ALEP (the Association of Leasehold Enfranchisement Practitioners) has welcomed the House of Commons Housing, Communities and Local Government Committee’s report on the draft Commonhold and Leasehold Reform Bill but warned that the success of reform will depend on clear communication, practical detail and a realistic timetable for implementation.
The Committee’s report says the draft Bill would make a significant step towards replacing leasehold with commonhold and giving homeowners greater control over their buildings. ALEP agrees that the legislation represents an important opportunity to improve leaseholders’ experience of homeownership during this Parliament.
However, ALEP also supports the Committee’s concern that the Government’s pledge to ‘bring the feudal leasehold system to an end’ has left some leaseholders with mixed expectations about what the legislation will achieve and how quickly change will come.
If passed, the Bill will not end leasehold overnight. Many existing leaseholders may be unable to convert to commonhold in the short term; it may be several years before commonhold is mandated for new flats; existing flats will have to go through the leasehold enfranchisement process prior to conversion, and some forms of leasehold ownership, including shared ownership flats, are expected to continue as ‘permitted leases’.
Mark Chick, ALEP director and Senior Partner at Bishop & Sewell LLP said: ‘The Committee is right to welcome the draft Bill, but also right to call for greater realism. This is important legislation, but it is not a switch that will turn leasehold off the moment the Bill is passed.
“The changes certainly will not be quick. In practice, it may be several years before commonhold is mandated and, across parts of the market, it could be closer to a decade before commonhold is fully embedded and widely understood.
“Customer education and expectation management is vital to avoid consumers opting for commonhold on the basis that it is ‘easy’: leaseholders need to know what the Bill will do, what it will not do immediately and what further legislation or regulation may still be needed.
“Homeowners will need to understand not only the advantages of commonhold, but also the responsibilities that come with membership of a commonhold association, collective decision-making and long-term building management.”
The Committee has recommended that conversion to commonhold should become the default outcome of collective enfranchisement. ALEP says this could help simplify the route away from leasehold, but only if the Bill sets out how the cost of acquiring the freehold and converting to commonhold should be shared fairly between leaseholders who participate from the outset and those who do not.
This point was raised by Mark Chick in oral evidence to the Committee. He noted that although non-consenting leaseholders would have a right to buy out the commonhold of their unit at a later date, it is not yet clear how interests such as development value would be valued. Unless this is addressed, he warns, “Conversions could be discouraged if non-consenting leaseholders do not have to contribute anything towards the cost that the collective has endured to buy the freeholding in the first place”.
Mark Chick added: “We look forward to seeing the Government’s strategy and timetable for implementation. That needs to cover both the final Commonhold and Leasehold Reform Bill and the outstanding measures in the Leasehold and Freehold Reform Act.
“Leasehold reform now has strong political momentum. The task for Government is to turn that momentum into legislation that practitioners can apply, leaseholders can understand and the market can trust. The detail is not secondary to the policy – it is what determines whether the policy can be delivered.”
