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On 21 December 2017, following a consultation exercise, the Government announced plans to tackle the growing problem of newly built houses sold as leasehold rather than freehold, and to limit ground rents on new lease agreements. Leasehold reform was included in the Law Commission’s 13th Programme of Law Reform with the aim of finding ways to make buying a freehold or extending a lease “easier, faster, fairer and cheaper.”
The Law Commission’s work
The Law Commission’s work on leasehold reform is complete. The Commission carried out a full review of enfranchisement law and procedure. Enfranchisement describes buying the freehold interest or extending a lease agreement.
On 19 July 2018, the Commission published proposed measures (PDF 477 KB) to help existing leasehold homeowners buy the freehold of their houses. In September 2018 a consultation paper (PDF 7.12 MB) proposed “a new, single regime for leasehold enfranchisement designed to benefit leaseholders of houses and flats.”
On 9 January 2020, the Commission published Leasehold home ownership: buying your freehold or extending your lease – Report on options to reduce the price payable. A final report on reforming all aspects of leasehold enfranchisement was published on 21 July 2020 entitled Leasehold homeownership: buying your freehold or extending your lease. A summary report was published alongside.
The Law Commission also reviewed leaseholders’ Right to Manage. A consultation exercise was launched in January 2019 with a final report published on 21 July 2020: Leasehold home ownership: exercising the Right to Manage. There is also a summary document.
The Law Commission issued Commonhold: A Call For Evidence (PDF 771 KB) on 22 February 2018. A public consultation exercise launched on 10 December 2018 with a final report published on 21 July 2020: Reinvigorating commonhold: the alternative to leasehold ownership together with a summary document.
A two-part legislative process
On 11 January 2021, Robert Jenrick, the Secretary of State, said leasehold reform would be tackled through two pieces of legislation.
A Bill in the forthcoming session will “set future ground rents to zero”. This will also apply to retirement properties, but commencement in respect of retirement properties will be delayed for a period.
Future legislation will:
- Reform the process of enfranchisement valuation used to calculate the cost of extending a lease or buying the freehold.
- Abolish marriage value.
- Cap the treatment of ground rents at 0.1% of the freehold value and prescribe rates for the calculations at market value. An online calculator will simplify and standardise the process of enfranchisement.
- Keep existing discounts for improvements made by leaseholders and security of tenure.
- Introduce a separate valuation method for low-value properties.
- Give leaseholders of flats and houses the same right to extend their lease agreements “as often as they wish, at zero ground rent, for a term of 990 years”.
- Allow for redevelopment breaks during the last 12 months of the original lease, or the last five years of each period of 90 years of the extension to continue, “subject to existing safeguards and compensation”.
- Enable leaseholders, where they already have a long lease, to buy out the ground rent without having to extend the lease term.
Responses to the Law Commission’s remaining recommendations on enfranchisement, commonhold and right to manage will be issued “in due course” and translated into law “as soon as possible”.
On the timing of future legislation, Lord Greenhalgh, the Minister responsible for leasehold, responded to questions on 5 January 2021 and said:
We need primary legislation. I have been told by Professor Hopkins, who was in charge of the Law Commission work, that the preparations to get primary legislation ready for consideration by noble Lords will take approximately one year, so we are probably talking about the third Session.
Related Government proposals
The Government has said it will:
- Require the regulation of all property/managing agents. A working group has developed recommendations for the regulatory regime, see: Regulation of Property Agents Working Group: Final Report (PDF 655 KB), (July 2019). The Government is considering the recommendations.
- Make buying and selling a leasehold property easier with timescales for agents and freeholders to respond to leasehold queries and maximum fees. There’s an intention to introduce standard mandatory forms for leasehold information.
- Establish a Redress Reform Working Group with ombudsmen and redress schemes to help drive the programme of reform, including the setting up a housing complaints resolution service. The Group was established in January 2019.
Leasehold reform in Wales
On 1 May 2018, the Welsh Housing and Regeneration Minister at that time, Rebecca Evans, announced that the Welsh Government had joined the Law Commission’s leasehold reform project. A multi-disciplinary task and finish group on leasehold reform was established. The Task and Finish Group issued a report, Residential Leasehold Reform (PDF 892 KB), in July 2019 which was described as “just the end of the first key stage of the work” the Group is undertaking.
On 6 February 2020, Julie James AM, Minister for Housing and Local Government, referred to the publication of final reports by the Law Commission (due in Spring but published in July 2020) and said she would update Members with her intentions once the findings had been considered. On 14 October 2020 she told the Senedd:
…we are working very hard with the leasehold reform provisions that the Law Commission has looked at. They recently reported, and we’re looking to see what can be done in conjunction with some UK legislation, if at all possible, just due to the lack of time we’ve now got in Senedd provisions to be able to do this.
Library briefing paper: Leasehold and Commonhold Reform
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