Conveyancing
Cheaper lease extensions for homeowners?
T
he Law Commission has recently published its proposals outlining a number of ideas of improving the system for acquiring lease extensions and purchase of freeholds. Their proposals cut the overall cost for leaseholders as well as simplify the two processes. This is part of the government’s push to reform leasehold due to flat and house owners being unable to sell or remortgage their homes because of onerous lease clauses. Marriage value and a similar premium called hope value are being proposed for removal. These are currently added to leaseholders’ costs because of the potential gain they could obtain from purchasing their freehold. For example, the removal for the need to pay ground rent or an increase in property value when a leaseholder comes to sell. According to the Law Commission, these proposals could wipe around £6,000 from the cost of purchasing a freehold. It gave the example of a £250,000 property, with a 76-year lease, paying ground rent of £50 a year, rising to £200. Under current legislation, the purchase of the freehold would cost the homeowner around £16,453. The first option which is eliminating marriage or hope value could bring the cost down to £9,155.
The second option which is replacing marriage value with hope value could bring the cost down to £10,615. There is a third option which is to maintain the current method for valuing freeholds but tweak some of the calculations. These calculations would be prescribed which in turn, provides more certainty for leaseholders. The Law Commission report also provides details of other options called ‘sub-options’ which merge in some other ideas with the 3 main suggestions. One of these, is the development and use of a prescribed calculator for lower value or straightforward claims. This would make it more “user friendly” for leaseholders and give them more of an accurate idea of the upfront costs for an enfranchisement. The report gives government lots of options to consider and where to strike a balance on the redistribution of wealth and power in the leasehold sector. The proposals have already been criticised as not being radical enough which is not unsurprising. The Law Commission have commented that any change too radical would be open to challenge under the Human Rights legislation. ■
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