Co-operative living through commonhold


Feb 2001
Commonhold and Leasehold Reform Act                                                                                              
“Commonhold is a tried and trusted means of managing co-operative  living all over the world,” said Lord Bach, Parliamentary Secretary at the Lord Chancellor’s Department  when presenting the new  Commonhold and Leasehold  Reform Bill  to Parliament last month.  Though new to the UK, common hold has existed  in Australia and the US for many years. In Australia commonholds are called strata tenures while the US term is condominion.Residents jointly own and manage the common parts of their blocks of flats,but they differ from housing co-ops in that everyone owns their own individual  flat.   Under the new Bill, tenants will be able to form commonhold associations associations through which they will jointly own and manage the common parts of their buildings, and they could also buy the freehold.  Under commonhold, there are no leases and no landlords as the tenants own the freehold, but everyone involved has to agree in advance.  
Unlike consumer co-ops, commonhold associations will be companies limited by guarantee.  The government decided on this structure rather than that proposed in the Conservative government’s abortive 1990s attempt at leasehold reform.  The introduction of commonhold does not end leaseholding but will hopefully be the first stage in the phasing out of the system that is archaic, unfair and does not exist anywhere outside England and Wales.
  Once commonhold becomes established, most new developments will probably be sold as such.  People won’twant to buy leasehold properties as their value diminishes with time.  This has already happened with new houses, which in most new developments are sold freehold.  Prior to the introduction of commonhold, the only other way for tenants to join together to buy the freehold was by collective enfranchisement-- complicated and with all sorts of restrictions.  If landlords did not wish to sell, they could place difficulties in the tenant’s path and as tenants had to pay the landlord’s legal fees as well as their own, many became daunted at the prospect and simply gave up.  
Thus very few flat dwellers ended communally owning the own, many became daunted at the prospect and simply gave up. Thus very few flat dwellers ended communally owning the freehold of their flats.  As commonhold depends on unanimity it is not a solution to dealing with bad landlords.  Due to legal complications few tenants will be able to convert their flats to commonhold, but the Bill does ease some problems.  Even so it will still be difficult for tenants to achieve common ownership.  
So how do we deal with rogue landlords? The second part of the Bill provides the answer -- leasehold reform, with leaseholders given powerful new rights. They can challenge the service charges and, if they are unhappy with how the landlord is running the property, they can have a new right to manage (RTM) their buildings.  Tenants form a not-for-profit RTM company -- a co-operative in all but name-- and decide the level of service charges and repairs for themselves.  They don’t have to pay the landlord any compensation or prove any negligence. 
If people can’t afford to buy the freehold the Bill will make it easier to extend leases.  It will be more difficult to evict people and if their leases run out, they have to be given assured tenancies.  All these reforms were promised in Labour’s manifesto at the last General Election, but leasehold law is very complicated and consultation has taken a long time.  But it was important to get it right.  Housing Minister Nick Raynsford has described the Bill as: “ The most fundamental package of leasehold reform for 20 years.”  In the future, further reforms will be necessary to abolish leasehold, but this Bill is a big step forward.  Another example of Labour keeping its promises, commonhold is just another name for Co-operation.

This article was published in the Co-op News 

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