Law Commission recommendations to transform future of home ownership

• On the 21st July 2020, the Law Commission of England and Wales published recommendations for transforming home ownership in England and Wales.

• These reforms could help the owners of the 4.3 million leasehold homes in England alone.

• The reforms aim to allow future home ownership to be freehold, which will work alongside the Government’s planned changes to create fit-for-purpose home ownership across England and Wales.

• The reforms will both reinvigorate commonhold and improve the current system for existing leaseholders.

• The re-invigoration of commonhold will allow people to own a flat forever, with a freehold title and no landlord. By making it easier to convert to commonhold, these proposed reforms will also give leaseholders a route out of leasehold.

• The current system for existing leaseholders will be improved by:
o First of all, the process by which leaseholders can buy or extend their lease (“enfranchisement”) will be improved by making it simpler and cheaper for leaseholders.
o It will be made easier and cheaper for leaseholders to take over the management of their building, by exercising the right to manage (RTM), without having to buy the freehold. The RTM allows leaseholders to take control of services, repairs, maintenance, improvements and
insurance.
o These recommendations have been set out in three reports, the Enfranchisement report, the Right to Manage report, and the Commonhold report.

• Enfranchisement report:
o Recommendations to the scheme of enfranchisement rights aim to make the scheme work more smoothly and efficiently, whilst also shifting the balance of power in favour of leaseholders.
o One of these recommendations aims to benefit more leaseholders from a route out of leasehold by transforming the scope of enfranchisement.
o Another seeks to create a new right for leaseholders which will extend the lease of both houses and flats for a term of 990 years instead of the current law which only allow shorter extensions of 90 or 50 years. This extended lease would mean there was no ongoing ground
rent.
o Other recommendations aim to protect leaseholders from procedural traps and ensuring that they are not forced to pay unreasonable or unnecessary ongoing payments. Additionally, they aim to eliminate or control leaseholders liability to pay their landlord’s costs.

• Right to Manage report:
o Recommendations to the RTM report are designed to make the RTM regime cheaper and more attainable for leaseholders.
o It should remove any leaseholder’s obligation to pay the landlord’s costs of the RTM process, including for any Tribunal action. Additionally, qualifying criteria should be relaxed. This would mean leasehold houses with up to 50% non-residential space can qualify for RTM, and
leaseholders will be able to claim the RTM over more than one building at a time.
o It has also been recommended that the RTM claims process be made easy through reducing the number of notices that leaseholders must serve. Tribunals should also be given the power to waive minor procedural mistakes in the process.
o Further recommendations suggest improving information and training that is available to RTM companies and their directors, ensuring more efficient and effective handover of management responsibilities by leaseholders.

• Commonhold report:
o The recommendations to the commonhold report aim to make commonhold the preferred alternative to residential leasehold for all involved.
o It is recommended that it be made simpler, quicker and cheaper for leaseholders to convert from leasehold to commonhold.
o Additionally, introducing flexibility into the way commonholds can be built and managed will enable their use for developments of all types and sizes.
o They also suggest creating a robust regime for financing commonholds.
o Finally they recommend improving the day-to-day operation of commonholds, which will enhance the experience of the homeowners living within them.

If there is any information you wish to discuss further, please contact one of our partners.

This article is prepared with the intention of providing general information on the changes in law. Philip Ross Solicitors accept no responsibility for errors it may contain and the coverage of the topic is not comprehensive. You are advised to speak directly to the writer or another partner within this firm with any specific enquiries on the topic addressed.

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Alicia is part of the property investment and finance team and leads the residential team. Her practice is diverse and includes negotiating deals for domestic and offshore clients.