Leasehold Enfranchisement and Leasehold Reform 2020

October 5, 2020 3:33 pm

Leasehold Enfranchisement and Leasehold Reform 2020

 

What is Leasehold Enfranchisement?

There are two types of property ownership, freehold or leasehold. Freehold is the outright ownership of the property, including the land it is build on with no time limit to the ownership. Owners of leasehold properties own the property for a fixed term (as set out in the lease) but not the land on which it stands on with the ownership of the property reverting to the freeholder at the end of the lease term, unless the lease is extended.  The value of leasehold properties can depreciate as the lease expiry date gets closer, making them less desirable and difficult to sell.

Leasehold enfranchisement is the process you go through to either extend your lease or purchase the freehold. In most cases however, leasehold properties are blocks of flats, therefore it will be necessary for a majority of the leaseholders to agree to purchase the freehold together outright. This is known as collective enfranchisement and will likely be more cost effective than each leaseholder extending their lease individually.

What is the Leasehold Reform 2020?

Under the Leasehold Reform, Housing and Urban Development Act 1993, the government has been proactively giving leaseholders protection against short leases, by giving them the right to extend their lease or the right to buy the property.

However, this system has long been under criticism and recently there has been pressure of further reform from The Law Commission of England and Wales, who have called for an urgent shake-up of the leasehold and enfranchisement system.

This year, The Law Commission called for the process of extending or buying a lease to be simplified, and for costs to be capped. It took the example of someone with a £250,000 property with only 76 years left on the lease, who was paying a ground rent of £50 which would rise to £200 a year as the lease got shorter. Under the current system it would cost £16,453 to buy out the lease. The Law Commission proposed a different formula, which would cut costs to around £10,000. Although, campaigners say this is still too expensive.

Professor Nick Hopkins, Commissioner for property law said:

“The leasehold system is not working for millions of homeowners in England and Wales. We have heard how the current law leaves them feeling like they don’t truly own their home.

“Our reforms will make a real difference by giving leaseholders greater control over their homes, offering a cheaper and easier route out of leasehold, and establishing commonhold as the preferred alternative system. The reforms will provide a better deal for leaseholders and make our homes work for us, and not somebody else.”

However, it is unlikely that this will happen quickly even with the drive for reform, meaning that new changes would not become law for perhaps 2-6 years, if not longer. Leases under 90 years can start to cause issues and issues, and leases under 80 years can significantly affect the value of the property. Therefore, it is advisable not to wait for this reform to take effect as there are no guarantees as to when this reform will take effect.

What should I do if I want to extend or purchase my lease?

Extending or purchasing your lease can be a lengthy and complex process, and there are several processes and obligations you will need to be aware of, along with a strict timetable that must be adhered to by all parties. It is therefore vital to seek expert legal advice if you are considering extending or purchasing the freehold to your property. Our experienced Landlord and Tenant team are specialists in leasehold enfranchisement. We have the knowledge and expertise to guide you through all the legal requirements and can advise on matters including:

  • Lease extension
  • Collective enfranchisement
  • Freehold purchase of a house
  • The right of first refusal
  • The right to manage

Our specialist Landlord and Tenant solicitors will advise you on all costs and obligations and will help you determine your eligibility and guide you through the complex statutory provisions. To speak with one of our specialist landlord and tenant team please call on 023 9244 8100 or make an online enquiry You can also contact one of the team directly by clicking on the links below:

Please note that this article is not intended as legal or professional advice, it is for general guidance only and updates to the law may have changed since it was published.

 


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