Skip to content

Advice to a client on the possible conversion of a leasehold building to commonhold

Insight

Beach house

Every month the Farrer & Co Residential Property partners give us a brief insight into their working lives. This month we provide an overview of advice given to a client on commonhold at the outset of what is now a collective enfranchisement claim to acquire the freehold.

The Brief

Towards the end of last year, we were contacted by a client who owns the top floor leasehold flat in a double fronted detached townhouse in Notting Hill. The building was converted into five flats in the 1990s and we acted for our wonderful client on the purchase of her flat over a decade ago. When she bought the flat the building was beautifully maintained, but the freehold owner changed shortly before the first Covid lockdown and the leaseholders have become increasingly frustrated by the new landlord’s poor management and upkeep of the building. Four of the five flat owners live in the building and are eager to take over management from the freeholder, but the fifth flat owner is abroad and has no desire to step into the role of freeholder.

Executing the Brief

Our client had been reading about commonhold following the Government’s reiteration in November that it would bring the “feudal” leasehold system to an end and asked if she and her fellow leaseholders could (and should) therefore convert their building to commonhold.

We explained that as the law currently stands, the process that needs to be followed to convert a leasehold building to commonhold is restrictive and there are several fundamental hurdles that would stand in the way, namely:

  • commonhold requires unanimous agreement from all leaseholders in the building which was unlikely to be achievable here due to the absent and disinterested flat owner;
  • the consent of the freeholder would be required (although if not forthcoming this could be overcome by three or more of the leaseholders exercising their right to buy the freehold by way of collective enfranchisement); and
  • lender consent would be required, as two of the flat owners bought their flats with mortgage finance.

Commonhold is not yet seen as a secure asset class by lenders so we would not expect a lender to consent to the conversion (as a lender would not want their security to be transferred from a leasehold flat to a commonhold unit).

There are also fundamental issues with commonhold itself, particularly around potential disputes between unit holders and how these will be resolved. Another issue is the fact that a commonhold association (which would be responsible for the upkeep and management of the commonhold building) could easily find itself in a situation where it becomes insolvent due to the limited powers it would have if a unit holder is in arrears.

The debrief

Following our discussion with our client it was agreed that a better route forward would be for the four willing flat owners to simply exercise their right to buy out the freehold owner by starting a collective enfranchisement claim and we are now instructed by those flat owners.

Everything that our client was seeking from commonhold will be achievable once she has a share of freehold in the building, as she will then be running the management and upkeep of the building alongside the other participating leaseholders via a resident management company. We observed there is nothing to stop the tenants from revisiting a commonhold conversion if this becomes desirable down the line. However, it feels as though there is a long way to go before converting a leasehold building to commonhold becomes truly desirable. The Leasehold and Freehold Reform Act 2024 will already make it easier for more leaseholders to exercise a right to acquire the freehold and take over the management of their building or, alternatively, to just exercise their right to manage, if there is an appetite to do so.

Please see our article: Commonhold: what do I need to know about it? if you would like further information on commonhold.

We are always happy to discuss the conveyancing process and how to manage a transaction.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, January 2025

Want to know more?

Contact us

About the authors

Annabel Dean lawyer photo

Annabel Dean

Partner

Annabel advises on all aspects of the acquisition and management of real estate, particularly residential property. Her clients include individuals, trustees and landed estates. Annabel also has a great deal of experience acting for lenders taking security over property.

Annabel advises on all aspects of the acquisition and management of real estate, particularly residential property. Her clients include individuals, trustees and landed estates. Annabel also has a great deal of experience acting for lenders taking security over property.

Email Annabel +44 (0)20 3375 7206
Laurie Horwood lawyer photo

Laurie Horwood

Partner - Board Member

Laurie acts for individuals, institutions, private banks and others on property transactions with a particular focus on high value residential properties. His wide ranging market knowledge ensures he is able to work to achieve a successful transaction. He has acted for many of his clients for many years as their property interests have become more valuable and complex. He has an excellent understanding of the value and importance of relationships within the private wealth world and a desire to work collaboratively with all those involved in a transaction.

Laurie acts for individuals, institutions, private banks and others on property transactions with a particular focus on high value residential properties. His wide ranging market knowledge ensures he is able to work to achieve a successful transaction. He has acted for many of his clients for many years as their property interests have become more valuable and complex. He has an excellent understanding of the value and importance of relationships within the private wealth world and a desire to work collaboratively with all those involved in a transaction.

Email Laurie +44 (0)20 3375 7193
Hugh Wigzell lawyer photo

Hugh Wigzell

Partner

Hugh is a residential property specialist experienced in high-value conveyancing and acting for both banks and borrowers in secured lending transactions. In particular, Hugh has extensive experience in acting on new-build acquisitions and sales and frequently represents purchasers based outside of the UK.

Hugh is a residential property specialist experienced in high-value conveyancing and acting for both banks and borrowers in secured lending transactions. In particular, Hugh has extensive experience in acting on new-build acquisitions and sales and frequently represents purchasers based outside of the UK.

Email Hugh +44 (0)20 3375 7618
Laura Conduit lawyer photo

Laura Conduit

Partner

Laura is a specialist residential property solicitor, dealing with sale, purchase and mortgage transactions. Laura deals with all types of residential property, whether freehold or leasehold, town or country but she has a great deal of experience in the prime central London market. Laura particularly enjoys a fast paced deal and has an excellent track record for delivering quality advice and exchanging transactions under pressure.

Laura is a specialist residential property solicitor, dealing with sale, purchase and mortgage transactions. Laura deals with all types of residential property, whether freehold or leasehold, town or country but she has a great deal of experience in the prime central London market. Laura particularly enjoys a fast paced deal and has an excellent track record for delivering quality advice and exchanging transactions under pressure.

Email Laura +44 (0)20 3375 7161
Edmund Featherston-Dilke lawyer photo

Edmund Fetherston-Dilke

Partner

Edmund's practice has grown over many years to include agricultural estates work, residential and commercial property. This breadth of experience benefits clients, many of whom have a wide variety of property interests. His clients vary from institutional land owners, charities, property companies, individuals and farmers. Edmund was appointed the Solicitor to the Duchy of Cornwall in June 2020.

Edmund's practice has grown over many years to include agricultural estates work, residential and commercial property. This breadth of experience benefits clients, many of whom have a wide variety of property interests. His clients vary from institutional land owners, charities, property companies, individuals and farmers. Edmund was appointed the Solicitor to the Duchy of Cornwall in June 2020.

Email Edmund +44 (0)20 3375 7280
Back to top