At the moment, the government is keen to implement the recommendations of the Law Commission and make changes to improve the leasehold ownership system. The first of the changes is the abolishment of ground rent, which will soon be implemented for all new leases.
The government isn’t stopping there, though. In its consultation, named “Reforming the leasehold and commonhold systems in England and Wales” the government is now seeking views on further reforms. The key topics are enfranchisement and the proposed changes to the use of commonhold as a method of property ownership.
Enfranchisement
Enfranchisement refers to the right for leaseholders to collectively purchase the freehold interest in their property. The Law Commission’s recommendations as to the nature of reform in this area included:
- Making enfranchisement rights available to more leaseholders in more types of property
- Reducing the costs of making an enfranchisement claim, and giving leaseholders more control over those costs
- Making the enfranchisement process less complicated and protecting leaseholders from procedural traps
The current law excludes the potential for enfranchisement if non-residential parts of the building exceed 25% of the total internal floor area. In order to increase the availability of enfranchisement rights to a greater number of leaseholders, the government is consulting on proposing to increase the non-residential limit to 50% of the total internal floor area.
Mandatory Leasebacks
This is a collective enfranchisement where the landlord may be entitled to retain certain units on leases after the leaseholders have acquired the freehold interest, known as a “leaseback”. The current regime enables a landlord to insist upon leaseholder grating them a leaseback, but there is no equivalent right for tenants to insist a landlord takes one. The Law Commission is in favour a reciprocal right as it would reduce the price payable for the enfranchisement by the leaseholders. The government is therefore seeking views on this change.
Commonhold
Commonhold ownership is where owners of units in a shared property, such as a block of flats, take permanent ownership of their home together with an opportunity to participate in the management of the common parts of the property. This has not been taken up very much, so the government wants to “reinvigorate commonhold”.
Suggestions include extending the offer to shared ownership leases but seeks input as to how voting rights would work where ownership is still split.
The consultation is open until midnight on 22 February 2022, we shall provide the outcomes of the consultation once they are available.
If you have any queries relating to long leasehold issues, please contact Joe Brightman or Molly Frankham.
