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Law Commission backs commonhold? It’s not that simple for leaseholders

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The long-awaited report by the UK Law Commission, which was supposed to deal with the iniquities of Britain’s leasehold property system, is out. Badly put-upon leaseholders, particularly in a post-Grenfell Tower environment, were placing much hope in the commission recommending a system that removes freeholders and lets leaseholders administer their own blocks – commonhold.

But has the Law Commission really backed commonhold (where a block is owned by the people leasing the  flats in it rather than a possibly distant entity known as a freeholder) as a replacement for leasehold? It has set out the issues, proposed ways of making commonhold “work”, and is full of words that give the impression of a strong statement, but the reality is that it in effect concedes the matter will be a political decision. The Commission knew the Government wanted something on commonhold – but also knew it didn’t want to go all the way. The biggest omission is to do with whether commonhold should be the sole form of tenure for owning flats henceforth. The Law Commission hedges around the question.

The problem with leasehold (owning a flat on a lease for a period, often initially set at 99 years though some can be as much as 999 years) from the point of view of leaseholders is basically that the flat is a wasting asset. This means the lease has to be regularly extended ie extra years bought to keep it above the 80 years when costs of extension rise rapidly and it risks becoming unsaleable and unmortgageable (see this on marriage value). There is also ground rent and an unsatisfactory system of deciding on maintenance for the common parts and updating the fabric. The post-Grenfell situation is only the most egregious example of where this can go horribly wrong, with leaseholders vastly out of pocket. It’s a legal minefield and a lawyers’ field of gold.

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