Law Commission consulting on major reforms to leasehold enfranchisement

Written on 1 Oct 2018

On 20 September 2018, the Law Commission published its consultation paper on leasehold enfranchisement reforms.  The proposals put forward by the Law Commission are wide-ranging and aim to address the perceived faults of the existing leasehold enfranchisement regime, which many critics argue is complex, costly and weighted in favour of landlords.

The key proposals put forward by the Law Commission include:

  • Giving leaseholders (subject to certain qualification criterial) the right to extend the term of their lease, as often as they wish and for 125 years or more with only a nominal ground rent payable, as opposed to the current regime which permits a single 50 year extension for houses and (unlimited) 90 year extensions for flats;
  • Removing the two year ownership requirement which current leaseholders need to meet to purchase the freehold of their houses;
  • Removing the “low rent test” and financial limits based on historic rateable values as qualification criteria
  • Giving new rights to leaseholders of houses for the collective purchase of the freehold, where an estate includes houses and flats;
  • Introducing a single procedure to apply to all residential units and to remove the distinctions between houses and flats in the current leasehold enfranchisement regime;
  • Reforming the current valuation methodology applied to premiums paid to extend leases; and
  • Providing for disputes to be dealt with by the Tribunal and introducing a fixed-cost regime.

The consultation period is open until 20 November 2018 and the Law Commission is inviting responses from across the Real Estate sector.