Leasehold Enfranchisement: Proposed changes for 2019
The Law Commission has proposed a number of changes for leaseholders who wish to purchase the freehold interest of their property or extend their leases. The reforms are under consultation and a decision will be made once the consultation period ends, in January 2019.
What is leasehold ownership?
Leasehold title provides time-limited ownership, i.e. a 99-year lease, and control of the property is shared with, and limited by, the freehold owner – the landlord or freeholder. When the lease ends, ownership returns to the freeholder, unless the leaseholder extends the lease or purchases the freehold. As a consequence of the features of leasehold ownership, legislation has been enacted to give leaseholders ‘enfranchisement rights’. This type of right allows leaseholders to extend their lease, providing them with longer-term security of their home and overcomes the issue of the diminishing value of the asset. Leaseholders also have the right to purchase their freehold, known as freehold acquisition or freehold reversion.
In England and Wales, there are 4.2 million leasehold properties, comprising 18% of all housing stock. Of those, 2.2 million are owner-occupied, 1.8 million are privately owned and let out to tenants, and 0.2 million are owned by social landlords and let in the social rented sector.
What are the reforms suggesting?
The reforms aim to:
- Replace the current right of leaseholders to purchase a one-off 50 year lease extension at a high ground rent, with a right to purchase unlimited longer lease extensions without a ground rent;
- Enhance the enfranchisement rights for owners of leasehold houses on estates where there are shared services;
- Remove the requirement that leaseholders must have owned the lease of their house for 2 years before making a claim (thereby allowing the owners of leasehold houses to make claims immediately and avoid premiums increasing while they wait) and
- Remove technical barriers and complexities regarding governing eligibility and generally to improve and simplify the enfranchisement procedure, so that it is easier to operate and there are fewer traps to fall into, and less likely to result in costly disputes between parties.
Watch this space – you are able to have your say, read the full consultation, and check the progress of the project by visiting the Law Commission website.