The Guardian have just published an article Leasehold law proposals condemned as ‘window dressing’in response to the Law Commissions proposals to change leasehold enfranchisement (the process of extending leases on leasehold property).
- Leasehold reform is complicated
- You should ALWAYS read the lease before buying a property
- The Law Commission have proposed that the cost of extending the lease or buying the freehold should be 10 x the annual ground rent
- The Law Commission also suggests that freeholders need appropriate compensation
- Appropriate compensation can be interpreted in so many different ways that we will have to wait for the latest precedent set in the Case Law system to understand the rules – Window Dressing!
- There is a proposal for the removal of having to wait 2 years after purchase to extend your lease. If you’ve got an appetite for a bit of risk then this could be for you.
I’m always especially interested in leasehold reform, mainly because it’s such a deeply complicated system. Every time you think you understand Landlord and Property Law in the UK, new case law twists it, set’s a new precedent and there we go again off down the rabbit hole.
I teach this stuff as part of being a Lecturer, I’ve been heavily involved in leaseholds through being a surveyor and I own 3 leasehold properties and still it feels like a heavy subject.
So, no wonder there is now so much attention drawn to unfair lease terms and difficult, if somewhat bewildering ways to enfranchise which is different to each property.
This story begins with Jo Derbyshire, who after buying a new home from Taylor Wimpy in Bolton and being horrified that the ground rent doubled every 10 years (first rule of property READ THE LEASE people), so started the National Leasehold Campaign to do something about it.
This caught the attention of the Law Commission who set about trying to reform the system. The proposal is that the cost of extending the lease or buying the freehold should be 10 x the annual ground rent. What started at focusing on new builds with long leases, has now spread to all leaseholds.
I’d definitely take this, on one property I own the ground rent is £20 a year… £200 for the freehold, I’m buying today!
However, this comes with the caveat that freeholders should be properly compensated… and what does proper compensation mean? Probably that they shouldn’t be at a loss. However, it can be interpreted in so many different ways that we will have to wait for the latest precedent set in the Case Law system to understand the rules (you see we are back to the beginning where nothing has been reformed… ‘Window Dressing’ you say!).
There is one thing that caught my eye, and that’s the removal of having to wait 2 years after purchase to extend your lease. If you’ve got an appetite for a bit of risk then this could be for you. Buying up short leases and then riding on the potential leasehold reform to add value… you could even set a name for yourself by being one side of the case law…
Basically, what I get is that the Law Commission do want to make amends. Yet, no one can be at a loss. So, nothing will change, because if you want to start your lease extension, regardless if the amount if 10 x your annual ground rent you are going to have to pay solicitors fees (probably for yourself and the freeholder) and pay any additional loss suffered by the freeholder.
I mean can you actually blame them… anybody want to give re-writing the English Land Law system a go?
Yes, leasehold reform proposals are window dressing… behind the curtain it’s all just the same.
How do you feel about this? Do you desperately need this law reform to happen? Comment below.
Natasha
