Law Commission Publish Enfranchisement Recommendations

The Law Commission has published a report setting out options for reducing the costs leaseholders have to pay during the process of extending their lease or buying the freehold title.

The report suggested three potential reform routes to help reduce costs whilst maintaining a fair outcome for both leaseholder and freeholder.

The first option assumes the leaseholder is never in the market, including the time the premium is calculated and bases the cost exclusively on the reversion and the term.

The second option assumes the leaseholder is not in the market when the premium is calculated but could look to sell their property in the future. This option would include ‘hope value’ but exclude marriage value.

The third scheme remains closely linked to current law in that it assumes the leaseholder is in the market at the time of premium calculation. The premium would therefore be calculated on the term, reversion and marriage value (currently, properties where terms dip below 80 years incur an additional ‘marriage value’ which recognises the additional market value of the extended lease before the premium is calculated).

Housing Secretary Rt Hon Robert Jenrick MP said:

“I welcome these proposals from the Law Commission which provide options to make it simpler and faster for leaseholders to buy their freehold or extend their lease.

“I will consider the proposals outlined in this report carefully and set out our preferred way forward in due course.

“We have already committed to addressing the abuses of leasehold seen in recent years, by reducing ground rents to a peppercorn level and limiting new leasehold to apartments, save in the most exceptional circumstances. The Competition and Markets Authority is examining the alleged mis-selling of leasehold properties and I will also await their findings with interest.”

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