Back in 2017 The Law Commission of England and Wales announced it would explore reforms to residential leasehold home ownership and in July 2020 three reports setting out the commissioner’s recommendations have finally been published.

The recommendations form a series of three reports that address reform in three following areas.

1.   Commonhold

The ownership scheme provides an alternative form of ownership to residential leasehold

It estimates that 4.3 million leasehold homes will be affected by the new ‘fit for purpose’ recommendations for reform, which set out to create a commonhold system whereby leasehold flats are sold with freehold title. Commonhold is not a new concept, as it was first introduced in 2002 but resulted in fewer than 20 developments as leasehold ownership, particularly of flats, with landlords being able to make key decisions about the future interest of an individual’s property.

“The Law Commission’s reforms are about making our homes ours, rather than someone else’s asset”, says Prof Nick Hopkins, Law Commissioner.

The proposals include that the government intends to ban leasehold house sales (subject to exceptions) so houses will always be sold on a freehold basis. For future flat sales, the position is less straightforward as it is unclear as to whether a leasehold ban will be enacted, but the proposals suggest that the new commonhold system will ensure that it is easier and cheaper to acquire the freehold alongside the leasehold.

The commission says: ‘While the commonhold regime will be new to practitioners, it is more rational than the complex existing system of leasehold, and will be more efficient to operate than leasehold law’.

For existing homes, the proposals for reform include improved rights for leaseholders.

Full recommendations include measures designed to:

●      make it easier for leaseholders to convert to commonhold and gain greater control over their properties;

●      enable commonhold to be used for larger, mixed-use developments which accommodate not only residential properties but also shops, restaurants and leisure facilities;

●      allow shared ownership leases to be included within commonhold;

●      give owners a greater say in how the costs of running their commonhold are met and ensure they have sufficient funds for future repairs and emergency works;

●      make it easier to take action against those who fail to pay their share of the commonhold’s costs;

●      ensure commonholds are well maintained and insured, with new powers to replace directors who are not complying with the commonhold’s rules;

●      provide owners with flexibility to change the commonhold’s rules while improving the protections available to those affected by the change; and

●      improve mortgage lenders’ confidence in commonhold to increase the choice of financing available for home buyers.

2.   Leasehold enfranchisement

Leasehold enfranchisement allows leaseholders to purchase the freehold of their flat, either alone or collectively with other leaseholders, as well as the ability to extend the lease on their property.

Full recommendations include:

●      providing a new right to leaseholders of both houses and flats to a lease extension for a term of 990 years, with no ongoing ground rent under the extended lease;

●      providing a new right for leaseholders to “buy out” the ground rent under their lease without also having to extend the length of their lease;

●      removing the requirement for leaseholders to have owned their leases for two years before exercising enfranchisement rights and allowing flat owners to buy the freehold of a block where up to 50% of the building is commercial space;

●      making it easier and cheaper for leaseholders of flats to enfranchise by providing for groups of flat owners to acquire multiple buildings in one claim and allowing leaseholders to require landlords to take “leasebacks” of units within the building which are not let to leaseholders participating in the claim;

●      ensuring that a leaseholder is protected against the imposition of onerous or unreasonable obligations on acquisition of the freehold title to his or her home;

●      replacing the various procedures for making enfranchisement claims with one, streamlined procedure;

●      providing that all enfranchisement disputes and issues should be decided by the Tribunal; and

●      eliminating or controlling leaseholders’ liability to pay their landlord’s costs, in place of the current requirement for leaseholders to pay their landlord’s uncapped costs, which can equal or exceed the enfranchisement price.

3.   The right to manage

These reforms address the numerous issues and problems found with the current right to manage (“RTM”) scheme. RTM was introduced in 2002 giving leaseholders in theory the ability to take over the landlord’s management functions in respect of their building, without having to buy the freehold.

Recommendations for reform include proposals to:

●      reduce the costs of making an RTM claim, and give leaseholders more control over those costs;

●      make the RTM available to more leaseholders in a wider variety of buildings; and

●      make the process of claiming the RTM less complicated and less likely to be frustrated because of small procedural errors.

The proposals for reform are generally welcomed although there are some who feel that they do not adequately address the position for current ownership and what happens at the end of a period of ownership. We await the government's response and whether it decides to implement the recommendations.