Overhaul of the leasehold system: new consultation 

Summary

Following the Law Commission reports published in July 2020 setting out options for reform to shape the future of home ownership, the Government has now launched a consultation on further particular proposals which were not previously consulted on in the 2018 consultation papers. This is part of the Government’s wider proposals to overhaul the current leasehold system. Leasehold Minister, Lord Stephen Greenhalgh says, “The current leasehold system is outdated, unbalanced and broken — and we are determined to fix it.”

This consultation, which will run until 22 February 2022, includes proposals to enable leaseholders to take control and ownership of the buildings in which their homes are contained where there is a mixture of residential and non-residential use, such as restaurants, shops and bars.

Home ownership and protecting the rights of leaseholders remains high on the agenda for Government and this consultation follows the Housing secretary Michael Gove’s warning earlier this month that developers must pay to fix the cladding crisis as the Government overhauls its approach to building safety – read our Law-Now for further details on this.

Key proposals in this consultation

• Raising the non-residential limit, for mixed use buildings to qualify under both the enfranchisement and the right to manage legislation by increasing the limit for non-residential use from 25% to 50%. This will mean that in the future, significantly more buildings will qualify; and
• Introducing mandatory leasebacks on collective enfranchisement claims whereby landlords will be required to take a leaseback of non- qualifying units within the building e.g commercial units. Currently, taking a leaseback of these units is voluntary. Making such leasebacks mandatory will reduce the costs of enfranchising these types of buildings as the value attributable to commercial units can often make up a significant element of the total premium.

A link to the full consultation can be found here.

Conclusion

This is one of the Government’s many reforms in the pipeline for the current leasehold system.

Proposals were announced last year to abolish “marriage value” and to introduce an online calculator with prescribed calculation rates, and this year thousands of leaseholders are due to benefit from the ending of ground rents – read our Law-Now for more information on this.

We will continue to keep you updated.