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Law Commission publishes consultation paper on leasehold enfranchisement

Last month, the Law Commission published a consultation paper on proposals to reform the leasehold enfranchisement process.

The leasehold enfranchisement process allows people who own their property on a long lease to extend their lease, and to acquire the freehold of their house or their block of flats collectively with the other flat owners.

The paper comes about following a request from the Government asking the Law Commission to review the enfranchisement process to make it simpler, easier, quicker and more cost effective.

They considered the current cost for leaseholders to extend their lease or enfranchise (e.g. purchase the freehold of their house or block of flats) and also what should be paid to freeholders in return. On 20th September 2018 the Law Commission published the results of its findings.

In summary, the consultation paper proposes to make enfranchisement easier, quicker and more cost effective by reducing complexity, disputes and delays specifically:

  • Lease extensions - reforming existing rights of leaseholders, including removing the separate rules for houses and for flats, and allowing leaseholders to extend their leases multiple times for longer terms at nominal ground rents;

  • Freehold acquisitions – replacing the financial criteria that is currently used to determine the amount paid to the freeholder, introducing participation rights for those not involved in collective freehold acquisitions so they can join at a later date, allowing leaseholders to acquire the freehold of the whole estate where there is a mixed estate of flats and houses, and removing the requirement that leaseholders must have owned their house for at least two years before they can enfranchise; and

  • Reduce cost – suggesting two possible methods of deciding the price that leaseholders have to pay to freeholders in order to enfranchise, both of which would reduce the current cost.

Whilst the paper does offer some welcomed reform for leaseholders, it has caused some concern for freeholders, particularly considering the proposals for the reduction of the cost payable by the leaseholder to the freeholder in order to enfranchise.

The closing date of the consultation has been moved from 20th November 2018 to the 7th January 2019.

Top Tip It is a good idea to be aware of the proposed reforms and to seek legal advice if you are unsure.

For Commercial Property advice contact Christopher Sykes Head of Commercial Property.