April 2018
Before the Law Commission begins a law reform project, it agrees terms of reference with the relevant government department. On the 18 April 2018, the Law Commission (the Commission) published its terms of reference (TOR) for its residential leasehold and commonhold project.
This is the outcome of over 6,000 submissions to the government’s ‘Tackling unfair practices in the leasehold market’ consultation (LEASE response here); and the Law Commission’s own consultation on its 13th Programme of Law Reform. The latter also received substantial numbers of responses calling for leasehold reform.
The Law Commission has now been tasked by government to improve “consumer choice, and with providing greater fairness and transparency for leaseholders”. The Commission’s review will “complement Government’s own work to remove incentives to use leasehold, and Government’s work to address non-legal issues to re-invigorate commonhold such as education, publicity and supporting developers, lenders and conveyancers.”
The government aims to:
- promote transparency and fairness in the residential leasehold sector;
- provide a better deal for leaseholders as consumers; and
- re-invigorate commonhold as a workable alternative to leasehold, for both existing and new homes
In summary, the TOR covers:
Leasehold
- Simplifying legislation;
- Improving access to enfranchisement, but where this is not possible creating better protection for leaseholders;
- Examining options to reduce the price for enfranchisement, whilst ensuring sufficient compensation is paid to landlords;
- Make the process of enfranchisement easier, quicker and more cost effective particularly for leaseholders; and
- Prioritise leasehold owners of houses in bringing forward proposals for leasehold flat and house owners
Commonhold
- Creation of commonhold;
- Improving its flexibility;
- Considering whether the Commonhold Association (CA), made up of the unit owners, should be a company limited by guarantee or some other vehicle for communal ownership;
- Incorporating shared ownership within commonhold;
- Balancing the rights of developers with those of consumers;
- Reviewing the Commonhold Community Statement to ensure that it is flexible enough for local needs and the circumstances where it can be varied;
- Facilitating the resolution of disputes within a commonhold;
- Enforcement powers of the CA and the protections for unit-holders and lenders; and
- Mechanisms to prevent the insolvency of a commonhold; the implication for the CA in the event of an insolvency and the adequacy of protection for unit-holders and lenders
