Residential Property - What is Commonhold Ownership?

The advent of commonhold ownership, which is an alternative to leasehold ownership, is a relatively new phenomenon in property law. The legislation was only introduced in 2004 and, as a result, buyers are perhaps less acquainted with the term and what it means exactly.


With over 35 years of experience here at McGinley Solicitors LLP, we delve into what common ownership of a property entails and how it differs from other types of home ownership.


What’s the Difference Between Freehold and Leasehold?

Firstly, we’ll differentiate between a freehold and a leasehold sale. In a freehold sale, the buyer owns the property and the associated land until the buyer chooses to sell it.


In a leasehold deal, the property is owned, but only for the period set out within the agreement. Another quirk to consider with the latter is that a leasehold sale doesn’t include the land, which is attributable to the property. Therefore, your garden may not be included, even if the terms of the lease require you to maintain it.


What is Commonhold Ownership?

Over the last two decades, there’s been a significant recent rise in the number of commonhold ownership schemes. Essentially, a commonhold ownership is an alternative to a leasehold sale and it’s an option where a number of properties share communal areas. For example, in a block of flats, commonhold ownership would cover the stairwells, external doors, any gardens and other common parts.


This can be a similar scenario to a leasehold agreement, but there’s one key difference: with common ownership of property contracts, there’s no time limit on the arrangement. This can be a clear benefit of commonhold ownership.


Under a leasehold agreement, every flat owner will receive a leasehold agreement. Under a common ownership contract, there’s just one document that covers the entire block of properties.


What is a “Commonhold Association”?

In property law, a commonhold association refers to a group of property owners who are involved with common ownership. In, for example, a block of flats, there will be a number of residents who, as part of the agreement, are jointly responsible for maintaining those common areas within the overall building.


Those owners collectively form the commonhold association. A legal document is drawn up to determine the legal rights and obligations of each member of the association. In addition, every property owner will contribute financially to the upkeep of those common areas, and they will have a say as to how the association is run.


Any mortgage lenders have a right to form part of the commonhold association. This can sometimes be an issue when trying to get agreements in place as it may delay the process. Lenders will tend to view any decisions from a purely financial point of view.


While the presence of those mortgage lenders within a commonhold association is often seen as one of the potential downsides of the agreement, they do have an interest in the property and it’s necessary for them to be included.


Can I Convert a Property from a Leasehold?

There are circumstances in which a leasehold property can be converted into a freehold contract. There’s a formal route that may allow the leaseholder to purchase the freehold by law, providing that they have met certain requirements.


The other possibility is less formal and it requires consent from the freeholder. In this scenario, the leaseholder approaches and asks if they can purchase the freehold. Your solicitor can advise on these points, and help you to draw up the documentation that you will need.


It may be possible to convert a leasehold agreement into a commonhold ownership contract, but this is more complex. This will require the agreement of every leaseholder who has a responsibility for the common parts of a building. The agreement of mortgage lenders is required.


If just one leaseholder isn’t willing to pursue the conversion, this can be an issue. However, if everyone is in agreement, they can approach the freeholder with a view to transferring to a commonhold contract.


Once again, it’s a good idea to seek legal advice on this subject. If you wish to convert from leasehold to commonhold ownership of the property, there’s a process to follow and your solicitor is there to help you navigate this.


What are the Benefits of Commonhold Ownership?

The big advantage that commonhold ownership has over leasehold is the time factor. Under a leasehold agreement, there’s a set time in which the property can be inhabited before that lease expires. In many cases, the lease may not expire for decades, so there’s no immediate concern.


Nonetheless, a brief time limit could affect future sales of the property. If there’s a shorter time span before the lease runs out, it needs to be established as to whether the contract can be extended.


With common ownership of property arrangements, there’s no time limit in place. This offers breathing space and greater flexibility when it comes to selling the property or leaving it in a will. The presence of one document is another benefit of commonhold ownership. The commonhold association can operate as one entity and that may keep any legal costs down.


Your solicitor can provide more information on the benefits and potential downsides of commonhold agreements and whether they are right for you. This is a relatively new factor in Irish property law, so it makes sense to be fully aware of the mechanics of common ownership of property, together with your rights and obligations.


With commonhold ownership being a relatively new development, it’s extremely important that you understand this concept properly before you commit to the scheme. Luckily, we can help.


At McGinley Solicitors LLP, we’ve been dealing with all aspects of property transactions since 1988. We pride ourselves on knowing all there is to know about property law, including the scope and ramifications of recent revisions to pertinent legislation. To find out more about commonhold ownership and whether it’s right for you, please give us a call at 1800 998 969 or complete the online form and we’ll get back to you.

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