A consultation paper on ‘Reforming the leasehold and commonhold systems in England and Wales’ was published by the Department for Levelling Up, Housing and Communities (DLUHG) yesterday.
It will seek views from consumers and providers of shared ownership on how to introduce greater use of the property ownership method and how it can operate under the scheme’s new model.
The commonhold model allows homeowners to collectively own the building their flat is in from the outset. This gives them a greater say on their building’s management, shared facilities and related costs.
The consultation also aims to give leaseholders more control over mixed-use buildings.
Under the current system, only some residential leaseholders in England and Wales can 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 per cent of the total floorspace, then leaseholders cannot collectively bid to take control of the building.
The proposals could give such leaseholders the right to manage or buy their building outright, by increasing the limit to 50 per cent.
Other proposals in the consultation include plans to make it cheaper for leaseholders to collectively buy their freehold. This will be through a ‘mandatory leaseback’ which would require landlords to keep a lease on some properties in the building and therefore reduce the cost of a collective buyout.
A leaseback is where the seller sells a property and then leases it back from the new owner. This could give former landlords the lease of units within a building, such as commercial units.
The paper also suggests the abolition of ‘marriage value’, which is the increase in a leasehold property’s value once an extension has been completed to reflect the new market value.
Instead, an online calculator could be introduced with prescribed calculation rates.
This consultation comes after a two-year report which was published by the Law Commission in 2020 and called for reforms to the leasehold 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Leasehold minister, Lord Stephen Greenhalgh, said: “The current leasehold system is outdated, unbalanced and broken and we are determined to fix it.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.”
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.”