Law Commission not going far enough with attempts at leasehold reform

Recent recommendations by the Law Commission on reforming leasehold property have been compared to ‘window dressing’ by those opposed to the reforms. 

Louie Burns, managing director of lease extension specialists, Leasehold Solutions, believes that the reforms offer a lot more rights to owners of freehold property. 

Burns commented: “Whilst we welcome any changes that will make leasehold fairer for leaseholders, we were surprised by the optimism with which much of the media has greeted the Law Commission’s proposed ‘solutions’. Having reviewed the summary document in detail we see things rather differently. 

“Our main concern is that the document gives far too much weight to freeholders’ legal rights by promising to ‘keep in mind the interests of landlords who would be affected by reforms which lower the premium’ paid by leaseholders. The proposals are contradictory as any reform will create winners and losers, but the Law Commission proposal suggests that compensation will still be in the landlords’ favour. 

“By committing to ensure that ‘sufficient compensation’ is paid to landlords, the Law Commission has been unable to propose the radical reforms needed to make leasehold enfranchisement significantly cheaper and easier for leaseholders.” 

Overall, a variety of recommendations in the report have been deemed “inherently unfair,” by Burns. Amongst the concerns were the complexities and injustices associated with extending a leasehold lease because of the valuation model that is attached. Amidst the concerns for leaseholders here was the idea that an extension price is at the mercy of: current and future property prices, the time remaining on the lease and uncertainty regarding ground rent losses. 

The Law Commission concedes that: “the product of over 50 Acts of Parliament, totalling over 450 pages, with numerous anomalies and unintended consequences”. 

Where potential difficulties arise, the Law Commission has proposed possible options to ensure leaseholders’ risk is offset. 

One approach is to set a clear premium in the region of 10% of the property value. Another suggestion was using the current ‘market value’ whilst also omitting the ‘marriage value’ (a number calculated by adding the property price and predicted figure of any future loses in ground rent incurred by extending the lease.) 

Do you think the new recommendations have adequately considered the needs of all home-owners? Or, is the report unfairly weighted towards freehold property owners?  

 

 

 

 

1 Comment

  • test

    Many leasehold flats are second properties, providing additional income through letting. There should be a distinction between this kind of property owner and others whose flat is their sole residence i.e. their home. Marriage value should be abolished because the leaseholder has already paid/is paying for the cost of the flat via a mortgage. It is grossly unfair to have to pay a mortgage twice on the same property. The amount spent on repairs and major works by the leaseholders over the years needs to be deducted from the cost of extending the lease, and strict regulation of managing agents is essential.

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