Leasehold Reform: Law Commission Unveils New Proposals

By Lucy Riley

Head of Leasehold Enfranchisement

Earlier this week the Law Commission published its recommendations on reforming the law relating to the rights of owners of leases of flats and houses in England and Wales (tenants).

Commonly referred to as ‘fleecehold’ it is generally accepted that tenants currently get a raw deal.

In addition to some changes to the technicalities surrounding the various procedures, we highlight some of the recommendations which, if implemented, would improve the processes involved in extending leases and buying the freehold of residential buildings and make them more easily accessible and cost effective:

  • Removal of the two-year ownership condition when applying to extend the lease of a house or flat
  • The new extended lease will be for 990 years added on to the old lease term
  • Tenants will be able to ‘buy-out’ the ground rent in their lease without having to extend the lease term
  • The antiquated qualification procedure for dealing with leasehold houses will be removed
  • Those who own three or more flats in the same building will be entitled to join with other tenants to buy the freehold of their building
  • A building will need to have more than 50% in commercial use (up from 25%) to be considered outside of the enfranchisement regime
  • A resident landlord will not be exempt from a claim by the tenants to purchase the freehold of a building
  • Tenants will be able to apply to buy the freehold of more than one building on an estate
  • Tenants will be able to choose whether they want the freeholder to take a lease back of the flats which are not participating in the purchase of the freehold and/or commercial parts of the building/estate
  • There will be one uniform process for all enfranchisement claims
  • The rules on serving documents will be simplified as will the process involved in dealing with a missing landlord
  • An enfranchisement claim will no longer automatically fail if an application is not made to the tribunal within the statutory time limit
  • All disputes will be settled by a tribunal rather than the court
  • The tribunal will have powers to complete transfers and leases where the landlord fails to do so
  • Disputes which concern valuation matters only would be decided by one valuer judge in the tribunal rather than a panel of three experts
  • Depending on the valuation method adopted by the government, landlords will either be prevented from recovering legal and valuation costs from the tenants or will be limited to a fixed amount
  • Landlords and tenants will continue to bear their own costs which relate to the tribunal process unless the other party behaves unreasonably
  • Leases granted outside of the statutory procedure will need to be approved by the tribunal. If this is not done, it will affect the way in which those leases are interpreted and will take effect
  • Any agreement that seeks to prevent the exercise of statutory rights will be void.

On the whole, the reforms are likely to be welcomed by landlords and tenants; however, as expected, they are in the main very tenant friendly.

Whilst the government has indicated that leasehold reform is high on its agenda, and real change is likely to be popular, fast-track legislation is unlikely given that the government already has its hands full dealing with the ongoing impact of the pandemic and Brexit.

For more information on the new Law Commission report and to find out how we can help you, please contact a member of our Commercial Property Team on 0345 646 0406 or fill in our online enquiry form and a member of our Team will be in touch.