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Huge shake-up of leasehold proposed by Law Commission

After months of debate and deliberations, the statutory body that works on legal improvements says system needs total overhaul.

Nigel Lewis

law commission leasehold

Estate agents face major changes to the way leasehold properties are described, managed and sold following the publication this morning of radical proposals by the Law Commission, whose job it is to recommend to government when legal processes should be overhauled.

The Commission’s separate reports on key areas of property ownership – leasehold enfranchisement, the right to manage and commonhold – recommend reforms of the leasehold system and its replacement with a revived commonhold tenure.

Professor Nick Hopkins, Commissioner for property law says: “The leasehold system is not working for millions of homeowners in England and Wales. We have heard how the current law leaves them feeling like they don’t truly own their home.”

Improvements would make it easier and cheaper for homeowners to buy the freehold or extend their lease, and to take control of the management of their block of flats or an estate.

The Commission suggests that all new lease extensions would be 990 years, instead of the current 90 years for flats and 50 years for houses, and that there should be no ongoing ground rent.

Legal costs

Under its reforms, landlords would not be able to pass on their legal costs during the enfranchisement process.

In its commonhold report, the commission makes recommendations that would make it not just a workable alternative to residential leasehold, but the preferred alternative.

“The Law Commission reports are a nail in the coffin for predatory commercial interests seeking to exploit the feudal leasehold system,” says campaigning group the Leasehold Knowledge Partnership.

Industry reaction

Mark Hayward, Chief Executive, NAEA Propertymark (left) : “We have long called for action to be taken to help leaseholders who have been misled and treated unfairly so it is really positive to see  the law commissions report today.

“For too long, housebuilders and developers have not been transparent enough about what it actually means to buy a leasehold property, which in turn has meant many owners have been faced with escalating ground rents and unreasonable fees, leading them into financial difficulty.

“In 2017 we argued for leasehold reform through our ‘Leasehold: A Life Sentence?’ report which found that 93 per cent of respondents wouldn’t purchase another leasehold property.

“It’s vital that the proposals laid out in today’s report lead to actions as soon as possible to give some hope to those who are currently trapped in leasehold properties with no easy route out.”

Government reaction

The Government tasked the Commission to study the sector which it said, “has far too many problems including disproportionate costs to extend leases; poor value property management; and a slow and costly sales process”.

“We will carefully consider the Commission’s recommendations, which are a significant milestone in our reform programme, as we create a better deal for homeowners,” says housing minister Luke Hall.

Read the reports in full.

Read more about the likely effect on block management.

July 21, 2020

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