Developer and investor alert: commonhold consultation closes next week

The following sorts of organisations should consider responding:

• Housebuilders;
• Investors and lenders into the housebuilding sector;
• Managing and property agents;
• Developers and investors into allied sectors such as BTR, student accomodation and senior living; and
• Infrastructure investors with an interest in residential schemes.

The Government wants to understand how mandating commonhold for flats will impact on the real estate sector and allied industries.  The consultation invites responses on questions like:

• Scope Which sorts of residential units should be within scope, for example what about houses or commercial buildings that have been newly converted to contain one or more flats, or BTR blocks where the owners have later opted to sell flats for homeownership?  Answering this question involves thinking about whether the "sections" concept is likely to work in practice – as explored in an earlier briefing, this does not provide enough protection for either residential or commercial parts of a scheme, as currently drafted.
  
  
• Exemptions The Government intends to exempt some sort of lease from the ban, including shared ownership leases, home purchase plans (including Islamic finance products), and certain equity release products that require a lease.  Should any other sorts of flats (such as retirement flats) be exempted from the ban?  Should small schemes (such as those with fewer than four units) be exempted or use a simplified form of commonhold?
  
  
• Commencement When should the ban on new leasehold flats start?  What transitional arrangements might be needed, for example what should happen to schemes where the development straddles the ban coming into force such that some (but not all) of the flats have been sold as leasehold?  How long will the sector need to prepare, in terms of taking legal advice, training staff, changing corporate systems?  Should the ban be implemented on the whole housing sector on one date or should it be phased?
  
  
• Improvements Are there any technical changes to the draft Commonhold and Leasehold Reform Bill that would better support private sector housing development?  For example, are there any types of commonhold building or development (for example those over a certain number of units) which should be required to appoint professional directors and/or managing agents?  How effective are the Government's proposals for protecting "fair" long-term contracts for the supply of services (such as heating and hot water) from being cancelled by the commonhold association?

The opportunity to respond to this consultation is a valuable chance to share information with Government about how the changes are likely to affect the UK's housing sector, and to suggest ways to improve their proposals.

We have assisted several clients to respond to the consultation and have been pleased to explore the Government's commonhold proposals direct with MHCLG.  Please get in touch if you would like to discuss a response on behalf of your business or sector.