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Keeping It Real Estate

News and Trends in UK Real Estate, Disputes and Planning Law

Posted in Real Estate News

No quick fix for a broken housing market – government consults on leasehold reform

We blogged previously about the government’s proposed reforms banning the granting of new residential long leases of houses and setting ground rents at a notional figure. The government has now published its consultation on how to implement these proposals and also proposals to make charges paid by freeholders for maintenance of communal parts fairer and more transparent. Finally, proposals are included to set fixed time frames and maximum fees for the provision of leasehold information. The full consultation can be found here.

KEY POINTS

Implementing the ban on the unjustified use of leasehold for new build houses

  • Once the legislation is in force, it will not be permissible to apply to the Land Registry to register a residential long lease (over 21 years) of a house granted or assigned in circumstances caught by the ban.
  • The consultation asks for views on what remedies should be available to home owners who have been caught out by the ban – including transferring the freehold to the homeowner – and the practicalities of enforcing this. The consultation seeks input on further means of implementing the ban on new residential long leases.
  • A workable definition of “house” will be crucial for the legislation to be effective and the consultation invites views on the type of arrangements and structures which should or should not be considered a “house”.

Exemptions to the ban on new residential long leases of houses

  • The government believes shared ownership homes, community led housing (Community Land Trusts, cooperatives and cohousing schemes) and inalienable National Trust land and excepted sites on Crown land are possible exemptions to the ban.
  • The consultation asks respondents for other suggested exemptions.

Retrospective application of the ban

The consultation sets out the government’s proposals for the retrospective application of the ban on the granting of leasehold houses, namely:

  • any leasehold land owned on or before 21 December 2017 will not be caught by the ban but it is not clear how this applies to the ban on assignments referred to below
  • it will be possible to grant leases of houses before the new legislation takes effect
  • once the legislation is in force, the ban of granting leases of houses will apply to:

any freehold land at any time; and

any leasehold land acquired on or after 22 December 2017

  • The ban will catch assignments of leasehold land once the legislation is in force if a house or houses have been developed on that land after the legislation comes into force.

The government’s belief is that houses developed on freehold land should be provided on a freehold basis. It also states that the proposed restrictions should be placed on new leases of land granted or assigned from 22 December 2017 so that land is not acquired to circumvent the proposed ban. How these retrospective provisions will work is not clear and responses to the consultation will no doubt call for additional clarity, particularly in relation to existing development agreements and leasehold land where it will be impossible to develop under a freehold structure. There is also a concern that a one size fits all approach could prevent the future use of leasehold structures commonly used on complex regeneration projects.

Implementing the cap on future ground rents

  • Whilst the government wants to set ground rents at a nominal value on all new leasehold residential properties, it is also keen to clarify what “nominal” means. The proposed cap on future ground rents is therefore £10 (the figure being drawn from the Housing Act 1985 applying to council tenants and Right to Buy). The government asks whether there are justifiable reasons why ground rents on newly created leases should not be capped at £10, but instead at a different value. It should be noted that this is a cap so developers could choose peppercorn rents.
  • The consultation also seeks views on the exemptions to the cap, including:

community led housing (where ground rent forms the sole income for not for profit organisations)

shared ownership, but only where ground rent is used to buy out a landlord’s retained equity

retirement properties where community facilities costs are recovered through ground rents rather than service charges. Capping such ground rents could impact the affordability of such properties for an increasingly elderly population

mixed use leases (such as a lease of a building comprising of a shop with a self-contained flat above), although a further sub-lease of the flat for residential use would be subject to the cap

  • The proposed date for the cap to come into force will be three months after commencement of the legislation.
  • As with the ban on new long leases of houses, it will not be permissible to apply to the Land Registry to register a newly granted long lease with a ground rent in excess of the cap.

When to respond by

The consultation will close at midnight on 26 November 2018.

Posted in Real Estate News

Holy HMOly

Properties that qualify as Houses in Multiple Occupation (HMOs) have long presented a potential headache for unwary landlords, but from the start of this month the headache got bigger.

Originally, the requirement for an HMO licence only applied to properties that comprised at least three storeys but under new rules, introduced on 1 October 2018, size is no longer relevant. The change was brought in to tackle sub-standard and overcrowded homes and poor management practices. It is expected that it will bring an additional 160,000 properties within the HMO remit.

When do I need an HMO licence?

Landlords need to get an HMO licence from their local housing authority if:

• they rent out a property to five or more people who form two or more households; and
• the property meets one of the following tests:
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The “standard test”: the property:

(a) consists of one or more units of living accommodation (excluding self-contained flats);
(b) is occupied by two or more households, is the tenants’ only or main residence (this includes students only occupying during term time) and this is the only use of the property;
(c) one or more tenants pay rent; and
(d) two or more tenants share a toilet, bathroom or kitchen, or the accommodation is lacking in one of these.
­

The “self-contained flat test”: the property is a self-contained flat with a bathroom, toilet and kitchen available for the tenants’ exclusive use, and (b)-(d) above apply (but it must not be a purpose-built flat in a block of three or more self-contained flats).
­

The “converted building test”: the property is a converted building and (a)-(c) above apply.

A landlord will commit an offence if he doesn’t have a licence and could face an unlimited fine and a rent repayment order or a penalty of up to £30,000 as an alternative to prosecution.

Even if a property doesn’t meet the HMO licence criteria, there is still a risk that it will need an HMO licence as local housing authorities have powers to extend the mandatory licensing regime to other properties (typically where social and economic improvement is a priority in their area).

What sort of conditions will be included in the licence?

The licence must include various conditions ranging from landlords submitting annual gas safety certificates to the local housing authority to installing smoke and carbon monoxides alarms.

The new rules also introduce extra mandatory conditions: minimum bedroom sizes, restrictions on the number of people of certain ages in each bedroom and waste storage and disposal requirements. These conditions are intended to reduce overcrowding and problems with waste.

A landlord who fails to comply with the licence conditions could face a fine of up to £5,000. If he knowingly permits occupation in excess of the number of tenants or households authorised by the licence, the resulting fine is unlimited. In either case a penalty of up to £30,000 could be imposed as an alternative to prosecution.

Posted in Real Estate News

Dancing to the wrong tune? Theresa May’s additional SDLT levy on foreign buyers

Theresa May’s announcement at the Conservative Party conference that foreign investors into the UK property market were going to be targeted with an additional SDLT levy has caused further consternation within the industry.

Asserting a determination to “level the playing field” for those who live and pay taxes in the UK, the Prime Minister paved the way for yet another stamp duty surcharge, building on the higher levels already introduced for second homes and for corporates purchasing residential properties.  Whilst ostensibly aimed at the overseas oligarchy whose empty penthouses attract the continued ire of many who are struggling to get onto the property ladder, developers have claimed that the charge will have a negative impact on viability and thus reduce the more general supply of new housing stock coming to market – precisely the opposite of the intended effect.

What is beyond doubt is that the announcement follows a clear pattern and policy trend of targeting particular types of buyer through increased tax take.  These have included:

  • An additional 3% on top of normal SDLT rates if buying a residential property that means you’ll own more than one.
  • A flat 15% SDLT rate on residential properties costing more than £500,000 when purchased by certain corporate bodies or ‘non-natural persons’ – and, in some circumstances, a 3% surcharge when the price is less that £500,000 (but more than £40,000).
  • The ‘Annual Tax on Enveloped Dwellings’ (ATED) – an annual levy on the value of residential property (above a threshold value of £500,000 per separate dwelling), again where held by non-natural persons.

As ever with SDLT, the devil will be in the detail when it comes to analysing the implications of this latest additional charge.  The industry waits to see what further detail, if any, will be revealed in the Autumn Budget at the end of this month.  In the meantime, it does seem apposite to ask: to what extent is the UK really “open for business”?

Posted in Real Estate News

Law against revenge evictions extended to all Assured Shorthold Tenancies

From 1 October 2018, the government’s clampdown on so called “revenge evictions” has been extended to all existing assured shorthold tenancies, including those which pre-date the commencement of the Deregulation Act 2015.

The regime introduced by section 33 of the Deregulation Act 2015 is intended to prevent landlords from serving section 21 notices to recover possession of property let on an AST, if they are serving that notice as a reaction to the tenant having complained about the condition of their property.

Until this month, section 33 only applied to new tenancies created after the Deregulation Act 2015 came into force on 1 October 2015.  From 1 October 2018, it will apply to all ASTs irrespective of when they were entered into.

To take advantage of this statutory protection, a tenant will have to have made a written complaint to their landlord about the condition of the property, and then taken the complaint to their local housing authority, before obtaining an Improvement Notice or a Notice Requiring Emergency Remedial Action under the Housing Act 2004.

Our blog in February 2017 highlighted that in the first 18 months of the new regime fewer than half of the local authorities in England have been called upon to serve Improvement Notices to prevent so-called “revenge evictions”.  Although the  law will now apply to a larger number of ASTs, tenants need to be better advised as to their statutory rights, and as to the advantages of escalating legitimate complaints to their local housing authority, if more tenants are to benefit from the government’s clampdown.

 

Posted in Real Estate News

Urban exploration: a trend that’s going through the roof

From abandoned tube stations and former WW2 bunkers to cranes and skyscrapers, it seems barely a week goes by without a news story (or Instagram post) appearing showing an urban explorer in an area once thought of as off-limits.

A quick YouTube search brings up over 36,000 results for “urban exploration skyscraper” and “urbex” (as urban exploration is widely known) shows over 1,000,000 hits – these terms combined have tens of millions of views.

The trend, largely fuelled by social media, potentially causes legal issues (“unjustifiable” intrusion onto land owned by another person is trespass) and, in some cases, can be fatal.

Unsurprisingly, urbex comes with a number of inherent risks to the individual – from straightforward dangers such as injury from falling or poor structural integrity to lesser-known issues such as the health hazard of historic asbestos. Property owners can owe a duty of care to a trespasser if they are aware of a hazard on the premises which they believe the individual may come across and they should reasonably be expected to protect against.

Additionally, a trespasser may damage the premises and, in these times of heightened security, the access of unauthorised individuals undermines the valuable work done by landowners to keep their occupiers and visitors safe.

So. What is a property owner to do when faced with these potential risks?

From a non-legal perspective, property owners and managers should be adding safeguards to prevent access to at-risk areas. These can include displaying visitor guidelines, carrying out regular inspections, installing physical security solutions such as fencing, gates and doors, alarms, CCTV and employing security officers.

From a legal perspective, trespass isn’t generally a criminal offence but a civil one and is actionable in the courts whether or not any physical damage has been caused. If the police do attend it is likely to be solely to observe for potential criminal offences such as damage to property.

A landowner is only entitled to use reasonable force to eject a trespasser and, whilst it can be possible to recover damages in the civil courts, in reality, this is of little value. Urbex is generally a temporary activity and, once identified, individuals are often willing to leave – substantial compensation is only likely where items have been removed, damage caused or the landowner is deprived of his use of the property.

However, there is some light at the end of the tunnel. Where there is a genuine risk of future trespass, the civil courts may be willing to grant an injunction to prevent a trespass before it happens. If the injunction is then deliberately breached the person will be in contempt of court leading to a potential fine or imprisonment – a considerable deterrent where previously there was none.

These injunctions can be granted against specific named defendants or “Persons Unknown” (or a combination of the two). Whilst it can appear simpler to solely proceed against “Persons Unknown”, caution should be exercised as it may be harder to demonstrate that anyone in breach knew of (and therefore deliberately breached) the court order. The courts and landowners therefore may need to get creative – in addition to posting copies on the premises, the injunction may need to be emailed to social media groups or organisations likely to be caught by it.

This year, Canary Wharf Investments (“CWI“), were concerned about five urban explorers who had been climbing buildings and cranes on the Canary Wharf estate and posting pictures of their exploits on social media.

CWI made an application for an injunction against them and “Persons Unknown” to prevent future trespass and to require them to deliver up their media materials. There was significant evidence to show that, without the injunction, the defendants would continue to trespass.

The High Court was ultimately satisfied that the injunction was suitable and that its terms were correctly formulated to be proportionate and only capture those engaging in the undesirable conduct.

Whilst there are some hurdles to overcome in order to obtain these injunctions, many readers will remember the issues relating to squatters rights from recent years and this case shows further evidence that the courts are now more willing to take a pragmatic approach to protecting landowners from unauthorised use of their properties.

 

Posted in Real Estate News

PropTech Decoded: Smart Buildings

As our daily lives become more and more integrated with technology we take a look at two ways in which advances in tech can be used to improve the existing buildings in which we live, work and play.

 Renewable Energy

New buildings have the luxury of the latest energy efficient technology either through design or imposed through the planning process – but what can be done for our existing buildings?

Whilst we are motivated to ensure that efficiency ratings don’t fall below standards set through the Minimum Energy Efficiency Standards, there are ways that we can be proactive in improving efficiency too.   In the UK we’ve just experienced a summer which equals our hottest on record and some are already predicting that this winter will be the coldest in ten years.  The cost of heating and cooling our buildings is only going one way, seemingly because of the pinches between the price of energy itself, our more extreme summers and winters and wider global and political events.   Buildings which are able to produce their own renewable energy appear to be a logical solution.

In September 2018, the winner of the UK James Dyson Award was the O-Wind Turbine, a 25cm wind harnessing turbine designed to be fixed to the outside of existing buildings . It is clear that the technology sector is keen to find ways to make existing buildings “green”. Another company has created interactive flooring which harnesses kinetic energy from footfall and transforms it into energy. This technology is expected to be used in airports, hospitals, and shopping centres (such as Westfield, where it has already been implemented).

Despite advances in technology there are challenges for the property sector:   Will there be a way to keep the aesthetics of a building from being blighted, for example by a turbine on the end of a balcony?  Will battery storage become more common so buildings can store excess energy?  Who is going to pay to adapt our buildings in this way if it is only the occupiers that benefit from cheaper utility bills? Is it too much to expect landlords to fork out for this? Or will the Government need to step in and force change….

Information networks

Songdo International Business District in South Korea, which was built over a period of 12 years, is the world’s first smart city and the largest private development in history. Computers are embedded in the building structures forming a formidable information network used for monitoring everything from waste collection to maintenance.  Will we see similar technology becoming more common within existing buildings?  To what extent will this conflict with the new data protection regime?

Easy examples in new buildings might include sensors in bins which would be able to let a building manager know when waste needs to be removed or lightbulbs need to be changed – all of these can trigger notifications to a centralised manager, reducing the amount of time (and people) needed to check.  Could similar sensor technology be used to reduce energy waste?  Can these technologies work in existing buildings or would the costs associated with this outweigh the benefit?

Residential and student accommodation sectors seem prime candidates for the development of residents’ apps.  You would expect this to be a great selling point: the ability for residents to pay their service charge, request a meter reading, book a visitor’s parking space,  report a problem in the common parts or ask basic questions through their smart phones.  That tied with the benefits of being able to manage multiple buildings centrally and reduce running costs seems to be an obvious progression.  It would involve a central and automated system (significantly reducing service charge costs), yet appear extremely personalised to residents at the same time….

Time to engage?

Whilst we might observe the significant developments that the technology sector is making with interest, what’s not clear is how ready the property sector is to adapt to these new technologies for existing buildings. It’s fair to say the technological developments are becoming more prevalent but perhaps now is the time to push it into the forefront of everyone’s minds and to raise the standards of our existing stock.  Otherwise, at the rate the technology is being developed, we might miss our opportunity to influence how that technology is used.

James Dearsley will be the keynote speaker at the Hogan Lovells’ PropTech Decoded event on Thursday 4 October 2018. If you want to attend the event and find out more about what PropTech means for you and your business then contact Lauren.Boyle@hoganlovells.com.

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Posted in Real Estate

PropTech Decoded – BPF seeks to translate the PropTech revolution

The British Property Federation has commissioned a report, Lost in translation: How can real estate make the most of the PropTech revolution, which considers the opportunities and challenges posed by PropTech to the real estate sector.

Authored by Future Cities Catapult, the report notes that there is a strong correlation between digitisation and productivity. While real estate is not the least digitised economic sector, there is “significant untapped potential” and opportunities remain. Indeed, if the sector modernises and embraces PropTech, there is the possibility of transforming the economy through new ideas for property and its functions; better buildings for people to work, live and play in and for businesses to thrive in; improved infrastructure; and more prosperous communities.

Disruptive digital technology is already beginning to change the traditionally “safe and steady” property sector. The report highlights the current trends towards:

• more flexible use of space in buildings;
• a more service-based approach to property;
• use of sensors to provide information on building use and provide feedback to developers and architects;
• virtual replicas of buildings as a tool to improve design and operation; and
• more adaptable buildings that can cater for uncertain future uses.

With these trends only set to continue, the report makes a number of recommendations as to how the sector as a whole should respond to the technological revolution, including:

improving market information by creating a PropTech library documenting all current and emerging PropTech innovation as well as developing property innovation and PropTech maturity indices to give the market a clearer understanding of a business’s capacity and preparedness for innovation/tech as well as the innovations it should be adopting;

creating a cohesive approach to championing innovation across the property sector with the property industry, government and other key strategic organisations setting up a property sector regulatory sandbox and a property passport with common data standards for core information; and

embedding digital knowledge and fostering innovative behaviours by building a leadership development course with an overview of technologies driving digital innovation and developing a programme to put early career software developers, engineers, designers and innovators in influential roles in property businesses.

The BPF has launched a technology and innovation group to implement these recommendations. The group will be led by Andy Pyle, UK head of real estate at KPMG, and includes co-founder, James Dearsley, amongst others.

James Dearsley will be the keynote speaker at the Hogan Lovells’ PropTech Decoded event on Thursday 4 October 2018. If you want to attend the event and find out more about what PropTech means for you and your business then contact Lauren.Boyle@hoganlovells.com.

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Posted in Real Estate

Proptech Decoded – Pulling the chain on traditional land registration?

HM Land Registry is currently looking into the potential use of blockchain technology as part of its Digital Street project.  This supports HM Land Registry’s aim to “become the world’s leading land registry for speed, simplicity and an open approach to data”.

But how would this work in practice and what are the issues which will need to be resolved to make this a reality?

What advantages could blockchain technology bring to land registration?

Blockchain presents clear advantages over the existing land registration system, specifically:

• Security: blockchain is considered secure and could significantly reduce property fraud.  Records are cryptographically protected, with each property being given a unique code and linked to a smart key held by the owner.  The database is distributed across a network of computers, making it hard to hack.

• Speed: changes in property ownership would be recognised almost instantly, speeding up the time taken to complete transactions.  Smart contracts could take this a step further and allow a transaction to be completed automatically once the specified contract pre-conditions (eg payment of funds) are satisfied.

• Cost savings: completing transactions more quickly and securely would inevitably lead to cost savings for land registries and the parties concerned.  Further, having real-time property information available would facilitate better decision making and more efficient property management.

Will it make the conveyancing process redundant?

No.  Whilst any change in ownership could be recorded instantly, parties will still want to carry out prior due diligence and agree the terms on which the transaction is to be completed.  It is usually this part of the process which takes the time and blockchain doesn’t eliminate the need for this.  Blockchain may make it easier to access due diligence and title information about a particular property if such information is also recorded on the blockchain.

How will it protect confidentiality?

This is one of the biggest challenges.  One of the advantages of blockchain is its transparency, as it requires all members of the network to view and approve changes.  In practice, this would be a largely automated process, with nodes checking that each transaction submitted to the ledger is valid and that the chain has not been corrupted.

However it raises questions regarding how access to data would be controlled.  Currently, most property ownership information is publicly available and it is unlikely we would see a situation where blockchain would make this more restricted.  Most likely, there would need to be a public site (like the current HM Land Registry website) where the public could access title information held on the blockchain.  However steps would need to be taken to ensure that confidential transaction information (eg personal side agreements) are not made publicly available – whether by keeping this information off the blockchain in the first place or restricting access to such information to specified members of the network.

Does it completely eliminate the risk of fraud?

No.  It has been argued it would be harder to hack information contained on a blockchain given there are multiple copies of the database, however hacking is not impossible and for determined hackers the stakes will be temptingly high.

Are there are any other hurdles to overcome?

Yes.  Legislative change would be needed to support blockchain transactions in a real estate context as currently, for example, certain transactions can only be effected by deed. There will also be time and cost implications to HM Land Registry in implementing blockchain technology.

The future

The UK is not unique in considering the use of blockchain to modernise its system of land registration.  Internationally various other countries (including the Ukraine, Georgia, Sweden and Dubai) have all announced plans involving blockchain.  The case for modernisation is arguably more compelling in countries which do not have an established and well-respected centralised system for land registration as we have in the UK.  However there are still clear benefits to using blockchain technology which HM Land Registry is right to explore.  As the technology continues to evolve, it is vital that our transactional process continues to keep pace.

Ever wondered what PropTech was all about? Our PropTech event on Thursday 4 October will decode what it’s really about and how to stay ahead of the game. If you are interested in attending please contact Lauren.Boyle@hoganlovells.com

Find us at what3words

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Posted in Real Estate

Proptech Decoded – Proptech and its impact on the logistics sector

Robots; underwater warehouses; airships releasing drones for deliveries. No, this isn’t a pitch for a science fiction film but the future of distribution centres. The rise in global e-commerce together with shifts in customer delivery expectations and technological innovation are driving major developments in the logistics sector. In this blog we explore three such developments.

The location and shape of distribution centres

The near future could see distribution centres underwater or even taking to the skies!

A shortage of land is a constant and pressing issue for the logistics sector. Coupled with the growing need to ensure last-mile and last-minute deliveries, the price of traditional warehouses located in the vicinity of big cities is likely to increase drastically. Technology may offer alternative solutions.

Online retailers are already filing patents for airships to release drones or parachute deliveries, and underwater warehouses in lakes.

Coming back down to earth (quite literally), Hounslow Council has granted planning permission for a 2million sq ft underground warehouse alongside the Parkway (A312) near Heathrow Airport. The potential for subterranean development has already been spotted in America with the world’s largest underground business complex, “SubTropolis” located in Kansas City. This is housed in an excavated mine the size of 140 football fields and provides 6million sq ft of lettable space, with more than 8million sq ft available for expansion.

Developers are also looking at taller distribution centres as automation allows for higher racking systems as square footage is looking increasingly expensive. The natural way is up. All new P3 warehouses for example have 12m clear internal heights, which is 2m more than the current norm. This increases storage capacity by 20%.

Robots and smart tools

Technology is also changing how existing distribution centres operate.

Robots already play a significant role and this is set to increase. Certain retailers’ distribution centres are now almost fully automated and can process millions of items a week. Ocado Technology is trialling “CargoPod” autonomous vehicles to deliver groceries in residential areas of Greenwich. A growing shortage of labour, potentially exacerbated by Brexit, may lead to Wall-E lookalikes working in warehouses and handling our groceries before long!

The introduction of AI management systems also allows for the receipt and dispatch of more goods through quicker loading turnaround times. While current warehouses may need about 25 loading bays, warehouses of the future may use drones leading to higher site density and ultimately greater value.

Powering the future

The main challenge will be to ensure the warehouses of the future have enough power. Some owners have set out ambitious solar panel installation projects on the roofs of distribution centres, hoping to see as much as 80% of their energy generated in this way. IM Properties has built a 69,000 sq ft warehouse in Birmingham with photovoltaic roof panels which is fully electricity-cost neutral.

The world’s first carbon-neutral warehouse was launched in Enfield, Middlesex in 2016. The 173,000 sq ft development has reduced its power consumption through the use of motion controlled LED lighting and creates its own power through photovoltaic panels across its three buildings.

By enabling self-sufficiency, businesses can keep operating costs down and provide customers with cheaper warehouses.

Conclusion

Technological innovation is likely to face greater demand due to changing consumer behaviour as well as the redesign of logistics networks.

It is important to note that the road to automated distribution centres has been littered with obstacles, such as high costs, inflexibility, and non-scalability. As such, only 8% of warehouses in the grocery retailing industry are currently automated. But the future is coming …

Ever wondered what PropTech was all about? Our PropTech event on Thursday 4 October will decode what it’s really about and how to stay ahead of the game. If you are interested in attending please contact Lauren.Boyle@hoganlovells.com

Find us at what3words

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Posted in Real Estate News

Radical proposals on enfranchisement rights

The sale of houses on a leasehold basis has been criticised in some quarters because of its apparent unfairness to leaseholders. Leaseholders, in contrast to freeholders, lease a property for only a number of years. The question then being, what happens at the end of the term?

Enfranchisement rights provide leaseholders who hold a lease of 21 years or more with the right to buy the freehold of their house or obtain an extended lease of their house or flat. The procedure for doing so is not, however, universally popular. Leaseholders argue that it is complex and expensive, leading to unnecessary conflicts, litigation and delay.

In light of this, the Law Commission has recently published a position paper on proposed reform of the enfranchisement process.

The current enfranchisement rules are contained in over 50 Acts of Parliament. Moreover, there are different rules for leaseholders of houses and of flats, and the qualification criteria are complex and scattered across several statutes. Bringing an enfranchisement claim, even if there is no dispute between the parties, often brings about legal and other costs because of the complexity of the process. To make matters worse, leaseholders of houses are required to contribute towards the landlord’s non-litigation costs. Even if these costs are considered unreasonable, leaseholders are often left with no other option than to pay because of the disproportionate cost of disputing the sums.

The scheme is also unpopular due to its highly technical nature; simply beginning a claim can give rise to difficulties for a leaseholder. Minor errors in the tenant’s initial notice may invalidate the claim. Landlords might be difficult to identify, and there can be disputes about whether a notice has been validly served. Professional advice (plus the associated costs) is often required at an early stage.

Leaseholders argue that the valuation approach in the scheme is overly complex and difficult for the layman to understand. Leaseholders also state that where ground rents are high, the need to enfranchise is even more important for the leaseholder, but premiums are also too high.

In response to all this, the Law Commission has proposed several changes. These include changing the formula for calculating the valuation of the property and removing the requirement for leaseholders to have owned the property for two years before trying to buy it. The Law Commission also proposes replacing the right of leaseholders of houses to purchase a one-off 50-year lease extension at a high ground rent with a right to purchase an unlimited longer lease extension without a ground rent and to generally simplify the procedure in a bid to save both parties’ costs.

The Law Commission has stated however, that the intention behind the proposals is not to remove the requirement for leaseholders to pay landlords an appropriate price but rather to improve the process and reduce premiums payable by leaseholders, while ensuring sufficient compensation is paid to landlords. They must also take care not to cause damage to the leasing market at a time when supply is not meeting demand. Perhaps though, this is easier said than done… We shall find out later this month when the Law Commission plans to publish its full consultation paper!