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Leasehold law set for radical reform

Friday 20 July 2018

Radical new proposals to provide a fairer deal for homeowners caught in a "leasehold trap" have been announced by the Law Commission this week.

Following plans put forward by the Government to ban the sale of leasehold houses, the independent legal body has outlined a range of measures to help existing leaseholders buy the freehold of their homes.

The core elements of the Law Commission’s proposals include clearing away many of the legal and contractual complications that leaseholders face when attempting to buy a freehold; making it easier for lessees to collectively buy a freehold; and for leaseholders to more easily extend their terms.

According to Government estimates, there are currently just over four million leasehold properties in England, with houses accounting for around 1.4 million of these (although it has been suggested those figures are significantly underestimated) with leases ranging from between 40 to 999 years.

And although enfranchisement give leaseholders the right to purchase the freehold to their property, or to obtain an extended lease, major concerns have been raised over this type of tenure, and the statutory enfranchisement process itself has been widely criticised.

Law Commissioner Professor Nick Hopkins said: “Enfranchisement offers a route out of leasehold but the law is failing homeowners: it’s complex and expensive, and leads to unnecessary conflict, costs and delay.

“We’ve heard of untold stress caused to homeowners who have had to put their lives on hold because of issues with their leases. Clearly, that’s not right, and our solutions for leasehold houses will provide a better deal for leaseholders and make sure that the law works in the best interests of house owners.”

Secretary of State for Communities, James Brokenshire MP, commented: “This government is committed to tackling the unfair leasehold practises that exploit homeowners. We have already announced radical new measures to ban leaseholds for almost all new build houses and reduced rents to a peppercorn. I welcome these proposals by the Law Commission that will help homeowners get a fair deal.”

As part of plans to improve the enfranchisement process for leasehold home-owners, the Law Commission has published proposals for leasehold houses which include:

  • options for reducing the price that leaseholders pay to the landlord such as by changing the formula used to calculate the cost, following the Government’s request to set out ways that the price could be reduced
  • improving the right for leaseholders of houses to buy the freehold from their landlord
  • introducing an alternative right to purchase unlimited longer lease extensions without a ground rent – of (say) 125 or 250 years
  • making the enfranchisement procedure simpler to understand, to minimise disputes and prevent leaseholders falling into legal traps
  • removing the requirement that leaseholders must have owned the lease of their house for two years before making a claim
  • potentially scrapping whether leaseholders should contribute to their landlord’s legal costs, and if not, capping the contribution at a fixed maximum amount 

A full Consultation Paper is expected in September this year, in which the Law Commission will put forward proposals to address wider issues with the law of enfranchisement, for both houses and flats. The Commission however have been asked to prioritise solutions for existing leaseholders of houses and to set out those solutions before summer recess.

Respond to the consultation