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Ellie Benton

Ruby Russell

Kath Scanlon

September 25th, 2024

Leasehold and high-rise living: is commonhold the solution?

0 comments | 2 shares

Estimated reading time: 10 minutes

Ellie Benton

Ruby Russell

Kath Scanlon

September 25th, 2024

Leasehold and high-rise living: is commonhold the solution?

0 comments | 2 shares

Estimated reading time: 10 minutes

This is the second part in a two-part series summarising the conversations that took place at a roundtable held on the 2nd May exploring the challenges of leasehold in high-rise residential developments in London, and the potential implications of a commonhold system. The event was organised by LSE London, a research unit at the London School of Economics, in collaboration with architects PTE and HTA. The event built on the 2023 book What is the future of high-rise housing? by the Tall Residential Buildings Research Group, an informal network of London-based academics, architects and built environment practitioners. The roundtable was part of a series of events exploring how we can improve the financial, governance and wellbeing aspects of high-rise housing in London. The first blog set out the current state of the leasehold system and challenges for high-rise residential towers in the UK, we will now explore if commonhold offers a viable alternative.

Commonhold is a system in which flat owners own the property as a freeholder, indefinitely, without a lease. All owners have the right to be part of the commonhold association which is responsible for managing the communal aspects of the building, maintaining  the building and setting service charges. As a member, you can vote on these decisions. The Commonhold association can either manage the building directly or appoint a management agent. Under a commonhold system, there are no ground rents and no forfeiture. Commonhold first became legal in the UK in 2002 but there are only a total of 184 commonhold properties, making up 0.01% of total stock[1]. Currently, the commonhold system is not attractive to developers, and there is also a lack of understanding about how  it works in practice.

If we are looking at the major problem of leasehold as being a  “feudal system” that offers little control to the leaseholders, a commonhold system does address this, however as set out in our first blog there are a number of other challenges – principally the costs of managing and maintaining the building are unlikely to be significantly different and some costs might rise.

Firstly, the rising cost of insurance is pushing up service charges. If buildings become commonhold they will move away from large group insurance packages, where the freeholder owns a number of blocks of flats, which is likely to push up costs. One provider shared the example of a block that had recently taken on the “right to manage” asking to be included in the company’s insurance premiums because it would give them a lower rate. Furthermore, while commonhold may give residents more control over the service charge it does not remove the issue of other increasing costs such as energy bills, and The Building Safety Act requirements.

One participant argued that commonhold is sold as control but in reality it is democracy relying on high levels of agreement on cost levels. Residents are likely to disagree on what money should be spent on and the costs set, and if you are in the minority there is little you can do to change things. Arguments can occur over who should pay for what, for example, people living on the ground floor arguing they shouldn’t pay for lifts or people on the top floor saying they shouldn’t pay for the communal garden they never use. These challenges make coming to an agreement about how a building should be managed tricky and can lead to required works not being done and the buildings falling into disrepair.  In Scotland, which has a system similar to commonhold, 50% of all buildings are in disrepair.

As discussed in the first blog, high-rise residential blocks are complicated to manage and require professional management. Residents of these blocks often won’t have expertise or the time to dedicate to properly managing these buildings, so professional management will need to be used. In reality, the number of organisations  with these skills is limited, so the same individuals and organisations that managed buildings under a leasehold system are likely to manage them under a commonhold. The management of these new buildings is only going to become more complicated as new problems arise, as was illustrated in the cladding scandal following the Grenfell Fire. Furthermore, often tall buildings, such as those in the Kings Cross development, involve both residential and commercial space, which adds another layer of complication.

Many of the owners in high-rise blocks are either buy-to-let investors or people who want to live in the property before moving on to a larger home, not people who have an interest in the long-term life cycle of the property. Therefore, they are likely to vote for the cheapest option with little consideration of the quality of the works or the potential impact in the long term.

Taking these factors into consideration, there is an argument that commonhold would work best in simple low-rise smaller developments that are purely residential with  the majority of occupants owner-occupiers rather than tenants.  While there is evidence of commonhold working as a successful model in countries such as New Zealand, more needs to be done to learn from these countries and how we could make a commonhold system work in practice in the UK.

In conclusion, a commonhold system does offer an alternative to leasehold by removing the feudal nature of landlord-tenant relationships. However, it does not remove the problem of the cost and complexity of running high-rise residential blocks, and it creates new challenges of how buildings will be managed and conflicts between residents. More research is needed if we are going to make a commonhold system for high-rise blocks viable in the UK ensuring costs are managed and the buildings are well maintained.

[1] https://www.traverssmith.com/knowledge/knowledge-container/is-the-commonhold-model-of-ownership-a-good-fit-for-the-senior-living-sector

About the author

Ellie Benton

Ellie Benton is a Research Assistant at LSE Housing and Communities, a research team based within the LSE Centre for Analysis of Social Exclusion (CASE).

Ruby Russell

Ruby Russell is a Research Assistant at LSE Housing and Communities, a research team based within the LSE Centre for Analysis of Social Exclusion (CASE). Ruby conducts qualitative research on social disadvantage and explores the impact of public policy on low-income areas over time.

Kath Scanlon

Kath Scanlon is Distinguished Policy Fellow at LSE London. She has a wide range of research interests including comparative housing policy, comparative mortgage finance, and migration. Her research is grounded in economics but also draws on techniques and perspectives from other disciplines including geography and sociology.

Posted In: High Rise Housing

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