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Law Commission proposes major leasehold law reform

The Law Commission has announced new proposals that will allow homeowners to extend or buy their leasehold more easily and more cheaply.

‘Leasehold traps’ have been an on-going issue for some time. Describing the issue of homeowners owning their house for only a limited amount of time (typically between 40 and 99 years) before its papers return to a landlord, the means to extend the terms or convert the leasehold to a “freehold” – outright ownership, is an expensive one.

The government estimates that 1.4 million houses in England are leasehold properties.

In late December last year, Mortgage Strategy reported that the government announced plans to ban leaseholds for “almost all new build houses” and that ground rents on new long leases for houses and flats would be set to zero.

In July, communities secretary James Brokenshire MP announced that government funding for ‘unjustified’ new leasehold houses would be removed.

The latest move to help homeowners escape the trap comes from the Law Commission, the non-political independent body charged with reviewing and reforming law in England and Wales.

The commission’s new proposals include reforming the calculations used to value leaseholds (thus lowering the price of time extensions and freehold purchase) and doing away with the current rule that leaseholders must have owned their lease for two years before they can make any claim, all as part of an overall push to simplify the attendant rules and regulations, so empowering leaseholders.

Law Commission professor Nick Hopkins says: “The law is failing homeowners: it’s complex and expensive, and leads to unnecessary conflict, costs and delay. We’ve heard of untold stress caused to homeowners who have had to put their lives on hold because of issues with their leases.

“Clearly, that’s not right, and our solutions for leasehold houses will provide a better deal for leaseholders and make sure that the law works in the best interests of house owners.”

Secretary of state for communities James Brokenshire MP adds: “This government is committed to tackling the unfair leasehold practices that exploit homeowners. We have already announced radical new measures to ban leaseholds for almost all new build houses and reduced rents to a peppercorn.

“I welcome these proposals by the Law Commission that will help homeowners get a fair deal,” he says.

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