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Government advisers propose radical leasehold reform potentially helping thousands of families

Thousands of families stuck in leasehold homes could finally see a light at the end of the tunnel after government advisers today set out a package of radical reforms. 

A report two years in the making from the Law Commission laid out a raft of proposals which would make it easier for leaseholders to purchase their freehold, extend their lease or eliminate their ground rents.

One such proposal would give homeowners the right to extend their lease for nearly 1,000 years while at the same time removing any obligation to pay rent to the freeholder.

The proposals come in response to a scandal that has seen thousands of homeowners fleeced with inflating ground rents and fees by developers and investment firms.

The leasehold scandal emerged three years ago as property developers were discovered to have been flogging leasehold properties with high fees and spiralling ground rents attached.

Some developers included aggressive ‘doubling clauses’ in sales contracts that hike ground rents at an alarming rate, ultimately trapping some people in homes they cannot sell.

Last year the Government announced that it would ban the sale of houses on a leasehold basis, and ban developers from selling leases that contain an obligation to pay any money as ground rent.  

These reforms do not help existing leaseholders however and have yet to be implemented.

Today the Law Commission, an independent body set up by Parliament to advise ministers, went further by suggesting that existing leaseholders should have the right to a lease extension for a term of 990 years, in place of shorter extensions of 90 or 50 years under the current law.

It recommended that there should be no ongoing ground rent under this extended lease, and landlords shouldn’t be able to use the lease extension process to impose new obligations.

This would put an end to the onerous ground rents that many leaseholders have to pay while at the same time making it much easier for homeowners to sell these properties – something many are currently finding it difficult to do.  

The Law Commission also recommended a new right for leaseholders with very long leases to ‘buy out’ the ground rent under their lease without also having to extend the length of their lease.

It also reiterated called for a rules change so that leaseholders can extend their lease or buy their freehold immediately after buying their home rather than having to wait two years as they do now.

On top of this, the Commission recommended that the law is changed so that the current requirement for leaseholders to pay their landlord’s costs of dealing with an enfranchisement claim should be ‘eliminated or controlled’.

These recommendations all apply to both houses and flats. 

Professor Nick Hopkins, commissioner for property law said: ‘The leasehold system is not working for millions of homeowners in England and Wales. 

‘We have heard how the current law leaves them feeling like they don’t truly own their home.

‘Our reforms will make a real difference by giving leaseholders greater control over their homes, offering a cheaper and easier route out of leasehold, and establishing commonhold as the preferred alternative system.’

A spokesperson for pressure group the National Leasehold Campaign said: ‘The NLC is delighted that the Law Commission’s reports recognise how badly the current leasehold system is stacked against leaseholders and is recommending adoption of commonhold, and informed and practical routes for existing leaseholders to escape from the nightmares created by this feudal system. 

‘We need Government to act on these recommendations now. They must not be lost in a sea of endless consultations, further consideration and drift “until Parliamentary time allows”. Leaseholders’ lives are on hold and urgent action is needed.’

The Law Commission has also proposed a massive expansion to the commonhold system, which would give flat owners an option other than leasehold. 

This system was introduced in 2002 to enable the freehold ownership of flats. 

It allows the residents of a building to own the freehold of their individual flat and to manage the shared areas through a company.

Currently, for a flat owner to convert to commonhold from leasehold they need the agreement of other parties with interests in the building, for example the freeholder. 

The Law Commission is now suggesting this requirement be removed so that leaseholders can unilaterally decide to convert to commonhold without the approval of any other parties.

It also proposes that shared ownership flats be available as commonhold, something that is not currently the case. The Commission says this would help to encourage more flats being built as commonhold rather than leasehold. 

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