The Commonhold and Leasehold Reform Act 2002

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The Commonhold and Leasehold Reform Act 2002

• A subtle revolution

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The Act Sets Out to Achieve the Following Ends

• To define the nature of commonhold
• To specify the registration process
• To define the commonhold unit and the
  transactions which may take place, such as
  transfer, leasing etc.
• To define the common parts of a development and
  to regulate their use, maintenance, transactions,
  such as charging etc.

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Achieving the Following Ends Continued

• To define the form and content of a commonhold
  community statement
• To define the constitution and operation of the
  commonhold association
• To deal with winding up of a commonhold
  association, both voluntarily and by the court.

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The Commonhold and Leasehold Reform Act 2002

• In two parts
• 1 Commonhold a new way of holding freehold
  land
• 2 Leasehold reforms extensive and detailed

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The Commonhold and Leasehold Reform Act 2002 (The
Act)

• Received Royal Assent 1st May 2002
• The object of the commonhold is to overcome
  leasehold problems by vesting control and
  ownership of communal facilities in an
  association owned by the unit holders and
  introducing uniformity in the form and content of
  the documentation.

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Part 1 of the Act contains provisions for

• setting up and managing commonhold developments
• defining individual units and common parts
• identifying who is responsible for what in terms
  of maintenance, and how it is to be paid for
• drawing up documents governing the development

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the requirement to lodge with the Land Registry-

• the memorandum and articles of association of the
  commonhold association
• the commonhold community statement of the
  commonhold association which will contain the
  rules and regulations of the particular
  commonhold scheme and
• any amendments to these documents.

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Commonhold structure

• Commonhold is not a new estate in land
• it may only be created out of absolute freehold
  registered land.
• It can be created for residential, commercial or
  industrial use.
• Each separate property in the commonhold
  development is called a "unit"
• the owner is called a "unit holder".

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Structure - 2

• All the parts of the commonhold development which
  are not units are called "common parts".
• The body that will manage the common parts is
  called the "commonhold association ", (a private
  company limited by guarantee)
• Each unit holder will be a member of the
  association.

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Commonhold community statement

• A non-corporate constitution will be contained in
  a "commonhold community statement" (C.C.S.).
• It defines the extent of the units and common
  parts, regulates the use and maintenance of the
  units and provides for the rights and duties of
  the unit-holders and the association.

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Problems (and thus litigation!)

• Conversion requires all lessees to consent
• Failure to provide for a first charge on a unit
  for unpaid commonhold payments (assessments)
  just standard remedies for the recovery of debts
• One owner one vote two units owned one vote!
  Militates against mixed developments

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Registration

• The commonhold association with its common parts
  and the associated units will be registered at HM
  Land Registry
• The registry will need to see a commonhold
  community statement, CCS
• This will contain the rules of the particular
  commonhold

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Conversion

• It will be possible to convert from leasehold to
  commonhold
• it will be necessary to obtain the consent to
  conversion of 100 of the existing lessees and
  /or other owners

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What will it all mean?

• Suits blocks of flats but all of one size (one
  member one vote)
• Suits housing estates gated communities
• Commercial commonholds useful where there are
  shared facilities e.g. light industrial units on
  a business park
• A large commonhold could allow space in it let on
  a commercial lease subject to the terms of the CCS

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Commonhold Problems

• To convert you need 100 approval
• Unpaid assessment monies and reserve fund levy
  merely a simple debt no security
• Each member of a commonhold has one vote despite
  the size of the unit and even if more than one
  unit is owned
• Will developers see them as better than
  leaseholds will they sell for more?