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Radical proposal to make escaping ‘leasehold trap’ easier for homeowners raised by Law Commission

A radical proposal to make it easier and cheaper for homeowners to escape the so-called “leasehold trap” and buy the freehold of their houses has been put forward by the Law Commission.

The legal watchdog suggested a change in the valuation formula in order to reduce prices, and a removal of the requirement that freeholders must have owned their house for two years before making a claim to buy it.

But it said the changes would still provide sufficient compensation for landlords.

There are over four million leasehold properties in England, according to a government estimate. While 1.4 million are houses, the majority are flats.

Leasehold has been described as owning the house, but not the land it is on. In effect, it means the buyer owns a property for a fixed number of years on a lease from the landlord.

The Law Commission’s proposals include reducing the price leaseholders pay to the landlord by changing the formula used to calculate the cost, improving the right for leaseholders to buy the freehold from their landlord, and introducing an alternative right to purchase unlimited longer lease extensions without a ground rent.

It also suggested making the enfranchisement procedure simpler to understand, as well as removing the need for leaseholders to have owned the lease for two years before making a claim.

The proposals recommend potentially scrapping whether leaseholders should contribute to their landlord’s legal costs, or a cap on the maximum amount they should pay.

The law commissioner, Professor Nick Hopkins, said: “Enfranchisement offers a route out of leasehold but the law is failing homeowners: it’s complex and expensive, and leads to unnecessary conflict, costs and delay.

“We’ve heard of untold stress caused to homeowners who have had to put their lives on hold because of issues with their leases.

“Clearly, that’s not right, and our solutions for leasehold houses will provide a better deal for leaseholders and make sure that the law works in the best interests of house owners.”

The proposals come after the government announced plans to ban the sale of houses on a leasehold basis.

The Law Commission will publish a consultation paper in September which will be subject to full public consultation.

Source: Yahoo Finance UK

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Leasehold home owners slapped with costly fees, says Which?

Home owners in England with leasehold properties are being slapped with costly “permission fees” to make improvements, including £252 to own a pet and £60 to put up a doorbell, according to Which?

Leasehold properties generally require home owners to pay ground rent on their home and there can also be service charges for maintaining any common areas.

The consumer group said in recent months, many leaseholders have contacted Which? about needing to pay permission fees to freeholders and managing agents to make home improvements, citing the double whammy of paying a fee – of as much as £108 – to even make a request, followed by another fee to obtain permission.

It has received complaints from home owners who were asked to pay as much as £2,500 to build a conservatory, £252 to own a pet, £60 to replace a doorbell and £300 to erect a fence.

One Which? reader feared her property was going to be repossessed after she built an extension and this concern was only lifted after she agreed to retrospectively pay a £1,600 fee, the consumer group said.

Which? said that in an attempt to avoid paying ground rent, some home owners had asked to purchase their freehold up-front.

But some leaseholders told Which? they had been discouraged at the time of buying the property – only to find later that the freehold had been sold to a third-party company.

The consumer group said some home owners could find themselves effectively “trapped” in properties they may struggle to sell on.

In December, the Government announced a new crackdown on unfair leasehold practices – including making it cheaper and easier for existing leaseholders to buy out their freehold and better information available about redress for people who face the most onerous terms.

Gareth Shaw, Which? money expert, said: “We look forward to seeing firm action from the Government to protect home owners.”

A spokesman for the Home Builders Federation said: “Leasehold is in itself a secure and proven tenure that helps protect millions of home owners.

“It works well for the vast majority of people who own their home with a lease in instances where they are interdependent and where facilities, grounds and services are shared by multiple households.

“The terms of leases should be proportionate and clearly communicated to buyers whenever they purchase a home. The industry continues to work with government and other stakeholders to ensure that leasehold terms are fair and transparent, providing confidence to homebuyers and existing leaseholders alike.”

Source: Yahoo Finance UK