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Radical Changes to Home Ownership Proposals

What else is 2020 going to throw at us? Covid19, Lockdowns, BREXIT…if that is not enough The Law Commission published reports in July which could radically and fundamentally change what we recognise as leasehold ownership.

If you did not happen to be sitting at your laptop on 21st July 2020 at 12.01am, eagerly awaiting the release of The Law Commission Report then let us summarise briefly what it could mean for the future of leasehold properties.

The Law Commission sets down 102 proposals spread over three reports released and aimed at, amongst much else, simplifying the procedure for extending lease terms of years for flats and houses, abolishing rents in all new leases (which would capture lease extensions) and looks at options for calculating a fair premium for the leaseholder payable to the landlord in return to the extended term of years. The reports propose that the statutory term shall be increased from the current statutory period being an additional 90 years over the existing unexpired term to 990.

The Law commission seek to provide solutions for the issues connected with ownership of a leasehold property including high ground rents, unreasonable reviews of ground rents, diminishing terms of years, excessive service charges and poor management. In addition to the proposals to abolish new ground rents and create a fairer system for calculating the premiums payable for the extended lease term the proposals look to  control the levy of service charges and require more transparency in respect of the calculation of service charges.   It also looks to ensure that contributions to reserve funds become a statutory requirement within a lease thus avoiding the lack of funds for major works. 

So that does it mean for Leaseholders?

Leaseholders of both flats and houses will  see a relaxing of the qualifying criteria required for eligibility for lease extension, lengthier statutory terms (990), ground rents abolished and a simplified, cheaper system and further regulations regarding landlords' legal fees which historically have fallen to the leaseholder may now be an expense of the landlord where a market premium is charged, making it more affordable and a lesser financial risk for the leaseholder.

Leaseholders of houses on long leases (over 21years) can hope to see a system similar to that for extending lease terms for flats and a radical reform of the complex system set out in the Leasehold Reform Act 1967 both in relation to lease extensions and freehold purchase. The reports propose clear eligibility criteria which at best are currently confusing and look to resolve  the lack of specific clear time frames thus easing the frustrations caused by the outdated procedures currently in place.  Owners of houses on long leases can welcome a much-simplified system the creation of new leases for houses whether new build or otherwise ABOLISHED.

Leaseholders will welcome the proposals albeit the date and form of their introduction into the statute books remains to be seen - Covid19, Lockdown and Brexit all taking priority in the queue.

The reports boldly go where no one has dared to tread. They state their intention to make buying a freehold or extending a lease easier, faster and cheaper. Bold indeed.

AND for it finale if it is not enough to turn leasehold ownership on its head the commission are looking to reinvigorate the introduction of a Commonhold system.  The report sets down proposals to integrate Commonhold, for converting existing leasehold developments to Commonhold and making it attractive to developers in the hope of promoting its introduction into the UK (see blog) finally replacing our "very English" leasehold tenure. 

If you would like to discuss the proposals and how they may affect you, please  contact  Linda Ball on 01295 661537.

Linda is a Senior Associate in the Residential Leasehold team, specialising in Property and Land Law, in particular Leasehold Property.