A leading leasehold expert has warned that commonhold reforms will hit property values and shift costs onto individual flat owners including those belonging to private landlords.
Mark Wilson, director of surveyors Myleasehold, explains that under commonhold, the capital costs of running a building don’t get smaller just because they’re split among owners, but probably become harder to manage, as each owner in the cooperative has a different agenda.
Under commonhold, lift failures and insurance hikes all land on the owners, and those will show up in service charges, reserve fund contributions, and ultimately, in property prices, says Wilson.
“There will no longer be anyone to carry the risk,” he adds. “If your neighbour does not pay, someone has to cover it. If there is, let’s say, a £40,000 per flat, reserve fund contribution required in 20 years’ time, then you have no choice but to make your contribution. And that’s regardless of the fact you will have moved on by then.”
When flat buyers see the cost structure that comes with ownership upfront, annualised and indexed, priced into their service charge from day one, they may be forced to value their dream home differently, believes Wilson, who is also a member of the Association of Leasehold Enfranchisement Practitioners.
Not because flats are worse homes, but because they will be priced with their full liabilities in view, baked in.
“Commonhold makes the cost burden more obvious, it doesn’t remove it,” he adds.
“The risk does not simply go away - it becomes shared, and that may be a better model - but it won’t necessarily be a cheaper one. What we will see is the real cost of running a building finally coming to the surface, and when that happens, the pricing conversation may change.”
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