Legal Update

Leaseholders' Right to Manage

Since 2003 qualifying leaseholders have had the right to take over the management of their block of flats from their landlord, under provisions made under the Commonhold and Leasehold Reform Act 2002. Leaseholders who take advantage of this right have more control over the level of service charges, can appoint their own choice of managing agent and choose their own insurers.

The legislation also gave leaseholders who do not exercise this right increased powers when dealing with their landlord over unreasonable charges and improvements were made to the way the Leasehold Valuation Tribunals work to resolve disputes. In addition, requirements for landlords to consult over service charges came into force on 31 October 2003.

The Act also introduced the new concept of Commonhold, a new way of owning property in common which is intended to be attractive to some flat owners who wish to take the ownership and management of the freehold of their block of flats out of a management company. They may also become increasingly common in new developments of community housing and blocks of flats.

To set up a commonhold, the leaseholders form a Commonhold Association (CA) to own and manage the land in question, which must be registered land. Once the commonhold is formed, the CA becomes responsible for its management. Although this is normally contracted to property management professionals, the ultimate responsibility lies with the directors of the CA.

Due to the complexity of commonhold law, take up has been very low and in 2018 the Government set in train a consultation exercise called 'Reinvigorating commonhold: the alternative to leasehold ownership' to investigate possible reforms. A final report is expected to be issued in 2020.

Following widespread anger at terms contained in leases of some new residential properties, the Government announced its intention to reform the law, with the intention  'to cut out unfair and abusive practices within the leasehold system, including a ban on leaseholds for almost all new build houses.' This is currently the subject of a consultation exercise, There is no indication when the results of that exercise will give rise to legislation.