You are here: Home - Mortgages - First Time Buyer - News -

Measures suggested to cut cost for leaseholders buying freehold

Written by: John Fitzsimons
The Law Commission has outlined a handful of measures which could reduce the cost for leaseholders looking to extend their lease or purchase the freehold of their homes.

The formal name for this process is enfranchisement.

The Law Commission was tasked with reviewing the enfranchisement process by the government.

It has suggested three key schemes for determining the premium ‒ the sum paid by leaseholders when enfranchising the property ‒ which will make that figure more affordable, while still ensuring landlords are paid what it classes a sufficient amount.

For example, under the current system part of the premium is calculated using the ‘marriage value’ ‒ reflecting the fact that owning the freehold outright is worth more than the sum of the freehold and leasehold interests if owned separately ‒ and the ‘hope value’, which is a deferred form of the marriage value.

The three models suggested by the Law Commission involve removing either the hope value, marriage value or both from the calculation of the enfranchisement premium.

In addition to the three reform models, the Law Commission has outlined a handful of other options for revamping the system.

These include capping the level of ground rent which can be used when calculating the premium, creating an online calculator to help people work out what the cost of enfranchisement is likely to be for them, and to enable those looking to collectively enfranchise a block of flats to avoid having to pay a ‘development value’ to the landlord unless they actually do embark on further development.

Professor Nicholas Hopkins, property law commissioner, said: “We were asked to provide options for reform that save leaseholders money when buying their freehold or extending their lease, while ensuring that sufficient compensation is paid to landlords. This is what we’ve done.

“We are ready to help the government in implementing whichever options for reform they choose.”

The government has said it will now consider the proposals and set out how it wants to proceed.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Big flu jab price hikes this winter: Where’s cheapest if you can’t get a free vaccine?

Pharmacies, supermarkets and health retailers are starting to offer flu jabs ahead of the winter season, but t...

Is now the time to fix your energy deal?

Fixed energy tariffs all but disappeared during the energy crisis. But now they are back with an increasing nu...

Everything you need to know about the pension triple lock

Retirees are braced to receive another bumper state pension pay rise next year due to the triple lock mechanis...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

The best student bank accounts in 2023: Cash offers, tastecards and 0% overdrafts

A number of banks are luring in new student customers with cold hard cash this year – while others are compe...

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Money Tips of the Week