On 21 July 2020, the Law Commission published reports as part of the thirteenth Programme of Law in the biggest review into leasehold legislation for a generation.
The three particular areas of reform include leasehold enfranchisement, Right to Manage (RTM) and commonhold.
Leasehold Enfranchisement – lease extensions and freehold purchases
To review the enfranchisement process to make it simpler, easier, quicker and more cost effective, and to examine the options to reduce the price payable by leaseholders to enfranchise.
The Law Commission recommendations include:
- A new right to leaseholders of both houses and flats to a lease extension for a term of 990 years, with no ongoing ground rent under the extended lease;
- Providing a new right for leaseholders to “buy out” the ground rent under their lease without also having to extend the length of their lease;
- Removing the requirement for leaseholders to have owned their leases for two years before exercising enfranchisement rights and allowing flat owners to buy the freehold of a block where up to 50% of the building is commercial space;
- Making it easier and cheaper for leaseholders of flats to enfranchise by providing for groups of flat owners to acquire multiple buildings in one claim and allowing leaseholders to require landlords to take “leasebacks” of units within the building which are not let to leaseholders participating in the claim;
- Ensuring that a leaseholder is protected against the imposition of onerous or unreasonable obligations on acquisition of the freehold title to his or her home;
- Replacing the various procedures for making enfranchisement claims with one, streamlined procedure;
- Providing that all enfranchisement disputes and issues should be decided by the Tribunal; and
- Eliminating or controlling leaseholders’ liability to pay their landlord’s costs, in place of the current requirement for leaseholders to pay their landlord’s uncapped costs, which can equal or exceed the enfranchisement price.
RTM
To review the existing legislation with a view to making the RTM procedure simpler, quicker and more flexible, particularly for leaseholders.
Headline recommendations include:
- RTM should be exercisable in respect of leasehold houses as well as flats;
- The non-residential limit be increased to 50%;
- RTM should be exercisable in respect of premises which comprise or contain at least one residential unit held by a qualifying tenant;
- Removal of the current rule requiring the participation of both qualifying tenants in premises with only two residential units;
- Shared ownership leases granted for more than 21 years qualify as long leases for the purpose of the RTM legislation;
- The abolishment of the current exclusion from RTM of premises with a resident landlord and no more than four units;
- It should be possible for a single RTM company to acquire the RTM in respect of more than one building in a single RTM claim.
Commonhold
To recommend reforms to reinvigorate commonhold so that it may offer a workable alternative to leasehold, for both existing and new homes.
The full list of recommendations from the Law Commission can be found here.
At Grant Saw, we eagerly await the outcome of the Law Commission recommendations. Should you wish to discuss any of this in further detail, please do not hesitate to contact Tyrone Grant, Head of Leasehold Enfranchisement, via email or directly on 020 8305 3522.