A legal expert has warned that an amendment to the recently-passed Leasehold and Freehold Reform Act that raises the 25% non-residential limit in collective enfranchisement claims to 50% will have serious consequences for mixed-use developments.

Katherine Simpson (main image), who is both a leasehold enfranchisement expert, Partner at Edwin Coe LLP and a member of the Association of Leasehold Enfranchisement Practitioners, says this will have a much greater impact on landlords and the commercial property sector than might at first glance have been appreciated.

“One of the critical issues identified is the fragmentation of ownership of our high streets,” she says.

“It is important to note that many areas of historic value and importance have been successfully managed in single ownership for as long as they have existed.

“As a result of the change, the ownership of mixed-use buildings on our high streets may now be fractured and diversified.

“Cohesive management of mixed-use blocks may be undermined, resulting in a fall in standards of maintenance.

“This may then impact negatively on investment because the proposals will jeopardise capital investment and rental income from commercial premises.

“Not only will property developers be disincentivised from investing in mixed-use buildings, but also developers of new mixed use buildings will seek to ensure that the residential parts comprise less than 50% to avoid tenants seeking to manage the building.`

Out-performs

"This will be despte residential investment currently out-performs commercial investment and that there is a necessary aim - supported by the government’s increasing lenient attitude to change of use through permitted development rights  - to swing the balance in favour of residential development.”

Simpson also says the change will have significant impacts on sustainable development, building management and safety and financing.

“In the hands of amateurs, the technical understanding, investment, experience and institutional knowledge of professional managers, which are critical to the high street - whether those that have existed for years or those that have emerged as a result of large regeneration projects - will flounder.

Historical

Pointing to its likely effect on planning policy, Simpson says this would then impact the historical character of towns and cities, “just at a time when investment was beginning to turn neglected high streets with empty shop units into thriving communities”.

“The impact of the Leasehold and Freehold Reform Act runs far deeper than the Government’s aim to make enfranchisement easier for groups of inexperienced leaseholders to take hold of our communities, leaving them stranded without the benefits of continuing and long-term stewardship,” she adds.