The Law Commission has recently published their latest reports on leasehold reform focusing on leasehold enfranchisement, reviving commonhold as tenure and right to manage.
These recently published reports supplement the Commission’s January 2020 publication. Each one of these three reports contains detailed recommendations for leasehold reform.
Below are the key recommendations on Leasehold Enfranchisement.
Leasehold Enfranchisement – Key Recommendations
- It is suggested to have a single, unified set of enfranchisement rights for leasehold owners of both flats and houses. This should reduce the complexity of existing enfranchisement rights found across different statutes.
- A new right to extend leases of both flats and houses to a term of 990 years with no ongoing ground rent, and no opportunity for the landlord to impose new, onerous obligations. Currently, an extension of 90 years is available for flat owners, and 50 years for house owners. If this recommendation is implemented, leaseholders would only ever have to extend their lease once.
- A new right for leaseholders to buy out the ground rent under their leases without having to extend the lease term. This would be beneficial to those who cannot afford to extend their lease but wish to reduce their ongoing ground rent liability. Ground rents and ground rent escalation are becoming increasingly difficult and in particular for lenders. The introduction of this right may help get around the obstacle of unacceptable ground rent.
- Currently, a leaseholder should have owned a property for 2 years before they can exercise their enfranchisement rights. The Law Commission’s recommendation is that this 2-year ownership requirement is removed in order to widen the scope of enfranchisement
- A new, single procedure for making enfranchisement claims. The current systems are complicated which can all too comfortably result in failed claims if you do not strictly follow their requirements. The suggested new procedure would remove these complications and would counter the current procedural advantages that landlords often use as a result.
- Presently a leaseholder is liable for the landlord’s costs incurred in dealing with their enfranchisement claim. Although these costs are required to be reasonable, they are not strictly defined and are another unknown cost among the wider process of unknown costs. The Commission recommends that such costs should either be done away with or otherwise limited. This would give the leaseholder knowledge of what costs they will be incurred at the start of the process.
It is not known how and whether these recommendations will be adopted by the Government. In case these recommendations are implemented, they will certainly increase the range of enfranchisement rights available and make them more accessible to a larger number of leaseholders. It is obvious that the recommendations are in favour of the leaseholders and will it be interesting to see how, or to what extent, the Government will try and protect the interests of landlords when considering and implementing these recommendations.
