Law Commission Publishes Leasehold Housing Reform Plans

The Law Commission has put forward plans to make the leasehold system fairer and cheaper for Britain’s 4 million leaseholders to buy their freehold or extend their lease.

The UK leasehold system has come under criticism in recent years for becoming unfair and costly, with some leaseholders facing extortionate demands from freeholders and high and escalating ground rents, making it harder to sell or re-mortgage their properties.

In response, the Government last year tasked the Law Commission with investigating the issues and making proposals to improve the situation for leaseholders while ensuring that “sufficient compensation is paid to landlords”.

Under its proposals, the legal watchdog has set out three options; two which eliminate so-called marriage value and hope value, and one ‘do nothing’ approach that maintains the status quo.

Marriage value is the increase in the total property value following a lease extension or collective enfranchisement.

Hope value refers to the market value of land based on the expectation of obtaining future planning permission for development.

Housing campaigners, however, have expressed concern that the commission’s proposals are “nothing more than tinkering” and do not go far enough, with too much emphasis on the “human rights” of property owners. There are also fears that the proposals could be diluted following inevitable pressure from freeholders, who are set to lose an estimated £16 billion if reform goes ahead.

The Law Commission’s proposals now sit with the Government to decide which of the three options for reform will be implemented.

Law Commission Publishes Leasehold Housing Reform Plans 2
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