There was certainly plenty within the King’s Speech to keep conveyancers busy and which may well have raised an eyebrow or two in terms of how the legislation announced might be delivered in practice, and what potential foreseen and unforeseen consequences we might get as a result.
Without doubt, there will be many waiting to see how the new Government’s plans for Commonhold will come out in the wash, with the Government explicitly outlining in the Speech how it ‘will take steps to bring the feudal leasehold system to an end, reinvigorating commonhold through a comprehensive new legal framework and banning the sale of new leasehold flats so commonhold becomes the default tenure’.
It was not surprising to see this type of approach, given the failings of leasehold particularly since the financial crisis now almost two decades ago (how time flies!), however as mentioned above, many firms might be sceptical about how this will be delivered, particularly in terms of how commonhold will become the default tenure for flats.
At our recent series of meetings in York, we asked our members what they felt would be required in order to support this move to commonhold from right across the entire property/legal market, and there was plenty of suggestions around what would be needed, especially if the market wasn’t going to be severely disrupted.
As a starting point, the CA has always been very supportive of the move to commonhold and we certainly do not think that this should be held back by any sort of ‘fear of change’ from stakeholders, particularly when there are a number of tangible benefits that can be achieved through this. Notably, allowing residents to manage their own communities, creating opportunity to improve the quality of property management services while keeping costs down and more predictability, greater transparency and empowerment amongst owners, being just some.
However, whichever way we slice this, it is going to be a major change for the property market and for conveyancers, and this was reflected in the feedback we received at the CA meetings. When asked, what support would be required by conveyancers in order to deliver commonhold, we received a large number of answers which covered a large number of professionals and stakeholders such as:
- More financial support to speed up the registration processes at HM Land Registry.
- Training HM Land Registry staff to register commonhold.
- Lender approval for Commonhold plus a standardised approach to Part 2 of the UK Finance Handbook for Commonhold.
- Education and information right across the piece for all stakeholders – property managers, conveyancers themselves, lenders, advisers, case management system providers, the list goes on.
In fact, that education piece segued into questions about how we move from the old system into the new one, and member firms felt there was a real need for a transitional period between the two.
Firstly, this was to cut down on any potential disruption to the marketplace, which could be considerable if not taken into account.
Members highlighted potential issues around the marketing of properties on estates where buildings started in the leasehold regime and had leasehold flats, but other buildings end up being commonhold; also whether consumers might put more value on commonhold property which could down-value leasehold; the issues with lenders and valuers not having comparable property valuations which could cause delays; plus there were questions around how you might enable commonhold conversions for existing leases and what might happen to existing leasehold houses on managed estates.
Without any sort of transition period the disruption to the market could be huge, plus of course everyone active in this space – notably conveyancers, developers and lenders – will need to update their systems and train staff accordingly.
Consumers, of course, are at the heart of this move to commonhold so it’s undoubtedly important they clearly understand the change, what it means for them, and member firms also felt that media coverage, and positive media coverage at that, would be needed to instil confidence in consumers that they were not simply getting leasehold mark two.
There are clearly many positives to a move to Commonhold for a conveyancer. Let’s face it, only having one set of regulations to worry about (compared to the myriad of legislation in Leasehold) will make life easier, especially with all the standardisation of the clauses, the set-up of a Commonhold as well as the common sense wording for the running of the commonhold. That said, it is understandable that firms may be reticent about their role in this, and the requirements it will bring but do read on for a digestible fact find.
The Commonhold statement is the equivalent of the lease but without the declining term of rent; the commonhold contribution is the service charge but with a reserve fund; and the Commonhold Association is the equivalent of the Management Company/Landlord, making the decisions and collecting the contribution. However a Commonhold Association, as set up by the owners, could employ property agents to manage the properties if they do not have the time or expertise to do it themselves.
As an interesting aside 4,300 Right to Manage companies are already formed – and they are notoriously difficult to get set up – so consumers clearly do feel they can cope with managing their own estate, but at the same time, we’re unsure how many have enfranchised though a freedom of information request is in!
Overall, we sense there will be a strong appetite for Commonhold from consumers, and certainly a keenness to make it work. There are likely to be teething issues – hence the call for the transition period – but these should not be significant obstacles for making this change work; at the CA we will certainly be working with member firms to provide them with all the support and information they need to make a success of it.
Beth Rudolf is Director of Delivery at the Conveyancing Association (CA)
