In what has been dubbed the ‘most significant legal shake-up in a generation’ by Leasehold minister Lord Greenhalgh, the government has announced a consultation on its latest and wide-ranging proposals to shake up leasehold and commonhold ownership within England and Wales.
The aim of this proposal is to make it easier and cheaper for leaseholders to buy the freehold of their building in a bid to create a fairer housing system.
The consultation opened on 11 January 2022 and Homeowners and the housing industry are being invited to give their views on proposals from the Department for Levelling Up, Housing and Communities to allow more leaseholders in mixed-use buildings to take control and ownership of their building.
Thousands of future leaseholders are already set to benefit from the first of the government’s reforms to the leasehold system, expected to take effect later this year, that puts an end to ground rents for most new residential leases and lease extensions.
This consultation will be running for 6 weeks until 22 February 2022, and will seek views on proposals to give more leaseholders the ability to manage or own their properties – in buildings where there is a mixture of homes and other non-residential facilities, such as shops and restaurants.
Under the current system, only some residential leaseholders in England and Wales can choose to buy their building outright through enfranchisement – or take over the management of their building, in what is known as a ‘right to manage’.
If shops and other similar properties take up over 25% of the total floorspace, then leaseholders cannot collectively bid to take control of their building.
New proposals could give these leaseholders the right to manage or buy their building outright, by increasing this limit to 50%, enabling them to have more control over how shared facilities are run and have the final say on building maintenance costs.
Other proposals in the consultation aim to make it cheaper for leaseholders to collectively buy their freehold. A ‘mandatory leaseback’ would require landlords to keep a lease on some properties in the building. This means reducing the cost of a collective buyout of their building – making it a reality for thousands more leaseholders.
Leaseholders may also see the cost of enfranchisement reduce further with future government proposals, announced last year, such as abolishing ‘marriage value’ and the introduction of an online calculator with prescribed calculation rates.
Julie James, Welsh Minister for Climate Change, said:
“I welcome this consultation as an important step towards implementing the Law Commission’s recommendations on leasehold reform, which were jointly commissioned by the Welsh and UK governments. I want us to work together on these important reforms to ensure they reflect the best interests of leaseholders in Wales.”
The government is also calling for views on changes to support greater use of commonhold, as an alternative form of homeownership to leasehold – including for those in Shared Ownership schemes in England.
The commonhold model is used in countries across the world and provides a structure for homeowners to collectively own the building their flat is in from the outset – with a greater say on their building’s management, shared facilities and related costs.
Consumers and providers of shared ownership homes are now being invited to have their say on how decision-making in commonhold blocks could operate under the new Shared Ownership model, in England.
The government will consider all feedback from the consultation before making final policy decisions. This will help to form the next stage of the government’s comprehensive programme of reforms to the leasehold and commonhold systems.
Share your views on the Consultation before 22 February 2022.
