the UK’s housing market could learn from Australia’s strata title
“A mass shift to commonhold would be ‘leveling up’ in the truest sense, finally doing away with an unfair and essentially medieval land tenure,” says Katie Kendrick, founder of the National Leasehold Campaign and a member of a group advising the government on commonhold reforms.
At 76, retired master mariner Peter Roberts considers himself about as far from a revolutionary as anyone can get. But with one big leap last year, the Yorkshire native joined the vanguard of commonholders who are helping to break down the centuries-old traditions that still shape homeownership in the UK.
Roberts discovered this type of property ownership largely by accident. He had been living on the south coast, but hoped to move to Yorkshire to be closer to his daughter, who found a two-bed, two-bath unit in the market town of Pickering, about 40 kilometres north-east of York.
It was only after speaking to the former owner that they discovered the flat was commonhold.
“We quite quickly warmed to the idea,” says Roberts.
England’s homeownership system can befuddle foreigners and locals alike. It’s generally split into three forms: freehold, leasehold and commonhold. Freeholders are similar to homeowners in North America and Australia: they own both the property and the land on which it stands. Leaseholders are more like long-term renters, with the right to live in their properties for a set period of time, usually many decades or even centuries, via an agreement with a freeholder.
Commonhold is similar to the condo model in the US, and strata title in Australia: buyers own their individual units forever and may collectively own and manage communal areas. It was a system that exploded in popularity in Australia and the US in the post-war years, but failed to gain traction in England. It might call to mind England’s “share of freehold” model, but the condo or strata model rejects the notion of “leases” for properties and instead gives owners rights over their properties in perpetuity.
England’s unique housing rules were heavily influenced by industrialisation in the 19th century, which in some ways gave it a first-mover disadvantage. The Victorian-era growth of its cities – which spawned rows upon rows of stucco-fronted townhouses – required a new set of rules to manage dense urban life.
“We had these old, large Victorian mansions that were built for different purposes, possibly for very large families and servants, but then also possibly for rent,” says Susan Bright, a professor of land law at the University of Oxford. “The problem is as soon as you want to sell, what legal mechanism do you use to sell a unit in a part of a whole? We didn’t have any statutory scheme for that.”
Also problematic for early residents of those divided-up townhouses was how to require everyone to pay for repairs and maintenance of common areas. Leasehold solved some of these problems, but the property is still ultimately owned and controlled by the freeholder.
This is why activists often call leasehold “feudal” or even “medieval.” Under a commonhold system, by contrast, the residents own and control the communal property and can make decisions by democratic vote.
“Why would anyone care about the maintenance of a building that they have no real interest in until, say, the year 2090?” asks Xu of Lancaster University.
Questions from Grenfell tragedy
Scandal has recently engulfed the leasehold system. A number of the UK’s largest developers took advantage of the annual fees leaseholders pay to freeholders, known as “ground rent”, to turn flats and even homes into income-generating assets. In some cases homes were sold with fees that doubled every decade, making them unaffordable for occupants.
This prompted the country’s Competition and Markets Authority to investigate unfair contract terms and the potential mis-selling of homes to leaseholders. The agency ultimately forged agreements with several developers to remove onerous annual payments.
The Grenfell Tower tragedy in 2017, where a high-rise block of flats with flammable cladding caught fire and killed 72 people, highlighted another thorny question: if a leasehold building is constructed with dangerous material, do the developers, the leaseholders, the freeholder or the government pay to fix it?
An estimated three million people live in apartment blocks with dangerous materials, and many face eye-watering bills for repairs. In recent months, the UK government has pressured developers to contribute billions of pounds to fund repairs, yet the Grenfell incident spurred interest in a search for an alternative ownership structure that would clarify who’s responsible for such costs.
Last year, the government launched a Commonhold Council with industry representatives and campaigners intended to “prepare homeowners and the market for the widespread take-up of commonhold”.
Earlier this year, parliament passed a law banning developers from charging ground rent on new properties, removing a major incentive for developers to build leasehold properties. And, from the end of May, estate agents in the UK will be required to indicate on property listings whether a home is leasehold, freehold or commonhold.
Housing supply in Britain is tight, and there are concerns that a shift toward an Australian-style strata model could discourage development and increase prices. Sceptics also argue that a fundamental shift in the way property is owned should be implemented slowly.
Others ask about the viability of a system that’s been available in the country for decades but has not been widely adopted. Britain’s conservative government, meanwhile, has cited commonhold’s ability to give owners greater control over the costs of home ownership as one of its key benefits.
“We want to see many more people have the chance to own their own home and, when they do, to enjoy it and feel confident that it is truly theirs,” according to Minister of State for Building Safety, Fire and Communities Lord Stephen Greenhalgh.
Roberts, the retired master mariner in Yorkshire, is one of those people. He had never heard of commonhold before finding his current unit. But he says he likes the development, in which a small association of owner-occupiers makes decisions for themselves.
“It would be something that would appeal to quite a big amount of people in the UK,” says Roberts. “If they actually knew about it.”