Housing Advocates Want Government To Reform "Medieval" Leasehold System
Housing campaigners are eager for Government to reform the “medieval” leasehold system this year by tackling high annual costs and making it easier for leaseholders to buy the freehold of a home.
A housing industry source said they anticipated a Leasehold Bill could be laid out in Parliament during the King’s Speech on 8th November. The government is yet to confirm what will be in its next legislative agenda.
A leaseholder is a tenant who has paid to live in a property for a select period of time, and often includes apparent homeowners – government data suggests a long-term leasehold usually lasts between 99-125 years. Once the agreement ends, the property returns to the landlord, who owns the property and plot of land. Government data suggests there are almost five million leasehold properties in the UK. 71 per cent of leaseholds are flats and 29 per cent are houses.
A freeholder owns a property outright, including the land the home is built on. Unlike leaseholders, freeholders do not have to pay "ground rent", which is a cost paid by leasehold tenants to use the space they are living in.
Campaigners are calling for the Government to cap all ground rents at 0.1 per cent of the property's value, to stop costs becoming unmanageable as the value of the property increases. Currently the cost of a person's ground rent is dependent on the leasehold contract. It can be fixed for a certain period of time, reviewed every few years or rise in line with a home's value.
DAC Beachford, an international law firm, said that while ground rents have historically been stable, in recent years landlords are reviewing them every 10 to 25 years.
Activists also want to make it easier for leaseholders to buy the freehold of a property from a landlord.
Leaseholders under the current system cannot purchase their flat or house outright if 25 per cent of the building or estate belongs to commercial property. In practice, this limits people's ability to buy the freehold of their home, and means they are restricted to leasing their flat or house.
Commonhold Now, a campaign group to end leasehold, has called for the Government to reform Right to Manage. At the moment 50 per cent of leaseholders in a block of flats or an estate have to agree to remove the managing agent and gain control of the service charges.
The group is keen to water down this figure. PoliticsHome understands the Government has considered this proposal, but it remains uncertain whether it will be included in a future Leasehold Bill.
Nickie Aiken, Conservative MP for Cities of London and Westminster, who has campaigned on reforming leasehold, told PoliticsHome she was hopeful a Leasehold Bill would be included in the King’s Speech and felt it had been a “long time coming”.
“The reason why we need it is because people who buy their homes need to be confident that the money is spent on their buildings, or buildings within their apartments are managed properly,” she said.
“It's now time that leasehold reform was carried out, so that people who want to can take over the management of their buildings with their neighbours.”
Aiken said tenants who want to extend their leases have been hit with bills costing “hundreds of thousands of pounds”.
“For me as a Conservative, this is an example of a Conservative policy, allowing people the ability to own their own home outright,” she added.
Leasehold has been criticised by campaigners and experts as a “medieval system” which was designed to benefit landowners as opposed to people living in large cities.
Earlier this year, Levelling Up secretary Michael Gove said he wanted to scrap the “feudal” leasehold system in England and Wales.
However, The Guardian reported that the Government would look at reforming the system instead of abolishing it, and that the Prime Minister’s team had rejected the plan as they believed it was not possible to implement the plan before the next election.
Marc Vlessing, Chief Executive of Pocket Living, told PoliticsHome he believed the UK was an outlier compared to Europe when it came to leasehold.
“The government is absolutely right to bring forward leasehold reform and the real estate industry is broadly supportive of its efforts,” he said.
“Leasehold is, frankly, a medieval system that was designed in the interests of large landowners, not modern city dwellers.
“The problem with leasehold is that for young people, who we know are so desperately keen to get their first foot on the ladder, it makes homeownership more complicated than is necessary and they still effectively have a landlord in the form of the freeholder,” Vlessing added.
A spokesperson for the Residential Freehold Association said the current leasehold system works for the “vast majority of the UK’s 4.9 million leaseholders” and the Government should reconsider its position.
“There is no evidence that the public at large want leasehold to be abolished, and polling has shown that a large majority of those surveyed do not want the obligations that come with the proposed changes,” they added.
Matthew Pennycook, Labour’s Shadow Housing Minister claimed the Conservative Government has "crashed housebuilding" and have "dithered and delayed" on reforming leasehold tenure. He claimed it was the root cause of the "abuse and poor service that so many homeowners experience at the hands of their managing agents."
"Labour is committed to comprehensive and fundamental leasehold reform by enacting the Law Commission’s recommendations on enfranchisement, commonhold and right to manage in full," he added.
“Unless and until leaseholders get a renewed commitment from Ministers to enact all the Law Commission’s recommendations, leaseholders will reasonably conclude that the Government have scaled down their ambition.”
The Labour Party has previously committed to bringing forward a Leasehold Bill within its first 100 days in office. However, its position could change if Government ministers bring forward a Leasehold Bill in this session of Parliament.
A Labour source said it will pressure the Government to meet its promise and bring forward further reforms but that Labour cannot be more specific on its position without knowing for certain when the Government will bring legislation forward.
Harry Scoffin, Director of Commonhold Now, which campaigns to end leasehold, told PoliticsHome he believed it was “extremely disappointing” that Labour has "deprioritised" the issue.
“If Labour is serious about growth, life chances and inequality, there will be no better ‘quick win’ for them in government than ending the racket of leasehold affecting up to 5 million households,” he said.
Scoffin advocates commonhold which is an alternative system to leasehold. Commonhold would allow tenants freehold ownership of their homes and make them responsible for shared areas in a building or estate.
“Commonhold provides Labour the perfect opportunity of being seen to be more progressively capitalist than the Tories while having a clear line of us vs them with the feudal overlord freeholders," he said.
“There could be no better issue for Labour to differentiate themselves from the Tories. Gove may have been overruled on abolishing leasehold, but Rayner could get it through.”
A Department for Levelling Up, Housing and Communities spokesperson said they are “determined” to protect leaseholders and help them “challenge unreasonable costs”.
“We have already made significant improvements to the market – by ending ground rents for most new residential leases and announcing plans to make it easier and cheaper for leaseholders to extend their lease or buy their freehold,” they added.
“In line with our manifesto commitment, we will bring forward further leasehold reforms later in this Parliament.”
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