Leasehold property has faced strong criticism for some years now. Critics have argued that the process to extend a lease is too costly and complicated and issues with doubling ground rent or service charge payments following the Grenfell tragedy have highlighted some of the pitfalls of owning a property that is subservient to a superior landlord.
The Law Commission’s three reports on property law focussed on how leaseholders could better extend their leases; how they could take control of the management of their block; and revisited the forgotten commonhold principle.
As anyone who has attempted to extend their lease will know, the current procedure can be lengthy and costly. To extend the lease, a leaseholder must first be considered a qualifying tenant and then, if terms of the new lease cannot be agreed amicably, must obtain valuations and ensure the correct service of specific documents on the landlord. Different legislation currently underpins how a lease for a house can be extended to that of a flat meaning that there are also inconsistencies in the rights granted to leaseholders. Similarly, the current Right to Manage legislation does not currently apply to leasehold houses.
The Law Commission’s proposals to unify the legislation governing enfranchisement (extending the lease or buying the freehold) and Right to Manage is sensible and would bring a level playing field to all leaseholders. The proposal to add an additional 990 years to a lease (rather than 50 for a leasehold house or 90 for a leasehold flat as currently) would provide greater certainty to the leaseholder and ensure that the value of the property will remain in their hands. Most revolutionary however, may be the reintroduction of commonhold property, which enables freehold ownership of flats. Whilst commonhold was introduced in 2002, only a small handful of commonhold properties have been built since. The Law Commission’s report, which considered views from numerous stakeholders such as lenders and freeholders, could see an expansion in this type of property ownership if implemented by the government.
Whilst the government battles with Covid-19 and Brexit, it is unlikely that we will see any new legislation in the short term, but with pressure building on the government to implement leasehold reform, it would not be surprising to see the recommendations implemented by the end of this parliament.