Law Commissions Report on Leasehold Reform

Posted

This week, the Law Commission published its report on buying freeholds and extending leases. The report has been awaited since 2017, when the Law Commission announced it was given the task of promoting transparency and fairness in the residential leasehold sector and to provide a better deal for leaseholders as consumers.

At over 800 pages, there is a lot to consider and so we’ve set out the main points of interest.

There are also two other reports that have been released which deal with the right to manage and the issue of reinvigorating the concept of commonhold. All three reports feed into a wider project of enfranchisement reform having issued its report on Valuation in January this year.

On major change will be the uniform treatment of flats and houses under the new regime as, currently, these types of property are treated differently under the current law. This will apply to lease extensions, collective enfranchisement and right to manage claims.

So, what are some of the recommendations for lease extensions?

A leaseholder will be able to obtain a 990 year lease extension (with break rights to allow a landlord the right to redevelop the block within 12 months of the expiry of the existing term or within 5 years of each 90 year period);
The current two year ownership requirement will be abolished;
There will be an immediate transfer on assignment of a lease;
A new right for very long leaseholders to simply buy out their ground rent without extending the term;
Shared ownership leases will not need to be staircased to 100% before they are extended.

How about buying freeholds – how will this change?

Collective enfranchisement rights will be extended to multiple buildings;
The bar of 3 or more flats from participating will be removed;
There will be a proposed standard list of questions to determine qualification criteria;
The commercial element within the building will be increased to 50%;
Leasebacks will be mandatory for areas note demised by long leases and where leaseholders are not participating in the claim

These are just some of the proposed changes which are designed to benefit leaseholders by simplifying the process.

For both lease extensions and enfranchisements, one straightforward procedure will be implemented which will centralise the process and limit the ways in which a notice can be invalidated. The draft lease and / or draft transfer deed will be provided at response notice stage to speed up the transaction and the new process will contain fewer time limits.

The role of the Tribunal will also change as they will be able to hear all issues in dispute instead of the current Tribunal / Court hybrid we have at present. Also, depending on what valuation method is adopted by the Government, either each party will bear their own costs or, if not adopted, landlords’ costs will be subject to a fixed regime.

Of course, at this stage, the report is a set of suggestions for the Government to mull over and who knows whether, once enacted, it will still look the same. The Government is rather busy right now and so it could be years before this is made into law.

What is certain though is that this area of law is set to change for the better and will make home ownership in England and Wales more coherent and less confusing for all leaseholders.

If you have any questions, issues or concerns about what this latest report could mean for you, our experts are on hand to offer advice and support.