[2025] EWHC 2751 (Admin)

On 20 September 2018 the Law Commission published the Consultation Paper.

First, the Consultation Paper points to issues inherent in leasehold as a model of property ownership. Thus at [1.2]:

“So we refer to ‘buying’ or ‘owning’ a house or flat. But when we buy on a leasehold basis, we are in fact buying a house or flat for a certain number of years (after which the assumption is that the property reverts to the landlord). A leasehold interest is therefore often referred to as a wasting asset: its value tends to reduce over time, as its length (‘the unexpired term’) reduces.”

The Terms of Reference (“ToR”) refer to providing “a better deal for leaseholders as consumers”. “Our proposals for reform of enfranchisement are therefore intended to make the law work better for all leaseholders” (emphasis added, a word of potential significance given the prior breakdown of the leasehold market at [1.8] – see below). The Commission referred to the fact that in many countries flats are held by strata or condominium title and the concept of leasehold does not exist. Alongside their work on enfranchisement, the Law Commission was carrying out a separate project to consider legal issues with commonhold legislation which were affecting market confidence and the workability of the legislation, with a view to recommending reforms that would reinvigorate commonhold as an alternative to leasehold for both existing and new homes ([1.13]-[1.14]). The Consultation Paper contained an extended discussion of what some saw as “the inherent unfairness of leasehold tenure” and the wasting asset problem ([1.39] et seq), with references to “the diminishing value” of the leasehold interest, and the increasing cost of acquiring the freehold over time ([1.40] and [1.42]).

Second, the Consultation Paper emphasised the width of the proposed review ([1.7]). The ToR referred to nine policy objectives for the reforms to be recommended by the Commission, two general, six for leasehold enfranchisement and one for commonhold. The general objectives included “to promote transparency and fairness in the residential leasehold sector” and “to provide a better deal for leaseholders as consumers”. Those and other objectives were broadly phrased: simplifying the legislation; and examining “the options to reduce the premium (price) payable by existing and future leaseholders to enfranchise” and making enfranchisement “easier, quicker and more cost effective”.

Third, the Consultation Paper refers on a number of occasions to “leaseholders as consumers” (e.g. [1.53]), picking up language in the ToR in which one of the general “policy objectives” is “to provide a better deal for leaseholders as consumers”. The language of the nine policy objectives does not refer to or focus upon the dwellings of resident occupiers. As to who the Law Commission had in mind at the initial consultation stage:

It is relevant to note how this issue first arose. The objects in the ToR (identified at [14.5]-[14.6]) included examining options for reducing the price for existing and current tenants; introducing a clear prescribed calculation methodology; simplifying the legislation and making enfranchisement easier, quicker and more cost effective. The first of these objects also required the Commission to ensure that sufficient compensation was paid to landlords to reflect their legitimate property interests. These specific objects were framed in the context of one of the general objects of the ToR, “to provide a better deal for leaseholders as consumers”.

Fourth, the Consultation Paper identified criticisms of the current law on valuation:

Fifth, in circumstances in which any reduction in premium would reduce the compensation received by landlords ([14.9]), that left the issue of “sufficient compensation” which was addressed in chapter 15.

Sixth, the Law Commission recognised that reductions in the price for enfranchisement would involve a financial loss to landlords, and that this involved “considerations of law, valuation and, ultimately, political judgment” ([1.59]-[1.60]). They acknowledged a potential range of objects for enfranchisement reform legislation, with the choice of those objects and the implications for the legislation pursued being political issues for Parliament. Given that, and the structure of the Consultation Paper as a whole, we do not consider that it would be appropriate to treat the Law Commission as “ruling in” or “ruling out” any particular object at that stage.

Seventh, the Consultation Paper considered the issue of non-litigation costs in chapter 13. Noting that these were likely to be higher when the right to purchase arose by statute ([13.2]), the policy objective referenced in connection with this reform was to make enfranchisement “easier, quicker and more cost effective …. particularly for leaseholders”. Various criticisms of the current law were outlined ([13.35]-[13.39]). The matters identified in support of the proposed reform referred not to any particular type of leaseholder, but to the lack of justification for the landlord’s existing entitlement to be paid their costs, the pressure placed on all leaseholders by ownership of a wasting asset (referred to at [13.53(1)] as an “inherent weakness”), and the inequality of bargaining power which followed from this ([13.52(1)]). The Law Commission noted that the arguments in respect of non-litigation costs were finely balanced and asked for consultee views on potential reforms (including fixed costs and capped costs).

As part of its consultation exercise, the Law Commission held various public events around England and Wales in order to explain its reform proposals and obtain views. The Law Commission also met with different groups of stakeholders to hear their views about reform and invited leaseholders to respond to a Leaseholder Survey on their experiences of exercising enfranchisement rights, with over 1,500 responding to the latter. Stakeholder events included a symposium at University College London on 5 November 2018. One of the claimants, Cadogan, also hosted a stakeholder event for the Law Commission on 5 December 2018. The consultation closed in January 2019 and received in excess of 1,100 responses.