Property professionals have warned that commonhold reform must be workable from day one if it is to successfully replace leasehold for most new flats.
The Association of Leasehold Enfranchisement Practitioners says lenders, property professionals and building managers will need to be ready for the practical consequences of the Government’s proposed overhaul.
Questions remain over the cost of converting existing buildings, the treatment of owners unable to afford conversion, existing mortgages and development rights. Buildings operating under commonhold will also need adequate reserves, effective governance and mechanisms for recovering unpaid contributions.
The issues were highlighted at ALEP’s annual conference as the property industry prepares for potentially significant changes to residential ownership.
PRACTICAL TEST
The draft Commonhold and Leasehold Reform Bill proposes a new commonhold framework, makes it easier for existing leasehold buildings to convert and would ban leasehold for most new flats.
Further legislation and regulations are also required to implement outstanding elements of the Leasehold and Freehold Reform Act 2024.
ALEP Director Mark Chick (main picture, inset) says: “Commonhold is intended to give homeowners greater control over their buildings. Delivering that opportunity requires coordinated preparation across the property sector, from registering ownership and securing a mortgage to day-to-day financial and practical management.
“Residents need to understand the responsibilities they will acquire, lenders need confidence in the security they are financing and practitioners need clear rules and processes through which to advise their clients.”
ALEP says greater control for residents should not be confused with reducing the cost of maintaining buildings.
Commonhold properties will continue to require funding for maintenance, insurance and building safety obligations, making appropriate reserves and financial management important to the success of the system.
LENDER CONFIDENCE
Chick says the success of reform will ultimately depend on how the system operates at individual building level.
He adds: “Can owners make informed decisions? Can necessary work be funded? Can a buyer obtain a mortgage and understand the building’s financial position?
“ALEP’s members bring experience of the transactions, valuations and disputes that will shape those outcomes.”
The conference also heard from representatives of HM Land Registry, Nationwide, JLL and The Property Institute on issues including mortgage lending, building management, valuation reform and enfranchisement.
