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New-build homes best place to start with commonhold – UK Finance

  • 13/03/2020
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New-build homes best place to start with commonhold – UK Finance
Creating new-build flats as commonhold would be the best way to introduce the tenure as a mainstream alternative to leasehold, according to UK Finance.


Commonhold allows people to own the freehold of a unit within a building or development – such as a flat.

Matthew Jupp, principal of mortgage policy at UK Finance, warned government against creating rules that force leasehold properties to become commonhold.

In the coming weeks the Law Commission is expected to outline plans on how to widen adoption of the tenure.

It’s thought commonhold could eliminate some of the problems experienced by leasehold homeowners.


‘Competitive market’ for commonhold mortgages

Contrary to popular belief, there are lenders willing to offer mortgages on commonhold homes, and more are likely to follow if the tenure becomes a popular alternative to leasehold, according to Jupp.

There are around 40 lenders, including some big high street names, that will provide mortgages to commonhold properties, he said.

During the consultation process the Law Commission had suggested lenders were one of the reasons that commonhold property ownership had not been a success after being introduced in 2002.

Fewer than 20 commonholds have been created in the past 18 years.

Speaking at the Westminster Legal Policy Forum seminar on leasehold reform and the expansion of commonhold, Jupp, said: “It’s a bit of a myth that mortgage lenders were skeptical about commonhold in the early noughties. Lenders were gearing up to lend but the numbers never materialised, commonholds were never created so that tipping point was never reached.

“There’s a bit of a chicken and egg situation. Without commonhold properties being created, mortgage lenders can’t put in place the policies needed to be able to lend on them.”

He added: “There are some broader societal changes that need to take place as people take more responsibility for their own buildings.

“If more commonholds are created, more lenders will take the time to understand it and more of them will enter the market and be prepared to lend. I think the best way of doing that will be to develop that over time. New-build properties seem the obvious place to start.

“I would caution against compulsory commonholds for existing buildings or indeed the forced conversion of commonholds where lenders are unwilling to lend on commonholds. I think it would be unfair to expect mortgage lenders to lend on commonholds where they explicitly at the moment don’t do so.”

He added that UK Finance was supportive of Law Commission suggestions to help boost the commonhold market, including making sure there were appropriate insurance measures in place and sinking funds.


Lenders comfortable with leasehold

Jupp said UK Finance also supported government moves to ban leasehold houses and the law commission’s work to improve the enfranchisement process.

However, he seemed concerned that by promoting commonhold, leasehold could be subject to more problems.

Some experts have suggested wide introduction of commonhold, could devalue leasehold properties.

Jupp said: “Lenders are comfortable with leasehold, they understand it, both the flaw and positives alike – they don’t want to see any major disruption to that market. It will take some time to develop the same level of understand of commonhold.”


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