ENDING LEASEHOLD

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Our politicians have been busy ‘reforming’ leasehold since at least the 1880s. Can this disastrous system, a culturally entrenched habit rooted in the fourteenth century, produce a legitimate form of homeownership in a contemporary democracy? Our conclusion is that it cannot.

Every bit of leasehold legislation only ever benefits the freeholders and their professional acolytes who can twist it and find loopholes. Statutory rights for leaseholders are only ever as good as the other side’s compliance with them. It is nonsense to suggest that this system is too complex, too precious to radically alter. We won’t allow cynicism to confound progressive ideas about this vital stratum of communal and individual life. This issue touches on justice and, yes, liberty. 

Leasehold is a dead end form of property (ownership) typically used for flats in a shared block, or more recently for new-build houses on a shared estate.

While sold to unsuspecting buyers as ‘homeownership’, it is basically just a long-term rental, usually for 99 years, extendable on payment of a large additional ‘premium’ plus legal costs. In law, the homeowner is classed as a ‘tenant’. You have a ‘landlord’, or ‘freeholder’, who calls the shots in the block and decides what works need doing and how much things should cost, which you must pay. 

The property, the building and the land are all owned often by an external freeholder landlord – usually an investor seeking profits or, in the case of large new blocks of apartments, a City investment fund – who appoints a managing agent and charges leaseholders ground rent and service charges for upkeep of the building and communal areas. The managing agent works for them, not the paying leaseholder, who is not ‘the client’.

Increasingly malicious profiteering through the abuse of service charges – together with the effective powerlessness of leaseholders to prevent it – has brought leasehold into severe disrepute and led to growing calls for leasehold to be abolished, to be replaced with commonhold.

The post-Grenfell cladding and building safety crisis has also put faceless freeholder landlords under immense scrutiny, encouraging journalists to scrutinise their murky business model. These ‘building owners’ have confirmed that they are building owners when it comes to profiteering from leaseholders’ homes and making all the decisions in good times, but innocent minority shareholders in a block not able to pay up to make good their own property when it comes to taking any financial responsibility. So, what is the point of them? 

If anything, freeholder landlords have delayed remedial works as they try to minimise their liabilities and were incentivised to dump costs onto the blameless leasehold ‘tenants’. Such behaviour has actually made these properties more dangerous. They have imposed rip-off waking watch contracts on leaseholders with no substantive interest in affordability, or safety. In some cases, they and their agents have also made works more expensive by sneaking in commissions and other iffy fees, secure in the knowledge the leaseholders or the taxpayer will be paying. 

The Competition and Markets Authority investigated leasehold and concluded that “it is a real concern that homeowners who have entered into a lease are captive consumers with very little influence over the costs incurred by landlords or their managing agents that will in due course be passed on to them.”

The housing select committee in the House of Commons also didn’t like what it found with its longstanding Clive Betts MP commenting: “In too many cases, leasehold has acted primarily as means of providing a steady income for developers, freeholders or managing agents.” 

Mr Betts’ influential cross-party group urged the government “to ensure that commonhold becomes the primary model of ownership of flats in England and Wales, as it is in many other countries.”

In 2020, the Law Commission produced four reports offering a route map for government to take us out of leasehold and, where it stubbornly remains, massively improve the experience of those consumer homeowners who “own” a lease. They concluded:

“The leasehold system is not working for millions of homeowners in England and Wales. We have heard how the current law leaves them feeling like they don’t truly own their home.

“Our reforms will make a real difference by giving leaseholders greater control over their homes, offering a cheaper and easier route out of leasehold, and establishing commonhold as the preferred alternative system. The reforms will provide a better deal for leaseholders and make our homes work for us, and not somebody else.”

Leaseholders who try to challenge overcharging have to endure years of effort and struggle, through arcane tribunals, stitched up by insider rules set by organisations who themselves profit from representing the interests of freeholders. 

In any case, why should homeowners have to become serial litigators in order not to be ripped-off in their own home? Commonholders in Scotland and across the rest of the world have no need to constantly trouble the tribunal and courts systems because there is no remote or profit-chasing freeholder causing trouble or dictating what needs to be paid under the threat of forfeiture, i.e. losing your home and all equity inside it without compensation. 

Not only are millions of leaseholders being grossly overcharged by profiteering freeholders – through multiple, duplicated or excessive fees and commissions added shamelessly to their service charges – but the plummeting reputation of leasehold is also destabilising the housing market.

Our fundamental point is this: leasehold deprives people of the basic rights that underpin our British way of life. Competition and freedom of choice are the essence of our economy. Don’t rate your phone provider? Think your coffee chain gives lousy service? Is your broadband too expensive? In all these cases, you are free to take your business elsewhere. Without that freedom, civic life corrodes. Where consumers have no choice, providers have no incentive to provide a good or honest service. And so it has come to pass for millions of leaseholders. Freeholder landlords have power with precious little responsibility. Leaseholders have responsibility and take on all the risks with no power. Leaseholders are in financial servitude, second-class citizens in their own homes, buildings and estates. No taxation without representation!

The scale of financial abuses is putting off first-time buyers from stepping onto what is often the first rung of the housing ladder. The various leasehold scandals are toxifying this first rung. Our campaign is therefore not just for existing leaseholders, but future flat and house owners. The housing crisis doesn’t just stop when you finally get the keys to your first home and shut the door behind you. Affordability is an issue throughout the lifecycle of a property and leasehold – with its variable and uncontrollable – service charges puts enormous financial (and mental) strain on the ‘owner’. Leasehold must go. 

Leaseholders want to buy a home and enjoy control over it and the charges that must be paid for maintenance and insurance etc – not be treated as an ‘investment product’, required to pay an endless array of unjustifiable and opaque extra fees and charges. We don’t want to keep lining the pockets of freeholder landlords and their agents who don’t work for us. Our homes must stop being other people’s cash machines or wealth extraction strategy. 

No other country in the world outside England and Wales still uses leasehold with a private external landlord / building owner controlling the day-to-day management of the property and levying fees on the flat owners to organise flats and homeownership. 

Scotland abolished their unfair ‘feu duty’, or feudal tenure, to free ‘vassals’ with a two-prong approach, passing laws in 2002 and 2012. While their system is more akin to the problematic ‘flying freeholds’ in England and Wales, their policymakers are making strides to make tenements more standardised like proper commonhold / strata title schemes, with the Scottish Law Commission’s work on tenement law, specifically compulsory owners’ associations, still underway.

In the US, they have shared condominiums, or ‘condos’; in Australia, they pioneered the strata title system which has become one of the country’s biggest exports and is a roaring success internationally, practiced by countries as diverse as Singapore, South Africa, New Zealand, Indonesia and the UAE. Commonhold equivalents are also enjoyed by our continental brothers and sisters, with syndics and co-propriétaires in France, Bostadsrätt in Sweden, Comunidad de Propietarios in Spain, condominium in Italy, and cooperative in Belgium and elsewhere.

There is no reason here why flat owners, or new houseowners on private estates with shared grounds, need an external landlord, able to demand charges from them. We do not believe English and Welsh people are uniquely incapable of appointing their own managing agent and taking an interest in what is likely to be the most important investment in one’s life. 

Freeing people from the gross overcharging, corruption and profiteering from leasehold will allow literally millions of people who feel powerless to take back control over their own homes and, together with our neighbours, give us the freedom and dignity of real homeownership.

We are no longer an agricultural economy. Flat owners are not tenant farmers. It’s time to end the punitive, outdated and fundamentally unfair leasehold, once and for all. 

Commonhold will put rocket boosters on high-rise housebuilding and open up homeownership to renters who often cannot afford a house and must make do with a flat.

An Englishperson’s home should be their own, a Commonhold castle, not a feudal one subjugated by a mighty landlord.