Home ownership overhaul ahead

The Law Commission has proposed radical reforms to home ownership, making it simpler for leaseholders to extend their lease, buy the freehold and take over the management

The details were set out in three reports this week, ‘Leasehold home ownership’, covering freehold purchase or lease extension, right to manage’ (RTM) and reinvigorating commonhold.

Under the proposals, there would be a new right to a lease extension for 990 years in place of shorter 50-year or 90-year extensions. Landlords would not be allowed to insist leaseholders accept new obligations or pay the landlord’s extension costs. Leaseholders could buy the freehold of multiple buildings at once and could make a claim straightaway rather than waiting two years.

On RTM, leaseholders would no longer be obliged to pay the landlord’s costs, and the rules on non-residential space would be relaxed so more buildings would qualify.

Commonhold would include a requirement for a future repairs fund so major works can be budgeted in, providing reassurance for lenders, and home owners would be given a greater say on setting the commonhold costs.

Housing minister Luke Hall said the recommendations were ‘a significant milestone in our reform programme’.

Simon Davis, Law Society president, said the recommendations would ‘deliver real benefit for homeowners’ and ‘provide the flexibility for commonhold to develop as an alternative to leasehold, if incentivised further by government’.

Property lawyers broadly welcomed the Law Commission proposals.

The proposals ‘address inconsistent legislative requirements, streamline processes, reduce corresponding costs, grant greater protection to poorly advised leaseholders and help to keep unscrupulous landlords in check,’ Hema Anand, partner at BDB Pitmans, said.

Janet Armstrong-Fox, partner, Collyer Bristow, said fewer than 20 commonhold developments have been created since commonhold was introduced in 2002, and until lenders felt more comfortable with it, ‘the perceived limited availability of mortgage finance for commonhold homebuyers could be the biggest stumbling block to commonhold taking off’.

Adam Colenso, partner, Wedlake Bell, said the reforms required ‘very careful legislative drafting’ and commonhold ‘will not take root unless there is some motivation given to developers to apply it (because it is mandatory or there is a financial inducement)’.