Leasehold proposals welcomes by property lawyer
A Birmingham property lawyer has welcomed proposed reforms that could radically change how leases operate for the UK’s four million house and flat owners in England and Wales.
Charlotte Collins, of Realty Law, says she hopes the consultation document produced by the Law Commission will make the enfranchisement system – the process that enables the owner of a leasehold property to apply to purchase the freehold after two years or extend a lease – more streamlined.
Flat owners generally buy their properties on a leasehold, as opposed to freehold, basis, and although some houses have been sold on a leasehold basis for more than 50 years, recent concerns relating to escalating ground rent have led the Government to announce that it will ban the sale of leasehold houses.
Charlotte said more than one million house owners are caught in a “leasehold trap”.
“Thanks to a lease clause, housing developers can charge ground rents that double every ten years, which has resulted in these house owners being weighed down with annual bills that run into thousands of pounds,” explained Charlotte.
“These rules have also meant that many people have become trapped in their homes because they have been rendered unsellable and banks won’t offer mortgages on them.”
The Law Commission says it wants to make enfranchisement easier, quicker and more cost effective, by reducing the legal and other associated costs, particularly for leaseholders, by introducing a clear prescribed methodology for calculating the price of the freehold.
It also proposes reducing or removing the requirements for leaseholders to have owned their lease for two years before enfranchising, and to pay their landlord’s costs of enfranchisement.
The Commission says that rationalising and streamlining the system, which currently extends to 450 pages over 50 different Acts of Parliament, and expanding the existing enfranchisement rights and to improving the procedure for claiming enfranchisement rights would help leaseholders, but not at the expense of landlords.
Charlotte said: “Whilst there are many parts of the proposed reforms that need a great deal of thought as to implementation and accessibility, it is hard to see how anyone could object to the principles of the reform and the Commission has put forward some very interesting ideas.
“Seeking to untangle the enfranchisement rules and make them accessible and affordable to leaseholders is to be supported. It is, however, a plan which needs to be tested extensively to make sure that it isn’t derailed by any overly complex process with pitfalls for the unwary.”
The document offers “very interesting lateral thinking ideas” as to how to reduce enfranchisement prices, said Charlotte.
She said claims – mainly in London – that offices are “houses” would no longer apply because the proposals would remove the unsatisfactory definition of what a “house” is and there would be a 25% non-residential limit to all enfranchisements.
“There are lots of ideas contained within the document and it will be interesting to see what contributions property agents, landlords and tenants will offer during the consultation period,” added Charlotte.