Law Commission Reform: Buying your freehold or extending your lease
The Law Commission has now published its long-awaited further report on reforming Leasehold Enfranchisement. This is one of three reports published on 21 July which forms part of the Law Commission’s wider project on Residential Leasehold and Commonhold Reform included in its Thirteenth Programme of Law Reform. The Leasehold Enfranchisement report is published alongside reports on changes to the existing Right to Manage regime and Reinvigorating Commonhold.
This Leasehold Enfranchisement report follows the separate valuation report published on 9 January 2020 which contained “options” for reforming the valuation process.
The July report now focuses on recommendations for reforming and improving all other aspects of the enfranchisement regime including the eligibility criteria and the statutory procedure to be followed when exercising rights. The paper is described as a “root and branch review” of enfranchisement rights and the recommended reforms are intended to make the law work better for leaseholders. This is in keeping with the Law Commission’s Terms of Reference outlined at the start of the project which include two key policy objectives:
- To promote transparency and fairness in the residential leasehold sector; and
- To provide a better deal for leaseholders as consumers.
The report contains no less than 102 recommendations. We headline below some of the key recommendations:
- Leasehold owners of houses and flats should no longer have different enfranchisement rights. This is aimed at reducing the complexity of the current regime. The Law Commission now seeks to apply recommendations in a uniform way regardless of whether the property is a flat or a house.
- Expanding the scope of enfranchisement rights so that more leaseholders can buy the freehold or extend their lease. Reform includes enabling leaseholders to enfranchise immediately on acquiring their lease rather than having to wait two years. It will also allow collective enfranchisement in buildings where up to 50% of the building is commercial space where the current limit is 25%.
- Introducing a single, uniform and more efficient procedure for making enfranchisement claims (whether lease extensions of flats, collective enfranchisement of blocks or 1967 Act claims in respect of houses). By simplifying the legal procedure, the Law Commission seeks to remove the “legal traps” for leaseholders that are perceived to exist under the current regime.
- Enabling the Tribunal to determine enfranchisement disputes and issues, replacing the current division between the Tribunal and the County Court.
- Allowing leaseholders of both flats and houses to have a right to a new lease extension for a term of 990 years in place of the shorter extensions of 90 or 50 years under the current regime.
- Introducing a right for groups of flat owners to be able to acquire multiple buildings in one claim (e.g. an estate) rather than exercising rights on a building by building basis.
- Introducing changes which will either eliminate or control the costs that leaseholders currently pay towards their landlord’s costs of dealing with claims.
Given the spotlight that has been shining on residential leasehold in recent years and the importance of housing policy on the political agenda, the extent and nature of the Law Commission’s recommended reforms will be of little surprise. What remains to be seen is how these recommendations will be implemented and how they will work in practice for both landlords and tenants alike.
Please also see our Law-Now articles: Law Commission Report on proposed changes to Commonhold and The Law Commission recommends a simpler, cheaper and more flexible approach to RTM Claims.
