Many leaseholders are looking at reform to reduce their property costs, but will the commonhold proposals in the Commonhold and Leasehold Reform Bill reduce the cost of living compared to a leasehold building?

Irrespective of tenure, the buildings are still the same and must be managed, maintained, repaired and insured in the same way. It’s somewhat farcical to think that a builder would provide a cheaper quotation to carry out roof repairs just because the building is commonhold.

The cost of acquiring commonhold may also be a potential issue as those in existing leasehold buildings will need to buy this first, using a process known as collective enfranchisement, before converting to commonhold, although the government has vowed to work hard to bring these costs down.

However, there are signs that commonhold could theoretically be cheaper. For one, the residents’ approach to running the building may be very different to a third-party commercial entity. They are more likely to want to obtain competitive quotations to keep the costs down and may take a more hands on approach to day-to-day management.

Legal

The legal framework and approach to building maintenance is also substantially different to leasehold. The commonhold model mandatorily requires a 10-year maintenance plan for a building, identifying any necessary works during that period and when they should be carried out. This is complemented by a mandatory obligation to collect a reserve fund (a pot of money paid in manageable amounts over a long period), with the amount based on the plan.

Commonholders technically have notice of when works will need doing and a rough indication of cost. The monies are front-loaded, which is intended to avoid the need for substantial sums at short notice – something which often happens in the leasehold system.

Framework

A proper framework for building maintenance will invariably, at some point in the future, help to keep costs down on the premise of “prevention not cure”, noting that “cure” often costs more than simple preventative steps.  

Coupled with this, there are fewer processes and hoops to jump through in commonhold. Under leasehold, major works projects require a full consultation procedure to be followed before the works can be carried out, whereas no such procedure exists in commonhold. Administrative savings should therefore be possible by not having to go through the lengthy paperwork exercise.

While there is no tangible evidence that commonhold will lead to lower upkeep costs, that’s not to say that this won’t happen in the future.

Mari Knowles is a solicitor at Commonhold and Leasehold Experts Ltd, and a member of the Association of Leasehold Enfranchisement Practitioners.

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