The history of commonhold in the UK

In the late 1970s and 1980s, the Conservative MPs for Kensington proposed various leasehold reform measures. They were Dudley Fishburn and Sir Brandon Rhys-Williams, who apparently coined the term commonhold.

Commonhold originally meant a form of what is now called share-of-freehold, but with a requirement that all the leaseholders be members of an owners corporation. This was the subject of repeated backbencher parliamentary bills, which led to the Aldridge Committee of the mid-1980s.

Aldridge proposed:

• an owners body, comprising the owners of the flats in a block
• the flats could be owned on a freehold rather than a leasehold basis (this is a key departure from Rhys-Williams' schemes)
• that the freeholder not have a veto on conversion to commonhold, but instead be paid the fair market value for the land

And that is what commonhold is today, with various stipulations. However, in the context of the 1980s, there was no collective enfranchisement, which would only come in 1993. So for Aldridge, the conversion process involved leaseholder unanimity and no voice for the freeholder. Post 1993, leaseholders could enfranchise without commonhold conversion, meaning that commonhold must compete with share-of-freehold. It lost this competition badly and now it is to be given parasitic vitality through people being forced to use it.

Let's take a moment to examine how we got here step by step:

• structurally interdependent dwellings require mutually enforceable obligations
• positive obligations on freeholds are so problematic that the courts ignored Parliament's attempts to legislate to impose them
• government responded with long-running research projects into "land obligations"
• leasehold is compatible with positive obligations (e.g., making service charges, following block rules), so was in widespread use for flats
• however, leasehold is pathological without mutualisation of the underlying freehold
• so in the 1970s backbenchers tried to introduce compulsory mutualisation of willing blocks of leasehold flats, i.e. compulsory for the freeholder
• but in the 1980s, Aldridge proposes similarly mutual scheme with a statutory regime of *freehold* flat ownership with enforceable positive obligations, which the courts would not dare ignore; "commonhold" as a label from then on applies only to freehold-based flat ownership schemes
• in 1993, collective enfranchisement is introduced without providing for freehold ownership of individual flats by fixing the positive obligations issue; tens of thousands of blocks ultimately use it; there is no requirement for full mutualisation, leading to many partially mutualised blocks
• in 2002, commonhold is introduced in its current form, providing for enforceable positive covenants between freehold owners of flats

The original concept for full mutualisation became one of partial mutualisation. In both cases, Fair Market Value had to be paid to the outgoing freeholder.

This raised the question how FMV was to be ascertained, and the problem that the best way of finding out was to wait for the freeholder to sell on the asset, and grant leaseholders an option to pre-empt the sale at that price. But that took the timing of the action out of the hands of leaseholders, and therefore 100% consent could not be relied upon for exercising such an option. This was enacted in the 1987 legislation, and this set the pattern for the 1993 law allowing a subset of a block's leaseholders to initiate the process at a time of their own choosing, if they paid both sides' costs in calculating FMV.

The partially mutualised blocks are a sort of hybrid that remains to this day, complicating reform efforts.