The government’s swift volte-face on their proposed abolition of residential leasehold leaves tenants in a continued state of uncertainty. Residential leasehold specialist Siobhan Dunsdon considers what happens now for leasehold reform.
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How fast things move in politics. It’s barely four months since Housing Secretary Michael Gove committed to abolishing leasehold by the next general election, describing it as “an outdated, feudal system that needs to go.”
In a recent article, I examined the feasibility of that promise, concluding that the timescale was wholly unrealistic. And now, following reports of a heated dispute between Mr Gove’s department and Number 10, the plans have been shelved.
In their place, expect proposals capping ground rents, increasing tenants’ control over property management, and restricting leaseholders’ exposure to legal costs following disputes. But again, as with last year’s abolition of ground rents on most new leasehold properties, these latest plans amount to yet more tinkering around the edges in place of wholesale reform.
Opposition plans for leasehold reform
To muddy the waters further for leaseholders, Labour recently pledged to introduce legislation within its first 100 days in government to abolish leasehold.
Shadow Housing Secretary Lisa Nandy announced:
“There are five million people struggling with this feudal and archaic system. England and Wales are outliers in the world of holding onto this system.
“You save up, get a mortgage to buy your own home only to find out you don’t actually own it. You can be hit with arbitrary unfair challenges, you don’t know where they come from. Nobody is under pressure to explain why they are charging you that money. For some people it is just an irritation, for others it is ruining their lives.”
Does it feel like Groundhog Day?
The devil is in the detail
But as always, the devil is very much in the detail. Labour’s plan includes:
- ending the sale of new leasehold houses.
- replacing private leasehold flats with commonhold.
- as an interim measure, introducing greater powers for flat owners over management of their blocks, with new rights for leaseholders to form residents’ associations and simplifying the right to manage.
- the right to a 990 year lease extension with zero ground rent at any time; or capping ground rents when extending a lease to 0.1% of the freehold value, up to a maximum of £250 a year.
- fast-tracking the Law Commission’s proposals to reform leasehold enfranchisement valuation for leaseholders, including marriage value and prescribed rates for calculating the premium.
- cracking down on unfair fees and contract terms.
While that seems pretty comprehensive, these proposals contain nothing new. In particular, the plan to replace leasehold flats with commonhold is the only ‘off the peg’ solution available.
Introduced more than two decades ago by the last Labour government, commonhold represented a valiant attempt at finding a workable alternative to leasehold. However, it never caught on, and only 150 commonhold units were ever registered.
So what now for leaseholders?
It’s four months since Mr Gove announced major reforms that were effectively unachievable before the next election. In their place, we now have a limited package of measures even less likely to appeal to opposition parties. So, following the Bill’s introduction, expect glacial progress before its eventual withdrawal for insufficient parliamentary time.
Reform will come – and I do expect major change. But again, we return to the question of when. Remember, Labour’s pledge is only the introduction of draft legislation. Should they win the next election, the final shape of that legislation and its ease of passage onto the statute book will depend entirely on the composition of the House of Commons.
Certainly, expect the clamour of competing interests to highlight more than ever the considerable hurdles to clear in unravelling this centuries-old system.