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10 September 2019

What next for leasehold reform?

With the current leasehold regime undergoing a major overhaul, the government has been responding to calls to improve the position of leasehold home owners and to address a perceived imbalance of power which puts the leaseholder at a disadvantage.

Late in 2018 the Law Commission published a consultation paper proposing changes to the leasehold system to address concerns that leaseholders are getting a raw deal.

A series of radical recommendations followed, in a report published on 19 March 2019 by the House of Commons Housing, Communities and Local Government Committee.

In the latest development, the government recently published its response to the consultation, indicating that the reforms would include:

  • a ban on the use of new leases for houses except in limited cases. There would be no transitional period for the ban once the legislation comes into force;
  • introducing a right of first refusal to leasehold house owners so that freeholds cannot be sold behind their backs;
  • ground rents in new leases to be set at zero (exceptions include retirement properties, equity release and mixed-use leases);
  • statutory protection for freeholders – freeholders of private or mixed tenure estates to have equivalent rights to those of leaseholders to challenge the reasonableness of estate rent charges, and the ability to appoint a new manager to provide the services covered by the estate rent charges; and
  • a statutory deadline of 15 working days to provide leasehold information to buyers, with maximum fees set for this.

The government is also considering measures to promote commonhold as a new way of owning flats in England and Wales. Commonhold allows freehold ownership of a flat and requires residents to take control of and manage the communal areas and shared services in their building.

There is undoubtedly a fine line to tread regarding the way forward and it will be interesting to see how far the government is willing to take the reforms in the face of what is likely to be considerable opposition from those with a vested interest in maintaining the status quo.

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