All Party Parliamentary Group on leasehold and commonhold reform to meet at the demo to show support
The Leasehold Knowledge Partnership is calling on all leaseholders – whether affected by fire safety issues or not – to support a mass rally outside Parliament on July 15.
At the same time – and possibly at the rally itself – MPs of the All Party Parliamentary Group on leasehold and commonhold reform will meet and have given their support.
The event is being organised by the National Leasehold Campaign, UKCAG and assorted cladding groups caught up in the catastrophe of fire safety defects which has blighted private blocks of flats throughout the country. The Leasehold Knowledge Partnership is delighted to participate, having driven the agenda for leasehold reform since its foundation in 2012.
We are in the midst of generational change for leasehold: yesterday the government published its Leasehold Reform (Ground Rent) Bill, which will end ground rents on new build properties. And next year there will be more substantive reforms to leasehold.
Meanwhile, an urgent stimulus for change is the fire safety disaster, which will see ordinary home owners bearing huge costs to remediate building defects for which regulators or housebuilders were responsible. Having been promised for years by ministers – including prime ministers – that these costs would not fall on them, now they are.
The £5 billion in public money will pay to remove some combustible cladding, but not the whole host of other safety defects – such as fire compartmentation – that our bodging housebuilders introduced to their buildings. And if you live in a new site under 18 metres, you get a government loan (details long awaited) to fix the errors of others, or nothing at all.
Outrage at these government responses – as well as the horror of a fire at an unremediated cladding site – helped drive the demonstration outside Ballymore’s New Providence Wharf, in London’s Docklands, last weekend. Doubtless similar impromptu protests will follow: they certainly should do.
Right at the start of the cladding disaster following the Grenfell tragedy in June 2017, the Leasehold Knowledge Partnership asked whether leasehold could survive the sort of scrutiny that would inevitably follow.
It is not lost on cladding leaseholders that they – the weakest link – are being made to pay huge bills to correct the errors of others. Government is putting in £5 billion and housebuilders will have to pay out £2 billion over 10 years in contributions. But the bulk of the £15 billion bill comes from the hapless consumers.
Freeholders – these days mysterious private equity punters often based offshore – contribute nothing at all.
The bungling of England (and Wales) over the cladding disaster contrasts to the pro-active approach in Australia, where leasehold tenure was replaced with commonhold strata title in the early 1960s. There flat owners really are owners, not long-term tenants, and are thus able to make the decisions necessary to make their homes safe.
An unfortunate consequence of our existing flawed leasehold system is that billions of pounds – including £5 billion of public money – are to be entrusted to the eager hands of freeholders and their property managers.
So while flat owners face ruin, some of the most controversial operators in residential property will handle the money, with minimal scrutiny.
These controversies around modern blocks of flats will continue now for many years. And one consequence of that will be a repeated public clamour for change by flat owners who have absolutely nothing to lose by doing so.
For years, the leasehold thrived as the murkiest corner of residential property because leaseholders would not speak out about its abuses publicly. They did not want to trash the value of their flats. Now those values are trashed anyway.
An example of the new spirit of defiance was seen at London sites built and managed by the Irish developer Ballymore – again! – who told the Financial Times of rip-off service charges and other practices:
Of course, this remunerative sector of residential property is not going to accept reforms without doing its level best to derail them.
But the forces of darkness face a challenge.
Yesterday the government published the Leasehold Reform (Ground Rent) Bill, which will ban new ground rents being created.
This is a huge step – and one that directly follows LKP’s advice to officials and ministers: ban new ground rents first and THEN reform leasehold and reintroduce commonhold as an alternative and superior form of tenure.
In the past, leasehold reforms have faltered owing to their complexity, like the 2002 Leasehold and Commonhold Reform Act.
The sector would like nothing better than interminable, obfuscating arguments about lease lengths and values adopting all the skewed-in-their-favour mathematical modelling in enfranchisement that is argued by the courts.
Killing off new ground rents ends this: it stops leasehold having a future. The gravy train runs dry.
And if ground rents are banned, why would developers, who create them, resist commonhold?
With income streams stripped out of the homes they sell, there is little incentive to continue marketing flats as leasehold.
Many developers have already quietly dropped ground rents from their leases.
Home buyers should not be buying any new property with ground rents: insist that the clauses are struck out immediately.
Barratt abandons ground rents here:
Campaigners have hailed a breakthrough in the leasehold scandal that could help thousands of prospective homeowners after the UK’s largest house-builder eliminated ground rents on its new developments. Barratt Developments is beginning to offer 999-year leases and zero ground rent on new-build flats.
And others also quietly drop them:
Five of the UK’s biggest housebuilders have scrapped ground rents on new flats, in a victory for future homeowners and campaigners who have long argued that the charges allow leaseholders to be exploited. Thousands of homeowners have been hit with inflated management fees and ground rents that rose by hundreds or even thousands of pounds a year on new-build flats and houses.
With ground rents dead and buried, the monetising sector’s opportunities to stuff the leasehold reforms of the next parliamentary session are drastically reduced.
It will be next year that sees further leasehold reforms based on the Law Commission’s reports on enfranchisment and right to manage and commonhold.
LKP anticipates efforts to bring in ground rents by another name – management charges stated in the lease, for example – and other little earners.
But the big money – the ground rents, the fiddled insurance contracts, the freeholder’s control of management – will be gone.
For far too long, flat owners have been systematically cheated through leasehold, which serves the interests of powerful corporate interests – housebuilders, freehold speculators, their managers, insurers and an obliging terracotta army of lawyers, surveyors, valuers, and other professionals.