Law Commission backs making commonhold “preferred alternative” to leasehold home ownership

The Law Commission has proposed replacing leasehold with commonhold as the “preferred alternative” as it outlines long-awaited recommendations for reforming home ownership in England and Wales.

The legal body has released three separate reports advising the Government on how to make it easier for home owners to extend their leasehold or buy the freehold,  reforming the right to manage process and making it easier to create and build a commonhold property.

It recommends that leaseholders should be able to make a claim to purchase a freehold straightaway, rather than having to wait for the current two years

There should also be a new right to a lease extension for leaseholders of both houses and flats, for a term of 990 years, in place of shorter extensions of 90 or 50 years under the current law, the Law Commission said.

There would be no ongoing ground rent under the extended lease.

The Law Commission also recommends eliminating or controlling leaseholders’ liability to pay their landlord’s costs.

Similarly, with right to manage, the Law Commission recommends removing the existing obligation on leaseholders to pay the landlord’s costs of the, including of any Tribunal action and relaxing the qualifying criteria so that leasehold houses, and buildings with up to 50% non-residential space, can qualify.

Its commonhold report proposes introducing flexibility into the way commonholds can be built and managed, enabling their use for developments of all types and sizes.

The Law Commisison said: “It is now for Government to decide whether it should be compulsory, in all or some circumstances, incentivised, or left optional.”

Professor Nick Hopkins, commissioner for property law at the Law Commission, said: “The leasehold system is not working for millions of homeowners in England and Wales.

“We have heard how the current law leaves them feeling like they don’t truly own their home.

“Our reforms will make a real difference by giving leaseholders greater control over their homes, offering a cheaper and easier route out of leasehold, and establishing commonhold as the preferred alternative system.

“The reforms will provide a better deal for leaseholders and make our homes work for us, and not somebody else.”

Campaigners at the National Leasehold Campaign backed the report and called for the Government to immediately create legislation to be created as soon as possible.

Bruce Collinson, a director at Leeds estate agent and property company Adair Paxton was less sure of the benefit of the changes though.

He said: “The Law Commission’s recommendations are driven by the south and London where the premium for a lease extension is often millions of pounds.

“In the north, it’s more likely to be between £2,500 to £20,000, so much less onerous.

“You also have to keep in mind that many major freeholders are related to The Queen or pensions and if their assets are stripped they would have to be reimbursed.

“Who is going to compensate them? It would be more realistic to look at simplifying the system for leaseholders, because at the moment it’s wrapped tightly around English and Welsh property law, and is archaic.

“Any owner occupiers buying a home with a short lease purely in the hope that these reforms come to fruition would be taking a big risk.

“Such drastic changes would take many years to implement and could come to nothing.

“However, investors and elderly downsizers who are less reliant on securing a mortgage are often less worried about lease lengths and it’s likely to be these buyers that show most market interest as a result of these proposals.”

Mark Hayward, chief executive of NAEA Propertymark, added: “We have long called for action to be taken to help leaseholders who have been misled and treated unfairly so it is really positive to see  the Law Commission’s report.

“For too long, housebuilders and developers have not been transparent enough about what it actually means to buy a leasehold property, which in turn has meant many owners have been faced with escalating ground rents and unreasonable fees, leading them into financial difficulty.

“In 2017 we argued for leasehold reform through our ‘Leasehold: A Life Sentence?’ report which found that 93% of respondents wouldn’t purchase another leasehold property.

“It’s vital that the proposals laid out in today’s report lead to actions as soon as possible to give some hope to those who are currently trapped in leasehold properties with no easy route out.”


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