Residential leasehold – simplification of the enfranchisement process
by Lauren Hayes, 10 September 2018
As part the Law Commission’s plans to reform residential leasehold law it is considering ways to simply the enfranchisement procedure and, as part of its considerations, the sale of houses on a leasehold basis has come under particular scrutiny.
Key issues it has identified is the criticism that the sale of houses on a leasehold basis occurs because developers wish to extract an additional profit from homeowners by retaining the freehold and extracting a “ground rent”.
In recognition of this and in advance of its proposals for a new enfranchisement regime (due to be published in September 2018) the Law Commission has published a report summarising its proposed solutions for leaseholders of houses specifically.
A link to the full report can be found here
These are the main proposals put forward:
- The Law Commission will seek to remove technical barriers and complexities in the rules governing eligibility for enfranchisement rights in circumstances where they unjustifiably prevent some leaseholders of houses from exercising such rights.
- The Law Commission also plans to replace the current right of leaseholders of houses to purchase a one off 50 year lease extension at a high ground rent with a right to purchase unlimited longer lease extensions without a ground rent.
- In terms of estates with shared services, the Law Commission plans to enhance enfranchisement rights through the proper provision of the continuation of such services and the additional ability for the estate to be enfranchised as a whole.
- In respect of the time period for eligibility, the Law Commission proposes removal of the requirement that the leaseholders must have owned the lease of their house for two years before making the claim to allow the owners of leasehold houses to make a claim immediately to avoid premiums increasing while they are waiting.
- The Law Commission also plans a general simplification of the enfranchisement procedure to remove the current traps owners of leasehold houses are subject to, to make it easier to operate and less likely to result in drawn out and costly disputes between the parties.
- It also plans to consider the contribution that leaseholders of houses are expected to make towards to landlord’s non-litigation costs and whether leaseholders should be expected to make such contributions in the future as well as options for reducing the price (known as the “premium” that leaseholders of houses must pay their landlord.
- Whilst the Law Commission recognises that it must bear the interest of landlords in mind and that its proposals to reduce the premium paid by leaseholders will inevitably benefit leaseholders at the expense of landlords, its overall view is that the proposals to simplify the law and make it more efficient will help all those involved in the enfranchisement process to avoid unnecessary cost, conflict and delay.
We are monitoring developments as they occur.