The Law Commission presents a programme of reform every three to four years to the Lord Chancellor. The fact that two of the fourteen topics in its current 13th programme relate to leasehold demonstrates the attention that the subject has attracted over the last year. The Commissioners have decided to include ‘Residential Leasehold’ and ‘Unfair Terms in Residential Leasehold’ as part of their programme.
The Commission hit the ground running with its review of residential leasehold which it began almost immediately the programme was published in December last year. Such is the extent of the reform under consideration that it has been estimated it will take two and half years to complete in the first instance. This would appear to suggest that residential leasehold could also form part of the Commission’s 14th programme.
The Commission received a record number of responses to its consultation and the respondents expressed concern about a large number of issues with residential leasehold law covering:
Enfranchisement (right to a lease extension or the freehold)
Right of First Refusal
Right to Manage
Appointment of a Manager
The Commission has announced that it will be prioritising commonhold and enfranchisement.
It will explore why commonhold failed following its introduction in 2002 and determine how it can be made to work successfully, as well as making enfranchisement and the process of valuing lease extensions and freehold acquisitions clearer and more straightforward.
The Commission has said that it will further decide the scale of its review of the regulation of managing agents once it has received adequate evidence of the current position.
On a related topic, it is also looking into unfair terms in leases including rapidly escalating ground rents. It has identified that such terms are not regulated and incapable of being effectively challenged by leaseholders under landlord and tenant law. As an alternative, it is looking at ways to incorporate residential leases to the law governing unfair contract terms and consumer rights.
As the law stands, only the original leaseholder has the right to dispute a lease term as the relevant circumstances are limited to those which existed when the term was agreed by the original leaseholder. The Commission will consider whether every assignment of a lease to subsequent leaseholders should qualify as a new contract so that the circumstances at the time of the assignment can be considered as relevant.
It seems unlikely that any changes will come into force for a minimum of three years based upon the Commission’s estimated timescale but at the very least reform of leasehold has now begun in earnest.
For advice on all aspects of leasehold and commonhold, please contact Dominic Danvers on 020 7703 5034 or firstname.lastname@example.org.
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