The Law Commission sets out options for leasehold reform

Michael Lloyd

January 9, 2020

The Law Commission of England and Wales has published a report setting out options to reduce the cost that leaseholders have to pay to buy the freehold or extend the lease of their homes, known as enfranchisement.

These include reducing the price and introducing a single procedure that would apply regardless of the enfranchisement right being claimed.

The Law Commission recommended prescribing the rates used in calculating the price to remove a key source of disputes, and make the process simpler, more certain and predictable.

It also proposes helping leaseholders with onerous ground rents, by capping the level of ground rent used to calculate the premium.

Professor Nicholas Hopkins, property law commissioner, said: “We were asked to provide options for reform that save leaseholders money when buying their freehold or extending their lease, while ensuring that sufficient compensation is paid to landlords.

“This is what we’ve done.

“We are ready to help the government in implementing whichever options for reform they choose.”

The Law Commission also suggested the creation of an online calculator for determining the premium to make it easier to find out the cost of enfranchisement and reduce uncertainty around the process.

The Commission also wants to enable leaseholders who are collectively enfranchising a block of flats to avoid paying ‘development value’ to the landlord unless and until they actually undertake further development.

Both the Housing Secretary Robert Jenrick and Mark Hayward, chief executive at NAEA Propertymark, welcomed the proposals.

Jenrick added: “I welcome these proposals from the Law Commission which provide options to make it simpler and faster for leaseholders to buy their freehold or extend their lease.

“I will consider the proposals outlined in this report carefully and set out our preferred way forward in due course.

“We have already committed to addressing the abuses of leasehold seen in recent years, by reducing ground rents to a peppercorn level and limiting new leasehold to apartments, save in the most exceptional circumstances.

“The Competition and Markets Authority is examining the alleged misselling of leasehold properties and I will also await their findings with interest.”

Hayward said: “It’s encouraging to see that steps are being taken towards resolving the inherent issues of leasehold which is something we argued for through our 2017 ‘Leasehold: A Life Sentence?’ report which found that 93% of respondents wouldn’t purchase another leasehold property.

“While we still need a robust solution for all of those affected by the issue, this a positive step in making it easier for leaseholders to buy their freehold or extend their lease and we encourage further reform to tackle this problem.”

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