The UK’s property market is undergoing potential reforms that could impact leasehold flat owners significantly. The government has announced plans to phase out the feudal leasehold system, marking a shift toward commonhold ownership as a viable alternative.
The proposed reforms aim to give homeowners greater control over their properties by reducing the influence of freeholders and simplifying property ownership. At Lansdown, our Block of Flats Insurance experts have outlined the key advantages and challenges associated with this shift.
Pros of Commonhold for Flat Owners
Greater control over their property
- No freeholder interference – Flat owners won’t have to deal with freeholders controlling areas such as maintenance, service charges, or lease extensions. This means greater autonomy in managing their property.
- Collective decision-making – Owners will be able to co-manage the building, allowing for more transparent and cost-effective maintenance decisions.
Elimination of ground rent & lease-related costs
- No more ground rent – Leasehold flats often come with rising ground rents, which would be abolished under the proposed commonhold ownership.
- Simpler sale & mortgage process – Since commonhold flats don’t have diminishing leases or costly lease extensions, lenders may be more inclined to provide mortgages, making the buying and selling process smoother.
Insurance control and customisation
- Owners choose their insurance rather than being tied to a contract chosen by the freeholder that’s potentially overpriced.
- Tailored cover – Lansdown and other insurance brokers can offer more customised insurance policies based on the flat owners’ needs and demands.
Cons of Commonhold for Flat Owners
Higher responsibility for building maintenance
- Self-Management Challenges: Without a freeholder, flat owners must collectively maintain the building via a management association.
- Risk of Disputes: Differences in financial priorities or lack of engagement from some owners could lead to disagreements over repairs and costs.
Potential difficulties with insurance and risk management
- Complexity in arranging insurance: Instead of a freeholder managing the policy, owners must ensure adequate block insurance, which requires coordination among all owners.
- Underinsurance risks: If not properly assessed, buildings could be underinsured, leaving owners at risk in case of major claims.
Uncertainty over lender & market adoption
- Limited Commonhold Experience in the UK: Mortgage lenders may hesitate to finance commonhold properties until it becomes widely adopted.
- Market Transition Period: Until commonhold becomes standard, there could be short-term uncertainty affecting property values.
Darren Bee, Associate Director at Lansdown, comments:
“The proposed reforms mark a significant change in the property market, offering homeowners more autonomy over their buildings. However, with greater control comes added responsibility, particularly in areas like insurance and maintenance. It’s crucial that owners fully understand the implications of commonhold before making decisions.”
This article is for informational purposes only and should not be considered legal advice.
About Lansdown Insurance Brokers
Lansdown Insurance Brokers are specialists in Landlord Insurance and Block of Flats Insurance helping property professionals navigate the complexities of insurance and risk management.
Lansdown is part of the Benefact Group, a charity-owned, international family of financial services companies that gives all available profits to charity and good causes.