Changes to the law of enfranchisement

Following the extensive consultations by the Law Commission on leasehold reform, the first tranche of the changes to the law have been announced by the Ministry of Housing, Communities & Local Government, and largely affects leasehold properties in England & Wales.

Given there are more than four million leasehold properties in England & Wales, these changes to the law will have a significant impact for a huge number of home owners.

The main changes are:

• Leaseholders of flats (and houses) will have the right to extend their leases by 990 years, with the ground rent reduced to a ‘peppercorn’ (ie zero)
• A significant element of the price payable for a lease extension – the ‘marriage value’ – will be abolished, saving leaseholders with leases below 80 years many thousands of pounds
• Simple online calculators will be provided so that leaseholders can easily establish the cost of a lease extension (although they will still have to pay their landlord)
• Ground rents for new leases will also be set zero
• The alternative model of home ownership for blocks of flats known as ‘commonhold’ will be promoted to encourage increased uptake (it is currently very rare).

The legislation required to enact these changes is due to be introduced during the 2021 session of Parliament, and so should become law fairly shortly thereafter. It remains to be seen whether the next tranche of changes will provide any assistance to leaseholders stuck with long leases with ground rents that double unacceptably quickly, which is a much more pressing issue because those properties are currently unsaleable.

Nevertheless, the upcoming changes are a welcome modernisation of an area of law that many homeowners find a confusing, surprising and unwelcome cost associated with a property they already own (even if it does not eliminate that cost altogether).

The changes are the first tranche of a two-part reform of the law, with the government looking at enacting the remainder of the Law Commission’s recommendations next year, hopefully addressing the remaining major issues many leaseholders currently face.

Will Thomas is a senior associate in BDB Pitmans’ residential property team in Cambridge. Contact willthomas@bdbpitmans.com or visit bdbpitmans.com.

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