Leasehold Enfranchisement – Consultation on Reform

28th November 2018

The Law Commission has published a Consultation Paper on the law of leasehold enfranchisement, which discusses widespread reform for leaseholders’ rights to:
  • extend the lease of their house or flat;
  • participate, with other leaseholders, in the collective purchase of the freehold of their block of flats; and
  • purchase the freehold of their house.

The Current Law

Latest Government estimates state that there are over 4 million leasehold properties in England, making up 18% of all residential housing.  Impacting on the lives of so many, leasehold ownership has therefore been the subject of much debate for some time now.

The existing law allowing leaseholders of residential properties to purchase the freehold and/or extend the leases of their houses or flats has been developed piecemeal, and is the product of over 50 Acts of Parliament, totalling over 450 pages of legislation. Unsurprisingly therefore, the system has been described as inconsistent, unnecessarily complex and inherently unfair for leaseholders, often leading to protracted and expensive legal proceedings which are weighted in favour of landlords.

Proposals for Reform

The Law Commission’s project is designed to pursue certain policy objectives.  It aims to make the enfranchisement process more transparent, fairer and cheaper for tenants. It has produced a number of proposals to which responses are requested.

Some of the key proposals are as follows:

  1. Replacement of the complex categorisation of ‘houses’ and  ‘flats’ with the introduction of the new concept of a “residential unit”, for which there would be a universal right to a lease extension
  2. A new right of “estate enfranchisement” to allow for the collective freehold acquisition of an estate comprising multiple buildings
  3. Another new right for leaseholders who did not participate in previous collective enfranchisement claims to do so at a later date
  4. Removal of so called ‘barriers to enfranchisement’ such as the low rent test and two year ownership requirement
  5. Introduction of prescribed forms, deemed service provisions and limited grounds for challenging the validity of any claim
  6. Provision for all disputes to be handled by the First-tier Tribunal (Property Chamber), removing the complex division of responsibility between the County Court and Tribunal

In addition, the Law Commission has been asked to set out the options for reducing the premiums payable by leaseholders, whilst ensuring sufficient compensation is paid to landlords – two diametrically opposed interests!  It will be for Government to decide whether, and if so how, to put this into practice.

Conclusion

Given the magnitude of the proposals, the Consultation Paper (albeit lengthy) makes for a very interesting read.  It is an extremely ambitious project and the industry waits with bated breath to see how Government will balance the competing interests of leaseholders and landlords.

The consultation period is open until 7 January 2019 (having been extended from 20 November 2018) and the Law Commission invites responses from anyone with an interest in enfranchisement reform, including leaseholders of houses and flats, landlords, campaigners, property developers, industry bodies, professionals and academics.

Following the conclusion of the consultation, the Law Commission will publish a final report setting out their recommendations for reform, and the options available to Government.