Latest updates from the Law Commission report.
In this recent article , we discussed the recent Law Commission report outlining their recommendations for a change to the law on leasehold enfranchisement. At the same time, the Law Commission also published their report on ‘Reinvigorating commonhold'.
As with the Law Commission's work on leasehold enfranchisement, we have also had substantial interaction with the cross-party parliamentary commission looking at commonhold and have fed in to the Law Commission's initial consultation.
Commonhold is a novel legal structure, outside the usual concepts of freehold and leasehold, which has been little used since it was first launched because of perceived difficulties with the structure. One of these difficulties is that, under the current law, commonhold owners cannot grant residential leases for a term of longer than 7 years. In this report, the Law Commission recommended that shared ownership leases should be exempt from these restrictions, which is good news for affordable housing providers considering commonhold.
Unfortunately for the CLH sector, the Law Commission recommended against a general exemption to the ban on long leases being made for community land trusts or housing co-operatives, arguing that long leases are not necessary to ensure affordable housing is available within these structures. Although disappointing, it would be open to CLTs or housing co-operatives to make use of the shared ownership exemption, or to offer leases of less than 7 years. Their feeling (expressed in consultation although not so obvious in the report) is that CLH and commonhold are too different from each other to work and we think this view has merit.
We have not generally recommended commonhold for CLH groups, not least because we have been concerned about the lack of flexibility permitted in the articles of association which govern the commonhold association. Although the Law Commission's recommendations include some changes to these articles of association, we are not convinced that these would be enough to make commonhold a realistic option for most CLH groups.
Whether these recommendations are enough to truly reinvigorate commonhold remains to be seen.
Originally published by Wrigleys Solicitors, July 2020
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