Main project: Residential leasehold and commonhold
Current project status
The current status of this project is: Complete.
List of project stages:
- Analysis of responses
- Initiation: Could include discussing scope and terms of reference with lead Government Department
- Pre-consultation: Could include approaching interest groups and specialists, producing scoping and issues papers, finalising terms of project
- Consultation: Likely to include consultation events and paper, making provisional proposals for comment
- Policy development: Will include analysis of consultation responses. Could include further issues papers and consultation on draft Bill
- Reported: Usually recommendations for law reform but can be advice to government, scoping report or other recommendations
We published our report on leasehold enfranchisement (“Leasehold home ownership: buying your freehold or extending your lease”) on 21 July 2020.
Other documents relating to the project are available from the drop-down menus at the bottom of this page.
We also published our reports on commonhold (“Reinvigorating commonhold: the alternative to leasehold ownership”) and the right to manage (“Leasehold home ownership: exercising the right to manage”) on 21 July 2020.
Summary: The future of home ownership: download our summary of all three residential leasehold and commonhold reports and how they fit with Government’s own reforms.
At a glance: the future of home ownership: download our short “at a glance” summary of the future of home ownership.
In more detail: the future of home ownership: download our introductory chapter to all three reports, which explains how our reports fit with Government’s own reforms, and sets out the future of home ownership after reform.
We published our report on valuation in enfranchisement (“Report on options to reduce the price payable”) on 9 January 2020.
Background to the project
Our project on leasehold enfranchisement involves a review of leaseholders’ rights to:
- purchase the freehold of their house
- participate, with other leaseholders, in the collective purchase of the freehold of a group of flats
- extend the lease of their house or flat
Responses to our 13th Programme consultation criticised the current legislation as being complex, inconsistent and costly.
Terms of reference
Government asked us to review the enfranchisement process to make it easier, quicker and more cost effective, and to examine the options to reduce the price payable by leaseholders to enfranchise.
We published our consultation paper on leasehold enfranchisement reform (“Leasehold home ownership: buying your freehold or extending your lease”) in September 2018.
We made provisional proposals for reform designed to provide a new scheme of qualifying criteria for enfranchisement rights, enhance and improve the enfranchisement rights themselves, and provide a new unified procedure for all claims.
As requested by Government, we also set out options for reducing the price payable by leaseholders to exercise those rights, whilst ensuring sufficient compensation for landlords to reflect their legitimate property interests. We invited consultees’ views on our provisional proposals.
The consultation period closed on 7 January 2019.
Our recommendations on leasehold enfranchisement
The recommendations in our report on leasehold enfranchisement 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.
Report on options to reduce the price payable
In our report on valuation in enfranchisement, we put forward three alternative schemes for determining the premium, which will make enfranchisement cheaper, saving leaseholders of houses and flats money, whilst ensuring sufficient compensation is paid to landlords to reflect their legitimate property interests. Each scheme uses a different basis to determine the price of enfranchisement, and facilitates further reforms to make the process simpler and to reduce uncertainty.
Alongside the three schemes, we have put forward a range of other options for reform. These include:
- Prescribing the rates used in calculating the price, to remove a key source of disputes, and make the process simpler, more certain and predictable.
- Helping leaseholders with onerous ground rents, by capping the level of ground rent used to calculate the premium.
- The creation of an online calculator for determining the premium to make it easier to find out the cost of enfranchisement, and reduce uncertainty around the process.
- Enabling leaseholders who are collectively enfranchising a block of flats to avoid paying “development value” to the landlord unless and until they actually undertake further development.
As well as reducing the price, these options would clarify and simplify the law, making the process of leasehold enfranchisement easier and less expensive to operate. The report also explains the limited role that simple formulae – such as a multiple of ground rent – could play in delivering reforms, while explaining that their wider use is not possible under the UK’s human rights laws.
This report does not express a view on which scheme and which options for reform should be adopted, as this is ultimately a decision for Government and Parliament.
On 11 January 2021, the Secretary of State for Housing, Communities and Local Government, Robert Jenrick, made a written statement to Parliament highlighting Government’s intention to bring forward residential leasehold legislation.
In the announcement, the Secretary of State indicated it was Government’s intention to reform the way in which the sum that enfranchising leaseholders must pay to extend their lease or buy the freehold is calculated. The conclusion reached by Government is based on options supplied in our report on options to reduce the price payable in those circumstances.
In addition, the Secretary of State signalled the Government’s acceptance of some recommendations made in our later report on the enfranchisement regime by indicating that legislation will be introduced to give residential leaseholders of houses and flats the same right to extend their lease, as often as they wish, at zero ground rent, for 990-years, or, where leaseholders already have a long lease, to buy out the ground rent without any need to extend the lease.
By email to: email@example.com
Area of law
Property, family and trust law
Professor Nicholas Hopkins