Leasehold enfranchisement

Main project: Residential leasehold and commonhold

We also published our reports on commonhold (“Reinvigorating commonhold: the alternative to leasehold ownership”) and the right to manage (“Leasehold home ownership: exercising the right to manage”) on 21 July 2020. 

Summary: The future of home ownership: A summary of all three residential leasehold and commonhold reports and how they fit with Government’s own reforms.

At a glance: the future of home ownership: A short summary of the future of home ownership.

In more detail: the future of home ownership: An introductory chapter to all three reports, which explains how our reports fit with Government’s own reforms, and sets out the future of home ownership after reform.

Background (Back to top)

Our project on leasehold enfranchisement involves a review of leaseholders’ rights to:

• purchase the freehold of their house
• participate, with other leaseholders, in the collective purchase of the freehold of a group of flats
• extend the lease of their house or flat

Responses to our 13^th Programme consultation criticised the current legislation as being complex, inconsistent and costly.

Government asked us to review the enfranchisement process to make it easier, quicker and more cost effective, and to examine the options to reduce the price payable by leaseholders to enfranchise. Our full terms of reference are available here.

Project (Back to top)

Consultation

We published our consultation paper on leasehold enfranchisement reform (“Leasehold home ownership: buying your freehold or extending your lease”) in September 2018.

We made provisional proposals for reform designed to provide a new scheme of qualifying criteria for enfranchisement rights, enhance and improve the enfranchisement rights themselves, and provide a new unified procedure for all claims.

As requested by Government, we also set out options for reducing the price payable by leaseholders to exercise those rights, whilst ensuring sufficient compensation for landlords to reflect their legitimate property interests. We invited consultees’ views on our provisional proposals.

The consultation period closed on 7 January 2019.

Our recommendations on leasehold enfranchisement

The recommendations in our report on leasehold enfranchisement include:

• providing a new right to leaseholders of both houses and flats to a lease extension for a term of 990 years, with no ongoing ground rent under the extended lease;
• providing a new right for leaseholders to “buy out” the ground rent under their lease without also having to extend the length of their lease;
• removing the requirement for leaseholders to have owned their leases for two years before exercising enfranchisement rights and allowing flat owners to buy the freehold of a block where up to 50% of the building is commercial space;
• making it easier and cheaper for leaseholders of flats to enfranchise by providing for groups of flat owners to acquire multiple buildings in one claim and allowing leaseholders to require landlords to take “leasebacks” of units within the building which are not let to leaseholders participating in the claim;
• ensuring that a leaseholder is protected against the imposition of onerous or unreasonable obligations on acquisition of the freehold title to his or her home;
• replacing the various procedures for making enfranchisement claims with one, streamlined procedure;
• providing that all enfranchisement disputes and issues should be decided by the Tribunal; and
• eliminating or controlling leaseholders’ liability to pay their landlord’s costs, in place of the current requirement for leaseholders to pay their landlord’s uncapped costs, which can equal or exceed the enfranchisement price.

Report on options to reduce the price payable

We published our report on valuation in enfranchisement (“Report on options to reduce the price payable”) on 9 January 2020.

In our report on valuation in enfranchisement, we put forward three alternative schemes for determining the premium, which will make enfranchisement cheaper, saving leaseholders of houses and flats money, whilst ensuring sufficient compensation is paid to landlords to reflect their legitimate property interests. Each scheme uses a different basis to determine the price of enfranchisement, and facilitates further reforms to make the process simpler and to reduce uncertainty.

Alongside the three schemes, we have put forward a range of other options for reform. These include:

• Prescribing the rates used in calculating the price, to remove a key source of disputes, and make the process simpler, more certain and predictable.
• Helping leaseholders with onerous ground rents, by capping the level of ground rent used to calculate the premium.
• The creation of an online calculator for determining the premium to make it easier to find out the cost of enfranchisement, and reduce uncertainty around the process.
• Enabling leaseholders who are collectively enfranchising a block of flats to avoid paying “development value” to the landlord unless and until they actually undertake further development.

As well as reducing the price, these options would clarify and simplify the law, making the process of leasehold enfranchisement easier and less expensive to operate. The report also explains the limited role that simple formulae – such as a multiple of ground rent – could play in delivering reforms, while explaining that their wider use is not possible under the UK’s human rights laws.

This report does not express a view on which scheme and which options for reform should be adopted, as this is ultimately a decision for Government and Parliament.

Documents (Back to top)

Reports and related documents

Final report

Summary of final report

Note on the “right to participate”

Opinion of Catherine Callaghan QC on our recommendations on non-litigation costs

Our instructions to Catherine Callaghan QC on non-litigation costs 

Statistical analysis of responses to our consultation paper

Analysis of responses to our leaseholder survey

Responses received from consultees to our enfranchisement, commonhold and right to manage consultation papers

Report on options to reduce the price payable

Report on options to reduce the price payable

Summary of the report on options to reduce the price payable

Welsh Summary of the report on options to reduce the price payable

Contact (Back to top)

Contact us if you have any queries about this project.

Email: propertyandtrust@lawcommission.gov.uk