3 September, 2018
Property Law Reform – what’s on the agenda?
The Law Commission, under its’ 13th Programme of Law Reform (launched at the end of last year) it is actively reviewing 3 key property related areas of law:
It has also identified a further 4 property related areas as “potential projects” that may be considered in the near future subject to resources:
We are monitoring developments as they occur. This article summarises the Law Commission’s key proposals in each area.
Inconsistency, complexity and unfairness have been identified as issues in the current residential leasehold legislation governing enfranchisement, service charges, lease administration fees, rights of first refusal, the right to manage and the appointment of a manager. Limited regulation of managing agents is said to leave leaseholders exposed to high fees and poor service and issues with the commonhold regime have also been identified.
The Law Commission’s initial focus is 3 areas it considers to be a priority:
Unfair terms in residential leasehold
Potentially unfair terms in leases (including ground rents which increase exponentially, fixed services charges and fees an assignment of leases) are not regulated and cannot be challenged by leaseholders under landlord and tenant law. Instead the leaseholder must rely on unfair terms law.
The issue the Law Commission has identified is that that whilst unfair terms law can be used to fill the gap when challenges are brought by the original leaseholder, it is an unsuitable solution for challenges brought by a subsequent leaseholder (i.e. when the lease is sold or assigned) because unfair terms law only considers the circumstances as they existed when the term was agreed, it does not take in to account circumstances surrounding the assignment to the subsequent leaseholder.
The Law Commission is considering whether each time a lease is assigned it should be seen as creating a new contract between the landlord and leaseholder for the purpose of unfair terms law.
Registered land and chancel repair liability
The Law Commission plans to resolve an issue that has arisen under the Land Registration Act 2002. The Land Registration Act 2002 was meant to prevent chancel repair liability binding purchasers of land after 2013 unless protected on the register but a question has arisen regarding the legal status of liability for chancel repair which has produced uncertainty on whether homeowners are nevertheless bound despite the Act.
In the future the Law Commission may undertake a project to create a modernised, flexible legal framework for agricultural leasehold.
Defects in commercial leasehold law is said to adversely affect 1.2 million businesses requiring premises in England and Wales (both domestic and foreign companies looking to establish in the UK) and their landlords.
The main problems identified relate to the lease renewal process under the Landlord and Tenant Act 1954 and the law as it relates to guarantees and assignments which are said to cause needless red tape, inhibit economic growth and productivity and cause tenants, landlords, local authorities and central government to suffer significant preventable financial losses. It is also said that the current law creates uncertainty and stifles legitimate commercial transactions.
Despite extensive and long-standing cross industry support and the Government recognising that commercial leasehold law could be improved the Government does not currently support a project to address these problems due to other departmental priorities.
All involved in the moving house process (buyers, sellers, conveyancers, lenders, estate agents and mortgage brokers) have identified lack of speed and lack of transparency in the home-moving process as issues that need to be resolved.
The Law Commission is waiting for the Government to refer its’ plan before it considers a project in this area. Steps have been taken towards this including a Call for Evidence completed in December 2017 and the Government response issued in in April 2018 (an update on developments can be found here).
Public rights of way
The Law Commission has also considered a project to reform and update the law relating to certain, largely non-vehicular, public rights of way, clarifying the nature and extent of those rights. The project will not be considered further until the Government finishes its current work with stakeholders to improve the system.