On 11 January 2022 the Department for Levelling up, Housing and Communities opened up its consultation for the latest batch of leasehold reforms to work their way through Parliament. With the current Leasehold Reform (Ground Rents) Bill set to become law in the very near future this latest news continues to move leasehold reform in the right direction.
It focuses on proposed legislation for collective enfranchisement (purchase of the freehold for buildings containing flats); freehold purchase of houses; statutory lease extensions for flats and houses, as well as the right to manage.
In this briefing we outline the specific areas where input has been invited along with brief comments.
- The non-residential limit for collective enfranchisement: currently where there are buildings containing non-residential parts such as offices and shops they will not qualify if more than 25% of the internal floor area (excluding common parts) is in non-residential use. There is a move to increase this to 50% which will open the door for many more buildings to participate and for many more leaseholders to gain this right.
- The non-residential limit for right to manage claims: changes are proposed along the same lines as in relation to collective enfranchisement (detailed above).
- A non-residential limit for individual freehold acquisitions: the removal of any residence requirements has been proposed. However this requirement ‘kicks in’ very rarely under the current legislation.
- The introduction of mandatory leasebacks as part of collective freehold acquisitions: this is where the freeholder decides to retain leases over part of a building where the leaseholder is set to acquire the freehold. This consultation may provide greater clarity. Currently the freeholder has a right to certain mandatory leasebacks with the remainder being voluntary. There can be some contention regarding voluntary leasebacks. The new proposals also include a requirement for the freeholder to take on leases for non-participating flats.
- Commonhold voting rights in shared ownership properties: this move will lift current restrictions for shared ownership leaseholders putting them on an even footing with those that own 100% of their lease.
- The provision of information during the sale of a commonhold property: the current process when a unit holder sells their unit is for the supply of a Commonhold Unit Information Certificate (CUIC). It includes information on arrears and gives a clear picture of what monies are owing. The Law Commission proposes retaining this as part of the sale process. It is a sound suggestion and will certainly give greater confidence to buyers of commonhold units.
This round of consultation will end on the 22 February 2022 so there will be further updates. Watch this space.
If you have any questions about leasehold enfranchisement, right to buy or commonhold, contact Shabnam Ali-Khan in our enfranchisement team.