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Law Commission Reports published on Home Ownership

At one minute past midnight today the Law Commission published its much awaited reports into reforming the law of relating to home ownership and specifically (1) enfranchisement, (2) exercising the right to manage and (3) reinvigorating commonhold as an alternative to leasehold ownership https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2020/07/Summary-The-Future-of-Home-Ownership-final-N2.pdf. The proposals contained these reports running in total to some 2000 pages are as dramatic as they are wide-ranging.

Whilst there is of course no substitute for in depth reading of these reports, the key points from each report that you will want to be aware of on ‘day one’ are summarized below.

Enfranchisement Rights – key recommendations

One regime applicable uniformly irrespective of whether a property is a house or a flat but instead applying to a ‘residential unit’

A new right to a lease extension for a term of 990 years in place of the shorter 90 or 50 year extensions currently available

The abolition of the 2-year ownership rule for flat owners and relaxation of the limit on the commercial space disqualification from the current 25% to 50%

A new right to for lessees to ‘buy-out’ ground rents without also having to extend their lease and prohibitions on onerous or unreasonable obligations

Greater flexibility for groups of lessees to enfranchise by acquiring the whole of their estate with compulsory leasebacks in respect of units belonging to non-participators

A requirement to use a company as nominee purchaser and to use prescribed forms of notce

No liability on lessees generally to pay their landlord’s costs of the claim if Parliament adopts a valuation methodology that is market value based but otherwise fixed costs

A ‘single, efficient procedure’ removing ‘legal traps’ with all issues and disputes to be dealt with in the FtT as a ‘one stop shop’

Right to Manage – key recommendations

Removing the requirement that leaseholders pay the landlord’s costs of an RTM claim

Relaxing the qualifying criteria so that the RTM can be claimed in respect of leasehold houses, buildings with up to 50% commercial space and self-contained parts of buildings capable of being separately managed

Permitting leaseholders to acquire the RTM over their estate by allowing claims in respect of multiple qualifying buildings

Simplifying the process by reducing the number of notices required and giving the FtT the power to waive procedural mistakes

Clearer rules on shared management to be agreed by the parties or decided by the FtT from the outset
Free training on company law and building management to be made available to RTM directors and prospective directors

Commonhold – key recommendations

In support of a fundamental culture change to encourage the use of commonhold the LC recommends removing the requirement for the unanimous agreement of leaseholders and the introduction of a simpler, more cost-effective procedure for converting to commonhold

That so-called Option 2 should be adopted whereby all leaseholders including those non-consenting leaseholders will be obliged to take the title to their commonhold unit at the point of conversion, in exchange for their leasehold interest.

Government equity loans to be made available to non-consenting leaseholders, to cover their share of financing the freehold, to be charged on their commonhold unit and repayable on the sale of the unit

Increasing the flexibility of commonhold to accommodate mixed-use developments, shared ownership schemes and to enable developers to build new commonholds in phases

Toughening up the Commonhold Community Statement (CCS) to ensure that commonholds are kept in good repair and are properly insured, that a major works fund is established and there are enhanced powers to take action against those who fail to pay their share

Reforms to the content and layout of the CCS to make it harder to change the rules of the building, to ensure protection for the minority in case of any change by introducing the ability to apply to the FtT and to include a bespoke dispute resolution process

There is undoubtedly much to digest and to discuss, watch this space for further details including notice of our upcoming podcast.

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