Enfranchisement Reforms

The Law Commission has now produced its report ‘Leasehold home ownership: Buying your freehold or extending your lease’ some 18 months after it consulted on reforms to the enfranchisement process.

The legal body was first tasked in 2017 with reviewing how to make it simpler, quicker and more cost-effective for home owners to extend the lease or purchase the freehold of their property. It launched a consultation in September 2018 and this week released a report on how to reform and reduce premiums.

However, the 322-page document was immediately branded somewhat underwhelming and has been criticised by leaseholders for its focus on the human rights of the freeholders - warning that if legislation that reduces premiums is not compatible with the European Convention on Human Rights, the Government could face compensation claims from freeholders and would have to reverse any legislation.

The Law Commission has put forward three proposed ‘schemes’;

The first would scrap marriage value – the additional value that is gained when the landlord’s and leaseholder’s separate interests are “married” into single ownership. – and the premium will be calculated by reference to the remaining lease term and loss of ground rent only.

A second would also make a calculation using the remaining term and loss of ground rent but also use the hope value – a lower deferred form of marriage value.

The third option keeps the current system of using marriage value, the remaining lease term and lost ground rent but combining it with new reforms.

These options would all be enhanced by other changes including prescribing the various rates used to calculate elements of the premium, capping the treatment of ground rent and having different systems for owner occupiers and buy-to-let landlords.

The Government will now consider the proposals.

A copy summary of the report can be read here https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2020/01/Enfranchisement-Valuation-Report-Summary-published-9-January-2020.pdf

Do you need assistance with a leasehold property?

If you own a leasehold property and you are thinking about enfranchising, our team can help. Loveitts are widely acknowledged as local experts in the complex field of leasehold enfranchisement matters. Extending your lease can be a long and complicated process, that if you are not careful, can end up costing you more than is necessary. Loveitts are here to help you throughout every step of the way.