We have welcomed the Law Commission's proposals to exempt CLTs from leasehold enfranchisement rights in our consultation response.
The Law Commission is consulting on proposals to make leasehold enfranchisement simpler, easier, quicker and more cost effective.
Leaseholders have the right to buy the freehold of their house (and flat owners to collectively buy their freehold). Somebody living in an affordable home in a CLT could enfranchise, cutting out the CLT, and sell their home on at the open market price. This could drive a coach and horses through a Community Land Trust, which is required by law to ensure it uses its land and homes for the wellbeing of its local community, and protects them in perpetuity. Nobody has yet exercised this right in a CLT home.
There are already some exemptions. Shared owners cannot enfranchise until they "staircase" to 100%, buying up the whole value of their home, offering some protection to CLTs. In "protected areas" designated by national government, CLTs can cap ownership at 80%, ensuring the resident never takes full ownership. Homes built using Community Right to Build Orders are also exempt, though only one CLT has gone through the palaver required to secure one of these orders.
Gaining an exemption for all CLTs has been a long-running campaign for the National CLT Network, predating the charity itself (the earliest lobbying we can find is from 2002, from our trustee Stephen Hill).
We were pleased, therefore, to see that the Law Commission recognised this in their consultation and are proposing that CLTs become exempt.
Our consultation response - made jointly with the UK Cohousing Network - sets out our views on how it could work. We also propose that it could be extended to cohousing communities and other forms of community led housing. You can find our response on our campaign page on leasedhold reform.
We hope the Government takes up their proposal. We are also now drafting a response to the Law Commission's separate consultation on commonhold. Strangely, in that paper, the Commission proposes that CLTs should be banned from using leasehold altogether (except for very short leases of less than 7 years).
Commonhold doesn't really work for CLTs at the moment. For example, a CLT in a village might build twenty homes and sell them as leasehold homes, using the leases to keep them affordable in perpetuity. Everybody in the village can join the CLT and take part in its governance. But under commonhold, the homes would be owned by the residents of those homes, with no involvement for the wider community, and they could decide between themselves to remove any affordability restrictions.
We would like to see commonhold reforms so that it might be compatible with CLTs, but that needn't mean that leasehold is also banned. We don't want to see the baby thrown out with the bath water.
Now that the Government seems to have accepted that CLTs can make ethical and responsible use of leasehold, and one half of the Law Commission has endorsed this, we hope to persuade the commonhold team to follow suit.
Thank you to our members for your support on this campaign, and of course for your fees that help pay for our work!