Years of promised reforms to leasehold homeownership have yet to materialise, but a series of reports by the Law Commission highlighted how the government might give leaseholders more control over their homes.
What does leasehold mean?
If your property is leasehold, you only have the right to occupy it for a given period. You are effectively a long-term tenant of the freeholder who owns the property outright. This can make it difficult for you to make amendments to your property. Some leaseholds contain restrictive clauses forbidding you from keeping a pet at the address for example.
The Law Commission estimates, that there are 4.3 million leasehold properties in England currently.
What are the proposed reforms?
The Law Commission proposes that the government make it easier and cheaper for leasehold property owners to extend their leases, to buy the freehold, or to take control of the management of the buildings in which they live.
Part of the government’s approach is to stop developers from selling new properties as leasehold in the first place whether this be through an outright ban or offering builders incentives is unclear.
Move to commonhold
One alternative form of homeownership is commonhold. In a commonhold property, a management company deals with shared areas, common holders do not pay ground rent, and have more freedom to alter their properties if they choose.
Despite being around since 2002, The Commission notes that developers have failed to adopt commonhold as an alternative to leasehold. It believes housing developers have resisted a move to build common hold properties as, not only is there is no income beyond the initial sale of the new build, but it is often not suited for more complex developments.
In its report, the Law Commission recommends amending commonhold law to allow for specific kinds of development and to make it easier for existing leaseholders to convert to commonhold.
The Commission also recommended simplifying the process of buying a lease in order to convert a property to freehold, of making lease extensions last longer, and for eliminating the need to pay ground rent.
Currently, leaseholders cannot takeover the management of a block or buy the freehold if more than 25% of the block is commercial property. The Commission recommends upping this to 50% of the block.
Taking over management or ownership of their property would give leaseholders more control of services, repairs, maintenance, improvements and insurance, and the costs associated with property ownership.
It is clear that the current system needs reform, hopefully the government will adopt some or all of The Commission’s proposals and leaseholders will gain more rights over the property in which they live.