The Proposed Reforms
We welcome today’s Press Release from the Government “Government reforms make it easier and cheaper for leaseholders to buy their homes” suggesting the biggest reform ahead for English Property law for 40 years:-
The Press Release suggests the following reforms:-
- Leaseholders of both flats and houses will be given a new right to extend their leases to 990 years at no ground rent (rather than the existing additional 90 years at no ground rent for flats and additional 50 years at a modern ground rent for houses).
- Establishing a “Commonhold Council” a partnership of leasehold groups, industry and government in order to establish the tenure of commonhold in the marketplace as an alternative to leasehold ownership.
- A “cap” on ground rents when a leaseholder extends their lease (we presume this is referring to informal lease extensions to stop unfair tactics being used by Landlords by offering cheaper premiums in exchange for escalating ground rents).
- Prohibitive costs such as “marriage value” to be abolished and calculations of premiums to be made fairer, cheaper and more transparent.
- Introduction of an online calculator to make it simpler for leaseholders to establish the expected premium to extend their lease or to buy their freehold.
- Measures to protect the elderly in respect of retirement properties.
- For collective enfranchisement claims, the ability for leaseholders to agree a restriction on future development of their building to avoid paying ‘development value’.
- Legislation to be implemented to set ground rents in new leases to zero.
We are delighted for leaseholders to see news on the reform that so many leaseholders have been waiting for. However, the press has led to a flurry of questions from our clients to ask how the reforms affect their existing claims, whether to put their claims on hold or delay commencing an intended claim.
Over the last few years, we have followed the lengthy consultation papers and recommendations put forward to the Government by the Law Commission and we are concerned that this very short press release lacks detail and has raised a considerable number of questions leading to uncertainty of key details and timeframes for leaseholders and practitioners.
Further, we note the press release refers to the reform being “two-part” suggesting the first part will only deal with one change of setting ground rents for new leases at zero.
As members of the Association of Leasehold Enfranchisement Practitioners (ALEP), we are pleased that, on behalf of its members, ALEP has already called for clarity in respect of the proposed reforms including expected timeframes and a response is awaited.
Unfortunately, without the detail of the reforms and how and when they are expected to be implemented, we are unable to provide any further guidance on how the proposed changes may or may not affect claims by a leaseholder to extend their lease or to purchase their freehold.
However, our expectation is that the key and substantial reforms for leaseholders may still be a number of years away. In the meantime, it must be considered that other factors will affect the cost of extending a lease or buying the freehold, for example decreasing lease length and the market value of the property. Decisions by leaseholders whether to act now or wait for further reform may also depend on the personal circumstances of the leaseholders i.e. whether they wish to sell or re-mortgage their property or buy their freehold to take control of the management of their buildings.
We await further news from the Government and look forward to being part of the future evolution of leasehold and commonhold law.