership that lasts forever”. In contrast, “leasehold” is a “form of property ownership which is time-limited (for example, ownership of a 99-year lease)”.6 Thus, all is well again,7 for it is the lease that is “owned” and not the physical building.

The fact that many homes in England and Wales are held on leasehold has long been controversial. There are two principal reasons: first, it is time-limited and secondly, control of the property is shared with the landlord. The latter feature has a resonance again with the feudal system. For property developers, leasehold is attractive because of future rental income.

High-level policy decisions in relation to home ownership must be left to politicians. Thus, the UK Government has already committed to banning the sale of houses on a leasehold basis.8 For flats, however, there are big decisions still to be taken. Flats are the focus of the rest of this article. Here, as we shall see, reform of commonhold has particular significance. In Scotland, there may be lessons to learn. Our law of flats was substantially reformed (just as the feudal system was abolished) on 28 November 2004 by the Tenements (Scotland) Act 2004. Sixteen years on there are increasing calls for further legislative action in a country where flats account for 24% of the housing stock.9

CURRENT LAW

In England and Wales, flats are typically held on leasehold tenure. The principal reason for this is a major fault line between land law north and south of the border. In freehold tenure, English law is unwilling to accept positive obligations, such as a duty to maintain or to pay a share of maintenance, which bind successor owners.10 As the Law Commission notes, such “obligations are especially important for the effective management of blocks of flats”.11 In Scotland, however, this is possible by means of a real burden.12 In addition, there are default positive obligations of support and shelter under tenement law.13

To address this deficiency in English law, a new form of land tenure known as commonhold was introduced by the Commonhold and Leasehold Reform Act 2002. Under it, the flats in a building are individually owned, but the shared areas are owned and managed by a company run by the flat owners, known as the commonhold association. The day-to-day management in practice is contracted out to agents, in a similar way that factoring is common in Scotland. The principal advantages of commonhold are that the ownership is perpetual and there is no landlord to whom rent is due.

In practice, however, commonhold has been a failure. Research published in 2015 found that fewer than twenty...

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