CA issues response to Law Commission’s leasehold enfranchisement reform consultation

10 January 2019

The Conveyancing Association (CA), the leading trade body for the conveyancing industry, has today (10th January 2019) announced it has responded to the Law Commission’s leasehold enfranchisement reform consultation.

The consultation paper, entitled, ‘Leasehold home ownership: buying your freehold or extending your lease’, was published in September last year and the deadline for responses recently passed on the 7th January 2019.

In its response to the questions outlined in the consultation, the CA argues that any reforms should be relevant across England and Wales including:

• The entitlement of leaseholders of both flats and houses to a lease extension of 999 years on payment of a premium.
  
  
• The fact leaseholders should have a right to a lease extension at a nominal ground rent, plus they should have the choice to extend the lease without changing the ground rent but at a reduced premium and on the flip side should have the choice to extinguish the ground rent (without extending the lease) at a reduced premium.

The CA argues that once the premium and costs of a lease extension are reduced, more leaseholders will be able to benefit from the proposals and free themselves from the trap faced by those who have a lease with terms that are not acceptable to the major lenders.

It says that the ability to extend a lease which has a term below 85 years, with the added ability to re-negotiate onerous clauses in the lease using prescribed wording, will make it possible for existing leasehold owners to sell their property at its full market potential and have access to the whole of the leasehold lending market.

The Association is also calling for the introduction of a fast-track dispute resolution service which has jurisdiction over all lease terms, rather than just some. It says that the First Tier Tribunal currently only has limited jurisdiction on these matters and the redress schemes only has jurisdiction over service complaints in property management and not in connection with onerous lease terms, the fees charged or the timescales in which information is provided.

In its response, the CA agrees that new terms introduced into any lease extension should be drawn from a prescribed list, arguing that such standard wording can then be written in plain English and be more widely understood by the public with the provision of basic advice. It argues this would reduce costs, create a better educated consumer and lead to a higher proportion of leaseholders seeking extensions as they would not be put off by the perceived complexity of the process and terms used.

The CA also suggests that it is not alone in thinking that the premium calculations for lease extensions and enfranchisement are overly complex and have developed over time to be weighted heavily in favour of the landlord.

It argues that, what might have been appropriate in a time where leasehold property commanded lower prices per square foot than freehold, is simply not valid where full market value has been paid for a property along with a large amount of rent. In its response the CA sets out the inequity of a leaseholder having to pay time and again for the privilege of being able to live, sell or remortgage their own property and supports the Law Commission’s proposals for simplifying the premium calculation.

The CA’s response to the Law Commission consultation follows a response it made to last year’s Ministry for Housing, Communities & Local Government (MHCLG) consultation on Implementing Reforms to the Leasehold System.

The full Law Commission consultation document can be viewed at: https://www.lawcom.gov.uk/project/leasehold-enfranchisement/

Beth Rudolf, Director of Delivery at the Conveyancing Association, said:

“We, at the CA, see this response as the natural culmination of the vast amount of work that has been carried out in the leasehold arena and, following this consultation, we are extremely hopeful that we can have a system that is fit for purpose and does not work against both existing or new leaseholders in the future.

“Developing a system which allows leaseholders to extend their lease in a unified and stable way, without the vast amount of cost this currently requires, will open up this whole market, delivering far greater confidence to existing leaseholders and ensuring they are not exploited by freeholders or feel prisoners in their homes due to being unable to remortgage and/or sell their property.

“The leasehold scandal that has emerged over the past few years has shown that we need far greater clarity and transparency in this part of the housing market, and we are still utterly convinced that a greater take-up of Commonhold arrangements, as opposed to leasehold, would be a far better option for many consumers.

“That said, with the measures we outline in this response, and the work of all stakeholders, we should be able to move to a much fairer leasehold arrangement and start to provide far greater confidence for those who have, up until now, been placed in a very unsatisfactory position.”

For further information on The Conveyancing Association, and to read the response in full, please visit: www.conveyancingassociation.org.uk