Here in the UK, commonhold has been held out by the current government as a more progressive property ownership alternative to leasehold. The white paper issued by the MHCLG in March 2025 made it clear that this government wishes to reinvigorate commonhold and to make it the default ownership tenure, bringing to life the recommendations set out by the Law Commission in 2020 via a new legal framework.
A new way forward is to be welcomed, but will it be different enough for the home owner at the heart of the change? As one of the largest managing agents here in the UK and with our sister company – PICA https://picagroup.com.au – being the largest in Australia, we are well positioned to contrast the two approaches. Australia has been lauded as one of the success stories of the commonhold approach. As part of understanding how we can assist our clients with commonhold, we looked at this from the consumer perspective to contrast the differences.
[The ultimate approach to be adopted here in the UK will vary to the legislative framework across the various states in Australia. Also note that there are less common tenure alternatives in Australia to strata title as well as nuances in legislation that have a bearing, so for this purpose we have focused on the core principles of commonhold only].
Costs
Unsurprisingly, the costs experienced to maintain the communal areas of a strata scheme in Australia are broadly similar to an apartment block here in the UK. Ongoing upkeep such as gardening, cleaning and reactive repairs, to capital works on areas such as lift replacement, all require a similar level of commitment from the home owners, noting of course the usual variances occur due to the condition of the property, its age and the range of facilities it has. The impact of inflation on these costs is also similar, with rising insurance costs also contributing to significant increases over the last 5 years or so. Similar to what is proposed for commonhold in the UK, a mandatory capital works plan and contribution is required. This is broadly sensible, unlike leasehold whereby setting aside cash for major works isn’t required by law.
Building safety requirements are not as prescriptive in Australia as the recently introduced legislation in the UK, though general construction defects found are broadly similar. Owners corporations can apply for concessional government remediation loans and limited grant funding. Because the owners own a share of the common parts, remediation costs are more likely to fall to home owners than if they held a lease on a similar property in the UK, and they have fewer legal remedies available for liability.
In addition, the administration costs to run an owners corporation (or body corporate) in Australia are broadly similar to what it costs to run a resident management company (RMC, RTM or commonhold association) here in the UK, with the same necessary costs for professional, legal and accounting services. If a leasehold development doesn’t have a management company in place currently, a commonhold association will need to bear similar costs should it convert to commonhold.
It is challenging to compare UK versus Australian costs as these can vary widely depending on the properties, but at the time of writing, strata levies in Sydney are comparable to service charges in London as a percentage of property value (close to 1% annually).
Strata levies are a relevant factor in property sales the same way as service charges are in the UK, though the financial health of the owners corporation itself is an intrinsic part of the property valuation in Australia, given that it underpins the share of the common parts that the buyer is buying, and their lender is appraising.
Do’s and don’ts
On strata schemes, ownership entitles you to the ownership of your lot/flat, as well as a share of common parts. Shared ownership of these parts must be governed and respected collectively. As well as state specific strata legislation, the bylaws of the building must be observed by the lot owners, governing such matters as parking, noise control, visitors and pets, to permitted decoration and repairs.
In effect, the building bylaws and state legislation operate together, in a similar manner to how the lease and leasehold legislation in the UK operate together. The challenges and disputes that can arise are broadly similar in both countries, as commitment levels are not always aligned across the community. Whether these shared covenants are set out in a lease, or in the bylaws of a building (or in a commonhold community statement), the same level of collective goodwill and education on the requirements is critically important.
Decision Making
Similar to resident management companies in the UK, each owners corporation requires lay people to join the committee and take on more accountability to run the building. Australian committees typically have a maximum number, and are comprised of a chairman, a treasurer and a secretary as a minimum, to be elected at a mandatory AGM. You must be a lot owner and may be tested on your fitness and probity to join, with mandatory training coming to New South Wales (NSW) in 2025. Many decisions go to a vote, with set percentages required for resolutions to be passed. A compulsory manager can also be appointed if the committee falls into dysfunction, similar to the appointment of a manager via the First Tier Tribunal here in the UK.
In UK leasehold, the management is either devolved to the leaseholders via a resident management company, or to the freeholder if the lease doesn’t provide for one. There are benefits to both approaches. A management company can be run by the lessees, but this isn’t always fully successful. A freeholder holding the management function takes on accountabilities within the lease, and usually employs professionals to ensure these are met, and the building is adequately maintained (albeit with some of this decision making not sitting directly with the lessees). The residents can, of course, apply to the courts for the right to take on the management directly via an RTM company, or form a recognised residents association to gain a stronger voice.
While similar challenges exist in Australia when it comes to low owners stepping up, there are several differences built up over many years of good practice and more recent legislation in Australia that could be highly effective, and easily implemented into leasehold law here.
Transparency and Fairness
Similar to the UK, the legislation prescribes the frequency and level of reporting requirements, but there is a higher threshold in Australia for record keeping of correspondence, financial and company secretarial information related the running of the owners corporation.
There are similar rights attaching to lot owners in terms of raising complaints, resolving disputes, and statutory notifications as with leasehold, though the current UK leasehold legislation lacks clarity as an overall framework, and is in need of reform.
Strata mangers (managing agents) must be certified and licensed to operate and complete mandatory CPD, as well as hold registration with the office of fair trading. Most managing agents in the UK subscribe to voluntary codes of conduct of relevant membership bodies, or are regulated by the RICS. Mandatory regulation of all property agents has been proposed in the UK for some time, and this is likely to be brought forward by the current government.
So which is better?
There are many hurdles to be overcome to ensure that overhauling commonhold in the UK will stand up to legal scrutiny, and have the right controls in place to ensure that property valuations can be safeguarded. But it can be successful as can be seen in Australia and other countries with broadly similar tenures in place.
Leasehold is not without its flaws, and it is challenging to meet the collective objectives of all stakeholders. The legislative framework is unwieldy, with everything from the language, the unintended consequences and the large body of case law surrounding it making it difficult to navigate, and for home owners to interpret. Ownership of a lease for a reducing term is clearly not as attractive as owning a commonhold property, but this is usually reflected in the price.
Ultimately, it comes down to the experience of the home owner and as outlined above, communal living – whether leasehold or commonhold – comes with the same critical requirements for success:
- A fully funded scheme to ensure the development is safe and well maintained.
- A healthy respect for the relevant legislation and the privileges of others on the property.
- Democratic decision making.
- Transparency and fairness in how the scheme is operated.
These can be achieved by both tenures with suitable reform. There have been many sensible proposals put forward to reform leasehold, and it remains to be seen how government will bring these forward to align both tenures in a timely and cost effective manner. We look forward to bringing our experience to bear in assisting clients as the reform takes shape.
Get The Support You Need
If you’d like to discuss how commonhold or leasehold reforms could impact your property, or if you have any questions about how we can support you through these changes, get in touch with our team today.
