The Law Commission’s recommendations to reform leasehold are little more than window dressing, a prominent campaigner has claimed.
Louie Burns, managing director of lease extension specialists Leasehold Solutions, warns the legal body’s early suggestions ahead of a consultation on reform of the sector gives far too much weight to freeholders’ legal rights.
He said: “Whilst we welcome any changes that will make leasehold fairer for leaseholders, we were surprised by the optimism with which much of the media has greeted the Law Commission’s proposed ‘solutions’. Having reviewed the summary document in detail we see things rather differently.
“Our main concern is that the document gives far too much weight to freeholders’ legal rights by promising to ‘keep in mind the interests of landlords who would be affected by reforms which lower the premium’ paid by leaseholders. The proposals are contradictory as any reform will create winners and losers but the Law Commission proposal suggests that compensation will still be in the landlords’ favour.
“By committing to ensure that ‘sufficient compensation’ is paid to landlords, the Law Commission has been unable to propose the radical reforms needed to make leasehold enfranchisement significantly cheaper and easier for leaseholders.”
He described the proposals as vague and some, such as attempts to reform the valuation process, as unworkable.
Last month, the Law Commission outlined initial proposals on leasehold reform which will be included in a wider consultation covering both houses and flats in September.
Among the options the Law Commission now proposes is the suggestion that leaseholders will no longer have to own their property for two years before they can make a claim.
It also says the current system for extending a lease is “inherently unfair” to leaseholders and the valuation model – a complex combination of the time left on the lease, the current and future property values, the potential ground rent losses – is too complicated.
The Law Commission said the statutory enfranchisement process was “the product of over 50 Acts of Parliament, totalling over 450 pages, with numerous anomalies and unintended consequences”.
Instead, the Law Commission has proposed two options.
The first uses a simple formula to set the premium such as 10% of the property value or ten times ground rent.
Another proposed option is using the “market value” taken in the current system, but removing the “marriage value” – which is a figure calculated by taking the property price and adding any future losses in ground rent incurred by extending the lease.
The Law Commission said it would also invite views on whether leaseholders should have to pay the landlord’s costs in a claim.