The Law Commision has published the first of their detailed consultations on Enfranchisement. A 546-page document with 1,537 footnotes and 135 questions. The average reader may wonder if they have arrived in the wrong place at the wrong time.
The full set of consultation documents can be found here and the shorter leasehold response form can be found further down
The main consultation document can be downloaded HERE
A shorter summary document can be downloaded HERE
A summary of the position for houses can be found HERE
A summary of the position for flats can be found HERE
A summary of the position for landlords can be found HERE
A shorter leaseholder survey can be found HERE
Please do complete the survey but please do not rush the consultation stays open until the 20th November.
Any leaseholder who would like to complete all 135 questions in the consultation please contact us so we can send you a document including all the questions.
For the moment LKP is not commenting on the contents of the consultation document other than to say there are many very good points however there also seem to be important omissions and potential misunderstandings. Given the purpose of the project is to simplify the process of enfranchisement as well as making it quicker easier and cheaper we wonder why it needs 546 pages and 1537 footnotes to describe it?
The Law Commision may note the 1776 American declaration of independence was just 1,333 words spread over a few pages. Even the massively complex 1992 treaty on European Union (AKA Maastricht Treaty) is just 280 pages.
Related posts:
Law Commission enfranchisement valuation models delayed for second time as election ‘purdah’ rules kick in
Enfranchisement, commonhold and managing agent regulation are first up for the Law Commission
Is Law Commission wobbly over 25% commercial exclusion to collective enfranchisement? (Let’s hope so)
If you want to reform enfranchisement push government hard, is message of Law Commission
Even if you only respond to one question, take part in the Law Commission consultation!
The Social Housing Green Paper – the government should do more, says ex-civil servant
Length = complexity = time = long grass = loss of will to live waiting = quietly leave things as they are, mostly. Nice little earner.
Wasn’t there supposed to be a bill by summer gone banning new leasehold houses and zeroing ground rent on all new leases?
Do not hold one’s breath for real reform I say. This is Ye Merry England and we invented how to make a nice profit from landlording.
Admin,
Please do not diss the Law Commission, even lightly. Wisdom and erudition cannot be expressed in 1333 words, besides leasehold is a far more important and complex issue than founding a new nation.
Believe me I cannot express my true feelings about the Law Commission, it’s workings, it’s procedures, it’s wordy publications. In my representation I suggested they take up the sport of “boring for England”. They are a bunch of useless *****.
The Law Commision are often asked to look at quite complex issues and they have some very bright staff. Even most of the commercial lawyers drafted in to help seem reasonable sorts.
The problem seems to be they have already at least partially accepted the rabbit hole of enfranchisement has no easy alternatives.
It is a worry that so many of those providing input to the LC make their living from enfranchisement. What enfranchisement lawyer or valuer or landlord is going to suggest there is a much easier and cheaper way to do things when that change would mean reducing their source of income?.
It’s like expecting someone running a casino to explain to their customers how to get the best odds?
I do not doubt that the staff at the Law Commission are bright, but reasonable ( “having sound judgement, fair and sensible”) ?
What of Master of the Rolls, Sir Terence Etherton? I am sure he is bright, but his submission to the Law Commission favoured retention of our leasehold laws. demonstrating that he is not reasonable.
Crispin Blunt in his remarkable representation (to the Law Commission) made it clear that he considered there to be a cabal of professionals conspiring against ordinary home owners, and those aspiring to home ownership. Included in this cabal was the legal profession.
Sir Terence Etherton just happens to a high legal officer, and the Law Commission is composed of lawyers. Please, reasonable?
Is it not significant that these bright people at the Law Commission appear to have been swayed by submissions from vested interests. I say again, they might be bright, they are not reasonable. The lawyers at the Law Commission are self serving and self interested.
I have read about 100 pages of the Law Commission report, it is heavy going ! The main impression is of a complex, rotting, antique system that has evolved with time, a bit like the UK income tax system, and my garage roof and drainage ! I agree that it is a feast for solicitors and surveyors owing to it’s complexity, and it is going to be difficult to get the Law Commision to reduce the content, in effect get turkeys to vote for Christmas. Ideally the whole of leasehold is binned, and we start again using a commonhold system, fairly compensating freeholders.
I would ban leasehold for new flats and redevelopment of older buildings to flats, and allow an option to purchase a freehold share of the building instead of paying for a lease extension. Leasehold would then die off in England and Wales.
It would appear that the Law Commission see great difficulty in delivering cheaper premiums to lessees but yet ensuring adequate compensation is paid to freeholders. This is a recurring theme in all their publications to date.
The 1993 Act had to consider the same issue and a formula was derived which has been subject to some 25 years of various legal challenges and determinations so logically it should be possible to now to generate a formula which can be posted online for the vast majority of lessees to calculate the cost of a lease extension and enfranchisement.
However mindful of the Governments promise to make it cheaper it would seem that reducing the professional costs the lessee has to pay is fertile ground for making savings It can easily cost some £4k if the lease extensions is done under the Act with the lessee paying certain aspects of the landlords legal and valuation fees and of course their own.
I think the landlord should meet his own costs in dealing with lease extensions and enfranchisement except where the lessee wants to amend the existing lease to modernize it. The deed of surrender and re-grant could be relegated to a standard deed which would drastically scale back the legal costs for both sides. I think there should be exception to that rule if the freeholder acquired his interest prior to the 1993 Act in which case a set contribution should be made by the lessee to the landlord to cover professional fees
To reduce valuation fees, in cases where the lease is above 60 years the council tax banding could be used to generate a figure for the value of the flat – its crude and can only work up to tax band E but it would again reduce costs. It would require regular updating borough by borough. Below 60 years and for council tax banding above E I would propose that the property is formerly valued
In enfranchisement claims being able to make the landlord take an overriding lease over the non-participators share would also greatly reduce the acquisition price yet not leave the freeholder disadvantaged. Equally the freeholder should also be able to insist on taking an overriding lease over non participator
I think overall there will be savings for lessees particularly on leases where the term is lengthy and the rent small, where the legal and professional fees could well represent a very significant proportion (if not greater than 100%) of the value of the freehold/lease premium
Some reasonable suggestions Stephen.
If you were the freeholder of our block, 32 flats, lease length for all flats is 104 years, average flat value is £120,000, ground rent is £75 pa. Some leaseholders have improved their flats with new kitchens and bathrooms. The freeholder who is also the managing agent has no ability to further develop the site. Service charge for a 2 bed flat is £1800 pa. What would be your figure with calculations for an individual £120k flat to extend the lease by 90 years and no ground rent, or the cost of buying the freehold for the block ? Could just 17 participants out of 32 buy that proportion of the freehold, so reducing enfranchisement costs ? The remaining 15 reluctants could choose to participate later.
Leasehold is still a crock of sh**, which the rest of the world has got rid of. A fair amount of turd polishing going on with these latest proposals from the Law Commission. My lease document is about 80 pages long, written in the 19th century style of Charlotte Bronte with few full stops and commas. Making leasehold agreements with standard terms so they look like some shorthold tenancy agreements, that use less words and use bullet points would be a big improvement.
Enfranchisement
Reversion = 32 flats X £120k = £3,840,000 / 1.05 ^104 = £24,024
Rent = 32 X 75 = £2400 @ 6% yield = £40,000
Total £64,024
Lease ext would be £64,924 / 32 = £2k
The 17 participators would have to put up the £64k between them but when the other 15 join you would receive a share of their lease extension or share premium for becoming a shareholder. So each time someone joins those who put up more capital get about £150 a time on 15 times sometime in the future
Ideally you need to find a White Knight who will take an overriding lease over the 15 Non participators . They would receive the ground rent from the non participators and the premium when those 15 extend their leases. Therefore you and those that want to buy the freehold only have to pay the £2k each. The White Knight putting up the balance of the purchase price
We should be able to buy a 17/32 share of the freehold in the first instance, although that option may not be on the table of the Law Commission with this review. It is possible to buy shares in companies, I have very small holdings in Google and Amazon, but cannot run them until I own a majority. Surely freehold interest can be dealt with in the same way as shares in a business. An individual leaseholder should be able to buy a proportionate share in the freehold also.
The law commission are proposing that in your case the 17 lessees will purchase the freehold at 17/32 of the price and the freeholder takes an overriding lease over the non participators share of the freehold
This is better for you than the idea you had in mind
It is with real anger that I read the law commissions report….in my view it does not go far enough…yes.. some of these people have their own vested interests at heart….
I think the only real way forward is if leaseholders actually stand up and refuse to pay….
It is an absolutely outrageous system and as the Government have said…or some within it,.that the system is ‘unjust’….
Given the amount of current negative publicity on this money making system….it has been exposed for what it really is…again in the Mail today (Wednesday)….
I would therefore call apon all leaseholders to be brave and stand up and be prepared, on principle, to pay the consequences.
I am not sure whether these freeholders would want the publicity of taking a leaseholder to court…especially if they were growing in numbers and especially as they themselves know how unjust this rotton system is…
I know it might sound militant…but maybe the time has come to stand up….and make a stand.
The consequences of not paying can be severe and very unjust, forfeiture of lease for example. Mass protest can work, although Blair still took us into the Iraq war after more than 1 million marched in London ! The mass trespass on Kinder Scout in the 1930s helped open up public rights of way, leasehold is equally antique and unfair. We need to keep bothering our MPs so meaningful leasehold reform is on their agenda.
Prof Nick Hopkins and his staff have produced a response that promises radical reforms to enable leaseholders in houses and flats to buy their freehold or extend leases by way of a unified procedure. available on the same terms to all leaseholders. It is proposed there should be a uniform right to a fixed additional term set at a nominal ground rent and at a premium calculated under a revised valuation procedure. By “minimal” the Commission has in mind a peppercorn.
At Government request, the Commission has provided options to buy the freehold or extend leases whilst ensuring compensation is paid to landlords to reflect “legitimate” property interests.
As one who is more concerned with the illegitimate activities of the small band of unscrupulous landlords engaged in the criminal procurement of freehold titles through breach of RFR., I am encouraged by this response from the Law Commission. And irrespective of length, it is an impressive document produced in a short space of time.
Individuals or companies in the business of purchasing freehold titles (legally or illegally) behind the backs of long leaseholders, whose investment is thereby unilaterally usurped, must have no access to human rights legislation in order to protect their ill;-gotten gains.
What a disgrace! LawCom say they want to keep arbitrary 25% rule. Leasehold abuse will carry on however good the other reforms are. Developers will just focus on building more and more mixed-use schemes to flatten residential (leaseholder) rights. People won’t be able to collectively buy out their landlord. Our politicians need to pick up on this. If they don’t, leasehold reform means nothing.
Should not be able to build or redevelop as leasehold in first place, commonhold needs to be only option.
One of the political parties needs to commit to abolishing leasehold as was done by every other country in the world. Corrupt vested interest just keep it going.
The homeowner is bottom of the pile when it comes to rights and justice. Enfranchisement is but one small part of the leasehold problem and the law commission can’t even disentangle the anomalies built up over centuries over enfranchisement.
Sufficient compensation for what exactly? The freeholder buys or sells the freehold for next to nothing (not giving us the chance at the same price), his total input is just about zero, risk factor zero, and worse, none of us knew we were part of somebody’s investment portfolio. The current law’s calculation formula is just a fiction, based on unreasonable expectations that again we knew nothing about. We, on the other hand, pay a vast amount of money that we spend the rest of our working lives paying for in loan repayments, and maintain the property. The government is well able to change these formulas to establish social justice, and to right a wrong. Lawyers as we know have lost sight of Justice, equity, fairness, right and wrong.
Kev,
I have seen people here accept that reasonable compensation (to freeholders) is in order. What happened to suggestions of mis-selling?
It appears to me that people have been brainwashed into this position.
If the ground rent terms are not in the lease along with its review pattern then it would be an easy case of mis-selling I would have thought