Law Commission Reform: Spotlight on Residential Leasehold

The Law Commission has presented its 13th programme of Law Reform which was launched on the 14th December 2017.

The Lord Chancellor has been asked to approve two projects affecting residential property law, Residential Leasehold and Unfair Terms in Residential Leasehold.

Project 1: Residential Leasehold

This project focuses on the extensive list of problems identified in residential leasehold law. These include criticisms relating to the inconsistency, complexity and (some say) unfairness in the enfranchisement legislation, service charges, lease administrative fees, rights of first refusal and the right to manage along with a review of commonhold.

Three areas have been prioritised:

1. Commonhold:- reviewing why it has failed and considering what reforms are needed to enable it to operate successfully;
2. Enfranchisement:- examining ways to simplify the procedure and make the valuation fairer and more transparent;
3. Regulation of managing agents.

Project 2: Unfair Terms in Residential Leaseholds

The project recognises the widely reported problems in leasehold including potentially unfair terms in leases relating to onerous ground rent increases, fixed service charges and fees on assignment. It recognises that such terms are currently unregulated and cannot usually be challenged under the existing landlord and tenant legislation. The use of the law that prohibits unfair terms in consumer contracts will therefore be examined.

Given the spotlight that has focussed on residential leasehold in recent months, it is of no surprise that the Law Commission has prioritised these residential projects. As we reported in a Law Now on 21 December, since the programme was presented, the Department for Communities and Local Government has confirmed that it will be working with the Law Commission to make the process of purchasing a freehold or extending a lease much easier, faster and cheaper. This will come as welcome news to tenants and both Landlords and tenants alike will watch with interest.