Leaseholders in England and Wales could find it easier and cheaper to buy the freehold of their building under new government proposals.
As part of a consultation which opened on 11th January, homeowners and those working within the housing sector are being invited to give their views on proposals from the Department for Levelling Up, Housing and Communities to allow more leaseholders in mixed-use buildings to take control and ownership of their building.
Fixing an “outdated, unbalanced and broken” system
Leasehold Minister, Lord Stephen Greenhalgh, said:
“The current leasehold system is outdated, unbalanced and broken and we are determined to fix it.
“Our proposals aim to rebalance power and should see more leaseholders than ever before owning the full rights to their homes.
“This comes on top of our new approach to building safety, which includes decisive action to protect leaseholders.”
Earlier this month, Advantage wrote that the NHQB has published its new code of practice for the housebuilding industry, which is also being touted as a means to empower home owners.
The consultation (which will run for six weeks until 22nd February) seeks views on proposals to give more leaseholders the ability to manage or own their properties in buildings where there is a mixture of homes and other non-residential facilities, such as shops and restaurants.
Offering leaseholders the potential to manage mixed use buildings
Under the current system, only some residential leaseholders in England and Wales can choose to buy their building outright through enfranchisement – or take over the management of their building, in what is known as a ‘right to manage’.
If shops and other similar properties take up over 25% of the total floorspace, then leaseholders cannot collectively bid to take control of their building.
New proposals could give these leaseholders the right to manage or buy their building outright, by increasing this limit to 50%, enabling them to have more control over how shared facilities are run and have the final say on building maintenance costs.
Making it cheaper for leaseholders to collectively buy their freehold
Other proposals in the consultation aim to make it cheaper for leaseholders to collectively buy their freehold. A ‘mandatory leaseback’ would require landlords to keep a lease on some properties in the building. This means reducing the cost of a collective buyout of their building – making it a reality for thousands more leaseholders.
Leaseholders may also see the cost of enfranchisement reduced further with future government proposals, announced last year, such as abolishing ‘marriage value’ and the introduction of an online calculator with prescribed calculation rates.
Julie James, Welsh Minister for Climate Change, said:
“I welcome this consultation as an important step towards implementing the Law Commission’s recommendations on leasehold reform, which were jointly commissioned by the Welsh and UK governments. I want us to work together on these important reforms to ensure they reflect the best interests of leaseholders in Wales.”
Switching to the commonhold model?
The government is also calling for views on changes to support greater use of commonhold, as an alternative form of homeownership to leasehold – including for those in Shared Ownership schemes in England.
The commonhold model is used in countries across the world and provides a structure for homeowners to collectively own the building their flat is in from the outset – with a greater say on their building’s management, shared facilities and related costs.
Consumers and providers of shared ownership homes are now being invited to have their say on how decision-making in commonhold blocks could operate under the new Shared Ownership model in England.
The government will consider all feedback from the consultation before making final policy decisions. This will help to form the next stage of the government’s comprehensive programme of reforms to the leasehold and commonhold systems.
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