The current incarnation of England and Wales’s leasehold system has been around for just over a hundred years, and it might be about to change. In a statement released by the government earlier this month, it was revealed that the current leasehold system, which they described as , could be coming to an end, possibly to be replaced by a new, ‘commonhold’ system. but what does commonhold actually mean for potential tenants, and is the leasehold system really that bad?
Landlords and the legacy of feudal power
As it happens, the current interpretation of the leasehold system has been in use since the 1920s, when specific changes in legislation at the time were introduced. However, the actual leasehold system has been in use for even longer.
Originally employed by wealthy lords to maintain control over the vast lands they owned, the leasehold system of the time allowed them to ‘rent’ parcels of land to be worked by less well-off families in exchange for a portion of whatever was grown on the land.
At this point in time, the landowners held all the power in these agreements. They were able to raise the rent amount or evict their tenants whenever they wanted, and there was little the tenants could do about it.
This system changed slightly in the 1920s when new, specifically aimed legislation was introduced, giving the tenants of certain leasehold agreements more rights. In response, landowners began the practice of selling long leases instead. This caught on, and has since given rise to the modern system of leases we know today. Of course, while the changes to legislation did give tenants more rights, they were still subject to the other terms and restrictions of their leasehold agreements. Perhaps most importantly, they still had to pay their landlord.
More power to the people
What this means for the leasehold tenants of today is that they’re still ultimately subject to decisions made by their landlord. And, as we’ve seen in the news recently, this can have consequences for tenants.
At present, the leasehold system allows for landlords to decide upon and make use of what are known as management companies. The primary function of these companies is to oversee the collection of rent as well as any maintenance or repairs that need to be performed.
These management companies, as well as some landlords themselves, are a big part of why many see the current leasehold system as ‘feudal’. Tenants can be left facing incredibly steep maintenance fee hikes (as shown in the linked article above) that many feel they just can’t afford.
However, according to a source at HM Land Registry (who wishes to remain anonymous) the current leasehold system has been in place for a long time and ultimately serves its purpose, whereas a changeover to a new system would require a great deal of retraining for everyone involved. In short, this could result in significant delays for new and current applications.
By contrast, the proposed replacement of leaseholds with commonholds would do away with landlords and management companies entirely. This is because, as part of the commonhold system, the land on which the property sits would be owned communally by the tenants, creating what is known as a ‘commonhold association’.
Tenants would, of course, retain individual ownership of their respective units, but as members of a commonhold association, they would also be able to take a more active role in the management and maintenance of the property.
It’s a system that’s actually been around in the UK since the early 2000’s, having been first introduced in 2002 and then brought into force in 2004. It didn’t see much use, however, and it’s only more recently that discussions about its use have resurfaced.
Of course, commonhold agreements aren’t without their own sets of problems. One of the more common criticisms is that, although commonhold associations allow tenants to have a more active role in management, problems can still arise when disputes between tenants occur; for example, disputes over an individual’s failure to pay their share.
Additionally, as mentioned above, while the commonhold system isn’t necessarily new, it doesn’t currently see much use. As a result, it’s not as well known, and it would require extensive support until it was more firmly established.
Overall, whether the commonhold agreement system can stand up as a replacement to leasehold will ultimately depend on how well plans to support a change are implemented, as well as how individual commonhold disputes are managed.
