It is thus very similar to a block of flats where the freehold is owned by a management company owned by the lessees, and all the lessees have 999-year leases. The ‘commonhold community statement’ is the equivalent of the lease.

Last month we noted several reasons why commonholds are likely to be extremely rare (eg everyone in the block of flats has to consent – including the freeholder and every lessee and every mortgagee of every lessee; plus, forfeiture is prohibited, and this is likely to be a major problem for mortgagees). The likelihood is, therefore, that relatively few commonholds will be granted.

Other points to note:

• commonhold does not apply only to residential premises. It has been designed to suit any and every property (eg shopping centres, industrial estates, holiday villages) and not only blocks of flats;
• having said that, the main emphasis is likely to be on blocks of flats. But, note that the long lessees must first purchase the freehold reversion (either by private treaty or under their rights to collective enfranchisement). It will then be necessary for all the long lessees and all their mortgagees to give consent. If anyone of them refuses to agree then the conversion to commonhold cannot go ahead. Accordingly, this must be an unanimous vote in favour of conversion to commonhold (with all mortgagees agreeing);
• for shorthand purposes, the 'commonhold community statement' is often referred to as being like a lease. But, there are important differences. Firstly, it is far less restrictive, setting out rules that are essential rather than desirable (although individual commonholds can tailor those to suit their requirement). Secondly, no rule in the commonhold community statement can restrict a unit holder's ability to freely transfer the commonhold unit. The policy is that a unit holder should have the same freedom to transfer the property as any standard freehold owner and so be free of restrictions on assignment that are resented by many Ts. In addition, sanctions for non-compliance in commonhold are far less draconian than those under a lease (as we have seen, there is no provision for forfeiture), and the formalities relating to the levying of service charges do not apply in commonhold;
• concerns have been expressed about the lack of real sanctions (in particular, forfeiture) against a unit holder who does not comply with his obligations. The answer to that is that any incoming unit holder will be liable for any commonhold debts of his predecessor, and that should be effective in most cases. However, whether that will satisfy mortgagees remains to be seen, although it should not be forgotten that the commonhold system does have a thorough dispute resolution procedure built into it, and the optimists hope that that will prove sufficient.

Source: Guy Featherston Haugh QC, Falcon Chambers (co-author of Commonhold, published by OUP; £49.95). © Practical Lawyer