Reforming leasehold is ‘populist’, declares Mick Platt, the day-to-day manager of Wallace Estates, in an article on the policy wonk Conservative Home website, before setting off down quite a familiar path to demonstrate that existing arrangements are just fine.
This prompts two reactions at LKP.
First, the populist bit. It comes as a great surprise to us, as to get meaningful reform from this government has been like pushing a boulder uphill: it’s nice to have the Leasehold Reform (Ground Rent) Act 2022, which ends future ground rents, but it has taken 10 years.
We also got the Law Commission reports on forfeiture, enfranchisement, right to manage and commonhold reforms as well, which serve as blueprints for legislative reforms, although who knows whether the new government will care very much about them.
Given that leasehold was dumped from the last Queen’s Speech, it hardly seems to us like the government is exactly pandering to a surge of populist enthusiasm.
At the outset, ten years ago, our message was markedly unpopular at every level, with ministers and officials eager to persuade themselves that all was well with the leasehold system and that it functioned acceptably enough.
It took several scandals in retirement leasehold, outing numerous leasehold scamps and then LKP’s exposure of the doubling ground rent scandal – which subsequently gave birth to the National Leasehold Campaign – to get leasehold to the forefront of political and media attention.
So I am not sure Mr Platt is on the right lines, thinking that Conservative politicians are champing at the bit to reform leasehold – even though to do so would marry well with the party’s sole significant housing policy: to increase private home ownership (which is in generational freefall).
And while it is always diverting to hear from Mr Platt – on Newsnight over the building safety crisis with LKP’s Martin Boyd last year and at the Communities Select Committee in November 2018 – and, indeed, to hear from his equivalents, such as Richard Silva, of Adriatic Land / Long Harbour, and Bill Procter, of Vincent Tchenguiz’s Consensus Business Group, something is missing: the masters’ voice.
This is our second response to Mr Platt’s article.
Isn’t it about time leaseholders heard from the organ-grinders, rather than the monkeys: like Mr Platt’s boss East Anglia-based Italian Count Luca Rinaldo Contardo Padulli di Vighignolo, of the hedge fund Camomille Associates?
When did he think it was a great idea to invest in residential freeholds to blocks of quite modest flats in England and Wales, with their enticing and legally enforceable income streams?
Or William Waldorf Astor, of the £1.8 billion Long Harbour fund. He is heir to a viscountcy and perhaps leasehold as a semi-feudal form of land tenure has a natural allure: the surge in apartment blocks over the past 25 years offering the prospect, perhaps, of another fortune to rival that of the Mayfair and Belgravia estates of the dukes of Westminster, who pioneered the modern leasehold business model three centuries ago?
Or Hampshire vineyard-owning James Tuttiett, of E&J Capital Partners, operating out of nice offices in the shadow of Winchester cathedral? Or Essex brothers Peter and Nicholas Gould of the Pier / Regis group?
Best of all would be to hear from Vincent Tchenguiz, perhaps the most interesting and talented of the lot of them, whose fortune began in Croydon by gearing the future revenue streams of commercial and residential properties, and from whom Astor learned the, er, professional business practices of the trade.
Who has called things right, for example, over the indebted Tchenguiz freehold portfolio: Vincent, or the ex-Goldman’s smarty pants at Rothesay Life? No idea, but my tenner is on Vincent.
It would be rather more interesting to hear these figures’ views of the leasehold sector, with all due respect, than Mr Platt’s.
Mr Platt was responding to an earlier article on Conservative Home by Harry Scoffin, who is also a contributor to the Leasehold Knowledge Partnership website, who argued the Tory virtues of reforming leasehold tenure:
Harry Scoffin: Abolishing leasehold for flats can revive the Tory dream of a property-owning democracy | Conservative Home
Here’s a message for Rishi Sunak and Liz Truss: failure to expand the property-owning democracy by overcoming the ghastly cartel of developers will banish the self-styled party of homeownership to opposition. “To Conservatism… the success and the stability of a civilisation depend upon the widest possible extension amongst its citizens of the private ownership of property”.
Mr Platt did not agree:
“The Government’s plan to abolish leaseholds on apartment buildings will be a nightmare for the majority of residents and is unlikely to make the Conservative Party popular in the long-term.”
Without freeholders – even the anonymous, offshore private equity punters who have invested in the funds above – you would lose the “vital stewardship role, overseeing the maintenance, safety and sustainability of building structures and communal areas, and taking on significant responsibility for the building as a whole, such as insurance [sic] and complying with legislative requirements”.
Leaseholders would be overburdened by the responsibility, especially in complex, mixed use sites.
This ignores the fact that western Europe, Australasia and north America all have versions of commonhold where the flat owners really do own the building and the land on which it stands, and have to co-operate at least to the degree of choosing a responsible board and appointing a professional property manager.
They may be a pain in the neck – communal involvement with lots of people with different priorities often is – but these commonhold entities seem to work with less widespread acrimony than is the case with leasehold.
On the other hand, let’s concede to Mr Platt that some leaseholder controlled blocks do go badly wrong.
Some resident directors can become awful bullies; others worse.
Some form alliances with commercial interests like the property managers at the expense of the whole; some feather their own nest by managing small sites without paying the service charges.
And here is one chairman who went to prison after privately educating his children on the reserve fund:
The most egregious case of bullying that I have encountered involved leaseholder directors of a large self-managed site threatening defamation proceedings against a leaseholder who appealed in writing, temperately I thought, for an extraordinary general meeting.
It cost the individual more than £10,000, and his grovelling apology was published on the block’s notice board.
I am not aware of any of the freehold owning groups named above behaving in such a vile fashion.
I am also aware of toxic and slightly mad leaseholders lurking in the nether regions of the internet and, frankly, I would take Vincent Tchenguiz and FirstPort any day, compared with a site run by them.
Mr Platt is not making valid points of this sort, however.
His article rehashes the “research” by the PR company Sevanta that showed that commonhold flat ownership in Scotland meant blocks were ill-maintained and that Nicola Sturgeon’s long-suffering fellow countrymen were crying out for a dose of English leasehold landlordism. (De-bunked in article below)
In fact, the Scottish residential property market has long been far healthier than the English one, being mortgage driven overwhelmingly by owner-occupiers. So you don’t have so many of the baby-boomer buy-to-letters, and overseas property punters with cash – against whom England’s unfortunate first-time buyers have been in unequal competition for two decades.
Lastly, Mr Platt makes a brave effort to argue that Conservative reforms of leasehold will switch off investment and affect tax revenues.
That one takes the biscuit, given the tiresomely routine use of offshore vehicles for this sector, and the entirely parasitical, non-wealth creating nature of freehold ownership.