Leasehold Reform - Chapter 5 - Freehold Enfranchisement of House-Rights

The next chapter provided for in the Law Commission's report, attends to the issue of the freehold acquisition of houses. Of late, this area has come under most scrutiny, as a result of it being unclear as to specifically why leasehold houses are required.

In considering the area of law, the Law Commission have put forward the following proposals, namely:

  1. The Law Commission is of the opinion, when acquiring the freehold of a house, that the owner of the lease should be able to acquire 100% of the premises included within their lease. Under the current regime, some areas of a property are specifically excluded due to rights of way or other elements, and the Law Commission is of the opinion that this should not matter. Indeed they are also of the opinion that if there are other leases granted, such as leases of roof or air spaces, these should be able to be acquired under the enfranchisement procedure also.
  2. The Law Commission were also of the opinion, that where the freeholder had a legal charge over the freehold land, and therefore this charge appeared on the freehold title to a house, upon an enfranchisement the charge will automatically be removed, and the freeholder will be under an obligation to account to the charge holder for any costs associated with the relinquishment of that charge. The intention in doing this, is to prevent a mortgagee's consent being required, and therefore reducing additional costs of enfranchisement.
  3. The Law Commission also considered circumstances where there may already be a relationship between the leasehold and freehold property (i.e. estate rights and covenants) which would be eradicated by the acquisition of the freehold title. They acknowledge that in some circumstances the relationship between the freehold land and the enfranchised land, will not have been set by an existing lease, and therefore the terms will need to be considered or implemented into any transfer. They therefore distinguish between the acquisition of the whole and acquisition of part of the landlord's freehold interest.

 In connection with the acquisition of the whole, the Law Commission are considering  whether the leaseholder should acquire with the rights and obligations of the freeholder;        whether they acquire with the rights and obligations imposed in their lease (and therefore  varying the freehold title). They also wish to consider whether there would be a possibility of the leaseholder introducing a covenant, that might then impact on the value of the property, reducing it for the leaseholder’s own benefit.

Where only part of the freehold title is being acquired, the Law Commission again makes two distinctions; The first being where there are already the terms set out within the lease     governing the relationship between the leasehold land and the freehold land.  The Law   Commission are of the opinion in these circumstances that those rights should remain as they are. This would be where for example there may be estate management charges, and therefore those should continue to be paid as part of a freehold obligation.

Where however there is no interrelationship, they considered whether there should be a prescribed list of appropriate covenants to be included on the transfer, and whether       those should then be imposed.

Ultimately however, there would need to be a consideration of the individual estate, however they would wish to put in place safeguards to prevent landlords from seeking to   introduce onerous terms.

4.    Finally, they again look at the issue of transfers outside of the statutory scheme. They repeat the points that they have repeated in relation to lease extensions, either whether they should prohibit such transactions from taking place; make them subject to the same terms as a statutory scheme; or alternatively whether they should allow them, but only after appropriate Initial Notices have been produced.

Again, but the Law Commission is looking for representations on this point, in order that they consider whether or not the proposals are beneficial or otherwise

Should you have any queries in connection with the above items, then please do not hesitate to contact this firm’s Real Estate Department on 01702 338 338 or llancaster@paulrobinson.co.uk