Bishop & Sewell

Having ploughed through over 800 pages of the Law Commission’s long-awaited report, it seems logical to suggest that the answer to this is ‘yes’ but as to when and to what extent remains unclear.

Here, our Senior Partner, Mark Chick, provides further commentary and opinion in this latest article.

The Law Commission’s report: leasehold home ownership: buying your freehold or extending your lease was published on 21st July 2020.

This has been accompanied by two other reports on Right to Manage and the introduction/ reinvigoration of Commonhold.

Further details of each of these can be obtained by looking at the Law Commission’s website.

The report can be reviewed here with summaries here:

• Leasehold home ownership: buying your freehold or extending your lease
• The future of home ownership – Summaries

The Law Commission’s summary document is easier reading as it runs to 16 pages rather than the 859 pages of the full report. Mark has also written a short summary note which was first published on 21 July and can be read here.

If the majority of these reforms were to be enacted, there are a number of points which would be good news for leaseholders.

A very short overview of some of the key points appear below:
• Costs – The proposals suggest a change of emphasis in terms of costs, with tenants not needing to pay the landlord’s costs on enfranchisement.
• Lease extensions –A new right to extend to 990 years, not plus 90 years as is currently the case and a right to buy out the ground rent (only) if your lease is more than 250 years long.
• Collective claims – The threshold for bringing a collective claim would be changed so that there would only be a ban on enfranchisement if 50% of the building was used for non-residential purposes. In addition, there is a requirement to retain their interest in non-participating units (by way of a ‘leaseback’), thereby reducing the overall cost of buying the freehold.
• Valuation – in a separate paper (published earlier this year in January) the Law Commission set out options to reduce the price paid on enfranchisement by adjusting the calculations in favour of the flat owner. These proposals are very political in nature, and hence a ‘range’ of options were presented for consideration by government.
• Flats and Houses treated the same – the proposals are that the same regime would apply to flats and houses and that many more properties that would previously not have qualified as houses to buy their freehold will do so (particularly those with leases of the internal parts only).

All of these proposals are part of the Government’s stated objective of making it “cheaper and easier” for people to buy their freehold or extend their lease.

What next?
None of this is yet Law and these proposals from the Law Commission would need to be responded to by Government and, there would need to be sufficient Parliamentary time for these to be turned into Legislation.

The early indications that we have seen suggest that there may be some cross-party support for these proposals. However, as you will be aware, the Government has many other things on its plate at the moment, including the Coronavirus situation and also Brexit. In addition, this is just a proposal from the Law Commission which Government have to respond to, but do not actually have to do anything with. History is littered with a number of very good Law Commission reports and recommendations which have not become law.

Will there be reform?
It seems logical to suggest that the answer to this is ‘yes’ but as to when and to what extent remains unclear. What is clear is that these reforms are at least 3-5 years away, if not further and might indeed not happen as mentioned above.

Do I wait to enfranchise?
As timescales are not clear – if you have a lease that is very short, or one that is approaching a ‘danger point’ in valuation terms (such as 80 years), then delay is not an option.

Even in other cases, recent market adjustments mean that now is as good a time as any (if not even better than normal) to be thinking about buying your freehold or extending your lease.

To get in contact with the leasehold team at Bishop & Sewell to discuss any of the above issues email or call 0207 631 4141 and ask to speak to a member of the Landlord and Tenant team.

Mark Chick Senior Partner   +44 (0)20 7079 2415

Category: News | Date: 27th Jul 2020

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