The Law Commission has set out three ways to cut the cost that leaseholders have to pay to buy the freehold or extend the lease of their homes - a controversial subject on which the government has pledged to take action in the future.
The commission’s recommendations - put to the government but not binding on it - aim to clarify and simplify leasehold enfranchisement as well as making it cheaper for owners.
The government asked the Law Commission to initiate the review to promote transparency and fairness in the residential leasehold sector and provide a better deal for leaseholders.
Each of the three options uses a different method to determine the price of enfranchisement and allow further reforms to make the process simpler and to reduce uncertainty, says the commission.
The report also explains the role that simple formulae – such as a multiple of ground rent – could play in delivering reforms, while explaining that their wider use is not possible under the UK’s human rights laws.
Alongside the three schemes, the Law Commission has put forward a range of other options for reform. These include:
- Prescribing the rates used in calculating the price, to remove a key source of disputes, and make the process simpler, more certain and predictable;
- Helping leaseholders with onerous ground rents, by capping the level of ground rent used to calculate the premium;
- The creation of an online calculator for determining the premium to make it easier to find out the cost of enfranchisement, and reduce uncertainty around the process;
- Enabling leaseholders who are collectively enfranchising a block of flats to avoid paying “development value” to the landlord unless and until they actually undertake further development.
Professor Nicholas Hopkins, Property Law Commissioner says: “We were asked to provide options for reform that save leaseholders money when buying their freehold or extending their lease, while ensuring that sufficient compensation is paid to landlords. This is what we’ve done. We are ready to help the government in implementing whichever options for reform they choose.”
In response, Housing Secretary Robert Jenrick comments: “I’ll consider the proposals carefully and set out our preferred way forward in due course. We have already committed to addressing the abuses of leasehold seen in recent years, by reducing ground rents to a peppercorn level and limiting new leasehold to apartments, save in the most exceptional circumstances. The Competition and Markets Authority is examining the alleged mis-selling of leasehold properties and I will also await their findings with interest.”
Even the summary of the Law Commission's report is a dense 31 page read - it's here.