The Future of Leasehold
There has been widespread publicity about the leasehold houses scandal where unscrupulous developers sold houses on a leasehold basis so that they could charge exorbitant ground rents which doubled every ten years resulting in houses which are unsalable. As a result of this the Government has set in motion several consultations to reform the leasehold system. The latest development is the publishing of three reports by the Law Commission under the heading “The Future of Home Ownership”, looking at enfranchisement, the right to manage, and commonhold. There has also been a consultation launched on how to improve the buying and selling process.
The good news is that the Government state
“Our terms of reference are not neutral. The Government requires us to make recommendations that would alter the law in favour of leaseholders.”
They also set out the options for reducing the price paid by leaseholders for enfranchisement (purchase of the freehold).
The "bad" news is that most of the recommendations need to be passed by Parliament. However leasehold reform has all-party support; there is an All Party Parliamentary Group (APPG) now has 162 members and 12 friends (including the Prime Minister).
It remains to be seen how much power large freeholders have as they will certainly exert pressure to prevent these reforms from being accepted.
The Tchenguiz Family Trust, Long Harbour and Wallace Estates are very large freeholders campaigning against reform as they are such wonderful people, and ignorant leaseholders know nothing about safety (cladding for example?). They are hoping that when they mention the word “safety” everyone will take notice. They are currently targeting the Building Safety Bill in order to sneak in legislation giving the freeholder great powers to keep the status quo. They seemed to have forgotten that in the Grenfell fire the problem was due to the structure, not weak management.
The Law Commission strongly recommends the adoption of commonhold although I am not sure that the suggestions on conversion from leasehold go far enough. It must be made easier and cheaper, and given wide publicity, otherwise nothing will change.
The three reports extend to nearly 2,000 pages. These reports are very detailed so they may be the blueprints for a draft act.
Fortunately they have produced a summary of all three reports and an overall summary, available on www.lawcom.gov.uk/project/residential-leasehold-and-commonhold/.
The following article gives more info on the recommendations and on timescale:
Earlier this year (2021) the Government announced that they would be abolishing ground rent on all new leases, but this does not deal with the millions of existing leases. They have implied that they will deal with these in the future.
They have also announced that they will set up a commonhold council to instigate the adoption of commonhold.