Why a phased start to commonhold is necessary to protect homeowners and housing supply – Riley

Proponents present commonhold as a democratic, owner-controlled alternative to leasehold, but currently, lenders remain reluctant to finance commonhold.

Reasons for apprehension

Their caution reflects the risks of collective management: what happens if residents fail to pay service charges, or refuse to authorise essential works? Enforcement options are limited, and few mortgage providers are prepared to underwrite that uncertainty. Without finance, liquidity in the market is compromised and developers will hesitate to bring forward new schemes.

Investors require tenure structures that are predictable, enforceable and underpinned by precedent. Leasehold, for all its flaws, meets that criteria. It has centuries of case law, a proven financing framework and tested mechanisms for enforcing covenants. Developers and institutional investors understand it.

By contrast, commonhold remains unproven at scale. Since its introduction in 2004, there have been fewer than 25 schemes across England and Wales.

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No consumer or mortgage lender wants to take substantial financial risks during the transitional process. This is how the ‘third way’ by Weston Homes addresses these concerns while delivering consumer benefits. All its new apartment schemes include a residents’ management company. Once a development is completed and occupied, Weston Homes transfers the freehold to the company at no cost, every flat owner becomes a member and directors are appointed from among them.

Crucially, 999-year leases are retained – and with it, the clarity of title, enforceable covenants and the comfort of legal precedent; features that are vital to lenders and investors. Simultaneously, residents enjoy control over service charges, transparent accounting and the absence of ground rents.

A promising start

The model has now been rolled out across 15 schemes. Early feedback from residents suggests strong satisfaction: most appreciate the fairness and transparency, while a minority take an active role in governance. For mortgage lenders, the attraction lies in the continuity of leasehold structures combined with the removal of the reputational risks that have plagued traditional freehold ownership.

Mortgage lenders are already wary that commonhold could create untested obligations and additional costs for resident-led associations and leave investors uncertain about enforcement. Without reliable finance and resale liquidity, flat values could come under pressure, affecting both individual buyers and larger investors in the private rented sector.

For buy-to-let (BTL) investors, the risks are pronounced. Large schemes with complex phasing or mixed-use depend on predictable management structures, and uncertainty over service charge recovery or governance could weaken investment appetite.

Weston Homes shows that reform does not need to be binary. Hybrids deliver consumer protection and transparency, while maintaining the structures that investors, lenders and developers rely on.

Commonhold almost certainly has a role, but only if introduced gradually, with technical hurdles resolved. In the meantime, the market can be reassured that alternative models already exist.