The Law Commission has proposed new rules which would transform the rights of leaseholders.

Under the reforms it leaseholders would have the right to extend their lease to a term of 990 years instead of the shorter terms of 90 or 50 years which are often granted today.

Landlords would be prevented from using these lease extensions to introduce more onerous conditions to the contract and leaseholders would not have to pay any ongoing ground rent, the Commission recommends.

Leaseholders should also have the option to buy out their ground rent and therefore free themselves from the obligation of making the annual payments without necessarily having to extend their lease.

Owners of leasehold homes should be allowed to seek “enfranchisement” or collectively buy the freehold with other leaseholders in the building straight away rather than having to wait until they have owned their property for two years before doing so.

Flat owners should also be able to buy the freehold where up to 50 per cent of the building is in commercial use, rather than just 25 per cent as it currently stands.

The proposals would lift the obligation on leaseholders to pay the costs of freeholders in enfranchisement claims.

The Law Commission says that where possible disputes should be dealt with entirely by the Leasehold Valuation Tribunal and not involve the county court in order to save both leaseholders and freeholders money.

While it is possible for leaseholders and freeholders to reach informal agreements on lease extensions and freehold purchases outside the statutory process, the Commission warns that more protection is needed to “prevent leaseholders from being persuaded to agree to lease extensions or transfers that have been drafted on unreasonable terms”.

The Commission calls for take further steps to protect leaseholders from being hit by onerous conditions or clauses that are designed to be profit-making for the freeholder. 

Further proposals are made in relation to leaseholders making “right to manage” claims.

The Commission says that leaseholders should not be forced to pay freeholders’ costs in these cases either.

Additional proposals would make it easier for leasehold properties to be converted to commonhold, by not requiring unanimous agreement from all  flat owners.

The Commission also wants to make it easier for developers to create properties on a commonhold basis from the outset.

Commissioner for property law Professor Nick Hopkins says: “The leasehold system is not working for millions of homeowners in England and Wales. 

“We have heard how the current law leaves them feeling like they don’t truly own their home.

“Our reforms will make a real difference by giving leaseholders greater control over their homes, offering a cheaper and easier route out of leasehold, and establishing commonhold as the preferred alternative system. 

“The reforms will provide a better deal for leaseholders and make our homes work for us, and not somebody else.”

Minister for rough sleeping and housing Luke Hall says: “This Government is determined to improve transparency and fairness in the residential leasehold market to help thousands of leasehold homeowners up and down the country as well as future homebuyers.

“We are clear that the current system needs reform, which is why we asked the Law Commission to carry out this important work. 

“We will carefully consider the Law Commission’s recommendations, which are a significant milestone in our reform programme, as we create a better deal for homeowners.”

NAEA Propertymark chief executive Mark Hayward says: “We have long called for action to be taken to help leaseholders who have been misled and treated unfairly so it is really positive to see the law commission’s report today. 

“For too long, housebuilders and developers have not been transparent enough about what it actually means to buy a leasehold property, which in turn has meant many owners have been faced with escalating ground rents and unreasonable fees, leading them into financial difficulty. 

“In 2017 we argued for leasehold reform through our ‘Leasehold: A Life Sentence?’ report which found that 93 per cent of respondents wouldn’t purchase another leasehold property.

“It’s vital that the proposals laid out in today’s report lead to actions as soon as possible to give some hope to those who are currently trapped in leasehold properties with no easy route out.”