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A fairer deal for leaseholders?

Thursday 20 September 2018

The Law Commission unveiled its long-awaited consultation on leasehold reform this week, which is seeking views on how to save leaseholders time, stress and money during the enfranchisement process and how to reduce legal costs, prevent unnecessary disputes, and the impact reform may have.

Last year the Government asked the Law Commission to review the enfranchisement process for leasehold houses and flats, and propose reforms that would promote transparency and fairness in the residential leasehold sector and improve processes for existing leasehold homeowners.

In their consultation paper, Leasehold home ownership: buying your freehold or extending your lease, the Law Commission put forward a series of radical reforms, designed to provide a better deal for leaseholders who want to purchase the freehold or to extend the lease of their home. According to the Commission, these proposals would:

  • Make the process (known as “enfranchisement”) easier, cheaper and quicker
  • Improve and enhance the rights of leaseholders to buy their freehold or extend their lease
  • Introduce a simpler unified procedure for houses and flats
  • Remove limitations on the right to enfranchise, including the requirement that leaseholders must have owned their property for two years before making a claim

The leasehold system has been widely criticised as being too costly and difficult to understand, and seen to be overly complicated - being the product of over 50 Acts of Parliament, totalling hundreds of pages. Not to mention, there are different rules for leaseholders of houses and flats.

Law Commissioner Professor Nick Hopkins said: “The current system is complex, slow and expensive and it’s failing homeowners. Many feel that they are having to pay twice to own their home. Our proposals would make it easier and cheaper to buy the freehold or extend the lease of their home, ensuring the system works for ordinary homeowners across the country. We want to hear views from across the spectrum on how this complicated area of law can be improved.”

Following the release of the consultation, Housing Minister Heather Wheeler reiterated the Government's position of being committed to banning leaseholds for almost all new build houses and restricting ground rents to a peppercorn. She stated that complicated processes and disproportionate costs are unacceptable and welcomed the Law Commission’s proposals, which she said, have the real potential to help those who are having to deal with these outdated practices.

NAEA Propertymark Chief Executive, Mark Hayward, commented: “Thousands of homeowners are stuck in leases across the country facing escalating ground rent, charges for making basic alterations and growing more concerned that their homes are unsellable. Our Leasehold: A Life Sentence? report, found that a third of leasehold house owners currently trying to sell their homes are struggling to attract a buyer because they don’t own the freehold.

“Helping those who feel trapped by their situation is a real challenge and we hope this process will result in a robust solution for all those affected and who are unable to sell their homes.”

Earlier this month we submitted written evidence to the Housing, Communities and Local Government Committee inquiry into leasehold reform. We argue that the Government’s programme of work on residential leasehold reform must go further to ensure developers no longer build on land when they do not own the freehold and put measures in place to restrict charges. We also believe that right of first refusal should be extended to houses and the procedure for right to manage must be simplified. In addition, the Government must ensure developers compensate leaseholders to remedy onerous clauses and purchasers of new build homes have access to an ombudsman scheme. 

You can read our full response here, and for more information on leaseholds, take a look at our leasehold lobbying page which includes everything from our newly released groundbreaking research, to help for members on how to market and sell leasehold properties.

The Law Commission's consultation is open for one month and closes on 20 November 2018. You can respond here.