Leaseholders could find it easier and cheaper to buy the freehold of their building under radical government proposals to create a fairer housing system.
As part of a new consultation, Homeowners and the housing industry are being invited to give their views on proposals from the Department for Levelling Up, Housing and Communities to allow more leaseholders in mixed-use buildings to take control and ownership of their building.
The consultation follows the Housing Secretary Michael Gove announcing a major reset of the government’s approach to building safety earlier this month, when he told developers they must pay to fix the cladding crisis and that leaseholders must be protected.
Thousands of future leaseholders are already set to benefit from the first of the government’s reforms to the leasehold system, expected to take effect later this year, that puts an end to ground rents for most new residential leases and lease extensions.
Leasehold Minister, Lord Stephen Greenhalgh said:
“The current leasehold system is outdated, unbalanced and broken and we are determined to fix it.
Our proposals aim to rebalance power and should see more leaseholders than ever before owning the full rights to their homes.
This comes on top of our new approach building safety, which includes decisive action to protect leaseholders.”
The consultation, running for 6 weeks until 22 February 2022, seeks views on proposals to give more leaseholders the ability to manage or own their properties – in buildings where there is a mixture of homes and other non-residential facilities, such as shops and restaurants.
Under the current system, only some residential leaseholders in England and Wales can choose to buy their building outright through enfranchisement – or take over the management of their building, in what is known as a ‘right to manage’.
If shops and other similar properties take up over 25% of the total floorspace, then leaseholders cannot collectively bid to take control of their building.
New proposals could give these leaseholders the right to manage or buy their building outright, by increasing this limit to 50%, enabling them to have more control over how shared facilities are run and have the final say on building maintenance costs.
Other proposals in the consultation aim to make it cheaper for leaseholders to collectively buy their freehold.
A ‘mandatory leaseback’ would require landlords to keep a lease on some properties in the building. This means reducing the cost of a collective buyout of their building – making it a reality for thousands more leaseholders.
Leaseholders may also see the cost of enfranchisement reduce further with future government proposals, announced last year, such as abolishing ‘marriage value’ and the introduction of an online calculator with prescribed calculation rates.
Julie James, Welsh Minister for Climate Change, said:
“I welcome this consultation as an important step towards implementing the Law Commission’s recommendations on leasehold reform, which were jointly commissioned by the Welsh and UK governments.
I want us to work together on these important reforms to ensure they reflect the best interests of leaseholders in Wales.”
The government is also calling for views on changes to support greater use of commonhold, as an alternative form of homeownership to leasehold – including for those in Shared Ownership schemes in England.
The commonhold model is used in countries across the world and provides a structure for homeowners to collectively own the building their flat is in from the outset – with a greater say on their building’s management, shared facilities and related costs.
Consumers and providers of shared ownership homes are now being invited to have their say on how decision-making in commonhold blocks could operate under the new Shared Ownership model, in England.