Housing and Property Mortgages

Leaseholds reforms aim to simplify much-criticised laws

Reforms to make the process of purchasing or extending a leasehold on a property “easier, cheaper and quicker” have been unveiled by the Law Commission as part of a government-commissioned review.

The plans strengthen the rights of leaseholders seeking to buy their freehold or extend their lease, potentially saving them time and money.

A unified procedure would be introduced for flats and houses, which currently operate under separate regimes for claiming freehold, and there would no requirement for leaseholders to live in a home for a minimum of two years before making a claim for freehold.

The arcane leasehold rules of English law have attracted increasing criticism in recent years after complaints over the difficulties faced by leasehold property owners in asserting their rights and revelations that some housebuilders had sold leasehold homes with annual “ground rent” charges that would double every 10 years.

With legal roots going back to the 11th century, leasehold laws have been subject to changes under 50 Acts of Parliament, generating an overly complicated and costly system for leaseholders, the commission said.

Nick Hopkins, law commissioner and a professor of law at Reading University, said: “The current system is complex, slow and expensive and it’s failing homeowners. Many feel that they are having to pay twice to own their home.”

Leaseholders, who are currently able to extend their lease just once, will be able to do so multiple times under the new proposals. Procedures for dealing with missing landlords would also be brought in, and limits imposed on the objections landlords can make to the validity of leaseholders’ claims.

There are an estimated 4.2m leasehold properties in England — 18 per cent of the housing stock. Nearly all flats are owned as leaseholds, since the arrangement eases the management of blocks of flats.

However, some owners of new-build properties who have been subject to onerous leasehold agreements have had problems trying to sell up, as potential buyers were deterred on discovering that a leasehold applies. Research by NAEA Propertymark, a representative body for estate agents, found nearly one-third (31 per cent) of leasehold house owners trying to sell up had struggled to find a buyer because they did not own the freehold.

Mark Hayward, NAEA Propertymark chief executive, said: “Thousands of homeowners are stuck in leases across the country facing escalating ground rent, charges for making basic alterations and growing more concerned that their homes are unsellable.

Heather Wheeler, housing minister, welcomed the proposals, which she said would tackle “outdated practices” in leasehold. “The government is committed to banning leaseholds for almost all new-build houses and restricting ground rents to a peppercorn. It’s also unacceptable for leaseholders who want to buy their freehold or extend their lease to be faced with overly complicated processes and disproportionate costs.”

The Law Commission is inviting views on its proposals until November 20.

Date published: 21 September 2018


Author: James Pickford 

Word count: 474

Copyright The Financial Times Limited 2018

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