Landlords to benefit from proposed leasehold reforms
Thousands of landlords could be set to benefit from the government’s plans to change leasehold regulations.
Boris Johnson and his cabinet are reviewing the recent Law Commission’s reports which recommend, amongst other issues, cutting the cost of buying back additional years on a lease. This is referred to as Leasehold enfranchisement.
It will affect landlords of apartments and some New Builds – which are more likely to be buy to lets. In fact, the government has calculated that there are currently around 4.7 million leasehold properties that will be affected.
The Law Commission – an independent body – looked at three main areas of the leasehold system in England and Wales. These were leasehold enfranchisement,right to manage and commonhold.
They want to stop the recent practice of developers selling on freeholds to property investment companies – rather than offering it to the leaseholder first. In many cases this has resulted in the freeholder charging the leaseholder extortionate service charges and land rents.
England and Wales using antiquated system
Other proposed reforms include abolishing the leasehold system completely. So antiquated is the system – it dates back to 1066 – that England and Wales are currently the only two countries in the western world who still operate leaseholds.
Landlords with buy to lets north of the border already have Outright Ownership of their property. Scotland abolished leaseholds in 2004 – a fact that makes changes to the other parts of the Union all the more likely.
Right to Manage to cut service charges
The Right to Manage issue, if it goes through, will mean that landlords can choose who they want to service their property. This is possible at the moment but leaseholders have to pay the freeholder’s legal costs in order to achieve this. In future, this wouldn’t be the case.
Commonhold may be compulsory
Under the Commonhold system apartment owners or house owners in a development can vote to manage their own block – despite not owning the freehold. All they would need to enact this is the go-ahead from half the owners. Other proposed changes include making all new apartments and housing complexes Commonhold in future.