Leasehold enfranchisement is the process by which leaseholders can either extend the term of their lease or buy the freehold.  Following widespread reports of difficulties and overcharging by landlords, the Law Commission launched a consultation to examine the options to reduce the price payable by existing and future leaseholders to enfranchise whilst ensuring sufficient compensation is paid to landlords to reflect their legitimate property interests.  This report was published in January 2020 and is available at www.lawcom.gov.uk/leasehold-enfranchisement.

The report sets out 3 alternative options for a new regime to calculate premiums (with various sub-options within each scheme).  With any of the schemes the Law Commission aims for an online calculator to be made available in the new enfranchisement valuation regime which would remove complexity, increase certainty and predictability, and reduce the scope for argument between the parties (and therefore consequential delays/professional costs).

During the consultation period campaigners for leaseholders almost unanimously sought a simple new formula for extending or buying out a lease at a price equivalent to 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. 

Alongside the 3 schemes the Law Commission has put forward a range of other options for reform.  These include:-

• Prescribing the rates used in calculating the price, to remove a key source of dispute and making the process simpler, more certain and predictable.
  
  
• Helping leaseholders with onerous ground rents, by capping the level of ground rent used to calculate the premium.
  
  
• The creation of an online calculator for determining the premium to make it easier to find out the cost of enfranchisement, and reduce uncertainty around the process.

• Enabling leaseholders who are collectively enfranchising a block of flats to avoid paying “development value” to the landlord unless and until they actually undertake further development.

The report does not express a view on which scheme and which options for reform should be adopted, as this is ultimately a decision for Government and Parliament.  When or whether it will do so remains to be seen.

If you have any queries regarding leases or enfranchisement please do not hesitate to contact Debbie Whiteley at these offices on 0161 819 4920 or at dfw@nexussolicitors.co.uk.