The Law Commission has set out a range of proposals which it said will make it cheaper for Britain’s four million leaseholders to buy their freehold or extend their lease. However, the reforms were immediately branded by campaigners as “nothing more than tinkering”.
Amid widespread controversy over spiralling ground rents and extortionate demands from freeholders, the government last year asked the Law Commission to produce proposals to simplify the process and provide a better deal for leaseholders.
During the consultation period, campaigners almost unanimously sought a simple new formula for extending or buying out a lease, arguing for a price set at 10 times the ground rent.
However, the Law Commission rejected such a formula, saying it would be a likely breach of the human rights of freeholders. It said: “The law governing human rights is highly relevant to valuation reform”, noting that the European Convention on Human Rights “provides for the peaceful enjoyment of property”.
The commission instead set out three options for reform – one of which broadly maintains the status quo, while the other two eliminate what is known as “marriage value” and “hope value”.
It gave a worked example of someone with a £250,000 property with only 76 years left on the lease and a current ground rent of £50 rising to £200 a year. It said under existing calculations, the leaseholder would have to pay £16,453 to buy out the lease. Under its proposals, the cost would fall to £10,615 if “hope” value is reformed, and drop to £9,155 if there is no “marriage value”.
The property law commissioner, professor Nick Hopkins, said: “We were asked to provide options for reform that save leaseholders money when buying their freehold or extending their lease, while ensuring that sufficient compensation is paid to landlords. This is what we’ve done. We are ready to help the government in implementing whichever options for reform they choose.”
Welcoming the report, the housing secretary, Robert Jenrick, said he will consider the proposals and set out the government’s response. “We have already committed to addressing the abuses of leasehold seen in recent years, by reducing ground rents to a peppercorn level and limiting new leasehold to apartments, save in the most exceptional circumstances. The Competition and Markets Authority is examining the alleged mis-selling of leasehold properties and I will also await their findings with interest.”
However, campaigners said they were deeply disappointed by the Law Commission proposals. Sebastian O’Kelly of the Leasehold Knowledge Partnership said: “It is very difficult to be too enthusiastic about options to government which give the £2.5bn annual leasehold enfranchisement sector plenty of scope to dilute any meaningful reform.
“A process which began with the aim of making the enfranchisement process more open and cheaper now has heavy emphasis on the ‘human rights’ of property owners – even when anonymous ground-rent speculators in the British Virgin Islands.”