Commonhold: how does it work in other countries?

On 3 March 2025 the government announced that it would be legislating to make Commonhold the default new form of flat ownership, replacing leasehold for new flats (but wont be replacing leasehold for existing flats).

Much has been written about whether commonhold will or will not work in England and Wales, and we feel it is useful to move away from hypothetical situations and look at a legal system which is similar to ours but which has left leasehold behind for the most part, and already has a version of commonhold that is the dominant force in property ownership. This means no leases, lease extensions or ground rent, in a move away from the dated and monetised system found in this country.

How does it work in New Zealand?

Firstly, the form of ownership in New Zealand is actually known as unit title rather than commonhold. However it is rooted in the same 'strata title' system from which commonhold is based. Unit title has been around in New Zealand since 1972 and was recently reaffirmed in the Unit Title Act 2010 - clearly strata title isn't going anywhere in NZ.

How does commonhold ownership differ from leasehold

Commonhold is a form of strata title. It means owning a strata or segment of the building (usually a flat) outright, rather than on a lease that reduces in length.

Commonhold association responsibilities and legal obligations and what we can learn

• This is the most common form of ownership where there are multiple owners within a building, such as a block of flats

• As a unit owner, you own the apartment or unit and any linked units such as garages, parking spaces, private courtyards, gardens or storage areas

• By default you own an share in the ownership of common property such as a lift, entrance hall, drive way, common paths and gardens used by all flat owners

• Becoming a unit holder means that by default you become a member of the corporate body that owns the common areas

• Most day to day decisions are made by the body corporate on a simple majority vote (more than 50%) of unit holders

• Some decisions require 75% of the vote of unit holders

'Don't buy a lemon' - what Kiwis say

Many leaseholders will be familiar with the types of issues that can arise with unit title or commonhold ownership, even those with a share of freehold, which is widely seen as the superior form of flat ownership in places such as Brighton and London with a high number of apartment buildings.

Unit title owners have a saying, which is based on making sure you ask plenty of questions during the purchase of a flat to get as much information as possible and to ensure that they don't 'buy a lemon', typically a building affected by leaks or earthquake issues. Thankfully, we only have to worry about rain in England and Wales.

The types of issues that typically arise in communally run buildings won't be a surprise to anyone that's lived in an apartment building:

• disagreements over budgets for maintenance and reports

• difference in opinion between unit holders over use of common areas

• neighbour disputes between unit holders

• contribution levels to the long term maintenance fund

• poor attendance at unit holder meetings to pass budgets

Commonhold isn't a magic wand that will remove these issues in their entirety, as is evident from real life experiences on the other side of the world. There are still flats held on a unit title that may be difficult to buy and sell owing to disrepair issues or deadlock within the body corporate that runs the building.

Perhaps however, these are issues that arise regardless of the legal system; it is always going to be difficult to have 100% agreement from flat owners with different interests. Those with a long term plan to live in the property will want to keep on top of maintenance whereas those looking to sell, may see little benefit of embarking on major works prior to selling.

Resolving disputes

Whilst there is crossover in the type of issue or dispute that plagues leasehold, commonhold arguably provides better dispute resolution mechanisms that are not at costs heavy as those that arise in England and Laws, simply due to the simplified system. Every lease needs to be reviewed individually whereas a commonhold association will have a majority of rules that are common to all associations.

Ricky Coleman, Solicitor, and writer at Peppercorn Law argues that "even in the case of share of freehold buildings in Brighton, I see conflict between resident owners, buy to let landlords and flat owners with vastly different financial and personal circumstances. In my view, this will happen regardless of the legal system. That said, commonhold should offer a codified and modern way of resolving disputes at lower cost, and without the one sided nature of the leasehold system which typically favours freeholders and which is extremely complex, having evolved through case law over many years".

What are the benefits of commonhold?

There are some major benefits to this proposed new way of owning a flat:

1. no ground rent is payable to a third party

2. the unit holder owns their flat forever, avoiding costly lease extensions

3. the freehold of the building is not owned by a faceless investor freeholder who may be difficult to reach

4. the maintenance and repairs are not decided by a third party freeholder with no real interest in the building, but is instead set by those that pay the service charge bills

Can commonhold work in England and Wales?

New Zealand is a great example of what our future could look like, because its laws ultimately come from the UK Parliament and in many aspects, the legal system mirrors ours. It therefore offers a unique insight into how a common law system (UK) can implement strata titles. Plus, we can learn from mistakes made and issues that have been ironed out in a system that is now over 50 years old. Yes, commonhold is nothing new to most of the rest of the world.

The Law Commission has published a White Paper setting out the challenges in implementing commonhold to our complex property system, along with suggestions on how these can be overcome. It is hoped that we can leverage the experience of other jurisdictions when the time comes to implement our own form of strata title.