In July this year, the UK Government published its proposals for reforming the law relating to residential property in an attempt to tackle unfair practices in the residential leasehold market.
These proposals are in response to last year’s consultation on implementing reforms to the leasehold legal system.
Our view is generally positive, as the Government’s approach has been comprehensive. They recognise the need to improve the experience of leaseholders in several ways and conclude that the law is unnecessarily complex and at times is weighted in favour of freeholders, to the disadvantage of leaseholders.
Recommended steps include further empowering leaseholders by improving access to legal procedures for dispute resolution, enfranchisement and lease extensions.
The government also proposes to simplify the law, which has developed incrementally over time. This has resulted in a home owner’s statutory legal rights differing significantly depending on whether they own a leasehold flat, a leasehold house, or a freehold house.
The government’s response has been largely met with approval by leaseholders. However, it is unclear when these recommendations will be implemented, with some estimating delays of up to 10 years before the changes are in force. A Leasehold Reform Act 2019 does not seem likely!
Set out below is a summary of the government’s response.
- Provision of clearer information to consumers on how to buy and sell leasehold properties. This will enable prospective buyers to make an informed decision when buying a leasehold property.
- Eradication of the sale of new leasehold houses. Owners of existing leasehold houses would have their enfranchisement rights made simpler and at lower cost, under ‘appropriate cost arrangements’, which are yet to be defined.
- Introduction of the right of first refusal for existing leasehold house owners. Presently, this only applies where the landlord proposes to ‘deal’ with its interest in buildings containing 2 or more flats.
- To make it easier, faster, fairer and cheaper for people to buy their freehold (either individually or collectively) or to extend their lease. The Law Commission is reviewing the process for enfranchisement and we expect to see a report later this year with their proposals.
- The Government supports the increased use of commonhold and wants more commonhold developments. It has requested that the Law Commission look to see what can be done to ‘reinvigorate commonhold’ to make it a more attractive proposal to leasehold owners.
- The introduction of a standardised key features document which provides full lease details at the start of the sales process so that consumers have clear details on the lease before they buy.
- Abolition of ground rent in future leases. For existing leaseholders with onerous ground rent terms the government has been working with industry to get their terms changed to a better deal.
- Tighten controls over the amount of fees and legal costs landlords can demand in return for considering requests for consent (to alter, underlet etc).