The assembly’s housing committee urges London mayor Sadiq Khan not to wait for reforms:
… Stand up to developers;
… Insist new sites have leaseholders’ resident management companies;
… Ensure leases are transparent;
… Get decent data on London leasehold
By Harry Scoffin
The Leasehold Knowledge Partnership celebrates the London Assembly Housing Committee’s spirited call for England and Wales to join the rest of the world with commonhold flat ownership.
“Transitioning away from leasehold to commonhold is the answer to resolving leaseholder dissatisfaction,” is the verdict of the powerful cross-party group that acts as a check on the mayor of London and pushes for better housing policy from central government.
LKP’s Sebastian O’Kelly and Martin Boyd, together with landlord and tenant barrister Rebecca Cattermole, gave evidence to the committee on February 11.
Like the Communities Select Committee in Parliament and the Competition and Markets Authority, the London Assembly Housing Committee finds that it also really doesn’t like what it sees in leasehold.
“Our system of leasehold is unfair, not fit for purpose and an archaic feudal hangover that should be consigned to history. The sooner Londoners can benefit from a more modern and equitable system of commonhold the better, bringing us in line with homeowners the world over,” says Unmesh Desai, committee chair and Labour member for City and East.
“We must ‘Get Commonhold Done’. Leasehold is just not fit for purpose and we need to get rid of this system for the sake of the many people trapped by it,” says Leonie Cooper, who serves on the committee as the Labour member for Merton and Wandsworth.
Mr Desai and colleagues grasp that leasehold is vulnerable tenancy, and not the home ownership product it is often sold as:
“Leasehold, in contrast to freehold, provides time-limited permission to occupy the property and control is shared with the freeholder (also referred to as the landlord).
“Commonhold is an alternative to leasehold and allows for the freehold ownership of flats.”
In a letter to the mayor of London sent on March 12, Mr Desai takes up a number of key LKP recommendations, including the need to confront developers over lease transparency, so unsuspecting purchasers can identify any nasty terms before they sign their lives away, and that reinvigorated commonhold must not leave buyers in mixed-use blocks high and dry.
LKP urged the adoption of commonhold for mixed-use and mixed-tenure developments.
As Mr Desai and colleagues advise Sadiq Khan, the Labour mayor who has been granted an extra year in office due to coronavirus poll delays, in their five-page letter:
“You note in your London Plan that ‘Planning for mixed-use developments in all parts of London will spread the success of London’s economy and create stronger communities where everyone feels welcome.’ Given the importance of mixed-use planning in London, it is essential that any successful reform of commonhold ensures it is viable for mixed-use.”
LKP is also calling on the Law Commission to drop the arbitrary 25% rule on collective enfranchisement and commonhold conversion in mixed-use blocks, as the body is doing in its right to manage reforms.
With the coronavirus pandemic threatening to kick much-needed commonhold and leasehold reforms into the long grass, it is welcome to see the London Assembly Housing Committee tell Mr Khan that he should not wait for law change.
Indeed, leasehold arrangements can already be crafted with the consumer in mind.
LKP chief executive Sebastian O’Kelly said to the committee that the mayor of London and local councils could use existing powers to require developers to build all new sites with residents’ management companies so those who do the paying are in the driver’s seat.
It is only right that those who have the overwhelming financial stake in a block of flats can democratically determine its management, he said:
The letter says:
“Residents’ management companies give leaseholders a stake in the company that manages their block. Our panel expressed the view that establishing residents’ management companies in new developments from the start would improve fairness in fees for leaseholders, such as service charges.
“The Mayor should work with London’s housebuilding industry and local borough councils to … Explore the possibility of developers building with residents’ management companies in place.”
LKP chair Martin Boyd, who in 2014 persuaded government to revise its methodology and numbers on leaseholds, can be especially proud of this passage:
“The Committee feels strongly that comprehensive, contemporaneous data on London’s housing mix is essential to ensuring effective policy and planning for the future. Currently, the Ministry of Housing, Communities and Local Government (MHCLG) produces experimental statistics on the number of leasehold residential properties in England, however, this is not provided at a sub-national level. Previously, you stated you will work with MHCLG to seek this data at a regional level. This matter needs to be pursued as a matter of priority. Given the upcoming reforms to leasehold, it is essential that London’s government has a clear picture of the extent and distribution of leasehold across the city so that any reforms can be effectively responded to and implemented.”
“The Mayor should, as a matter of priority, work with MHCLG to ensure data is available on the number and distribution of leasehold across London. If MHCLG is unable to provide this information, the Mayor should ensure that the GLA begins producing and publishing this data by December 2020.”
Mr Boyd gave a lecture on the topic of bad data to an audience at the Open Data Institute’s offices in December.
In just twenty minutes, the brilliant minds assembled in the room were able to produce data more accurate than the government’s own, which remain largely unchanged from the ones Mr Boyd helped to put together in 2014.
LKP stands ready to help MHCLG, the ministry of housing, on its next leasehold figures.
London Tories housing spokesperson: I will back Mr Khan if he stops developers creating more toxic leaseholds
Speaking to Leasehold Knowledge Partnership, Andrew Boff, the Conservative Londonwide assembly member who grilled LKP bosses on the need for a long-term shift to commonhold, said:
“What is absolutely clear is that a lot of people entering into leasehold contracts do so without all the information presented to them, and therefore they are making decisions that in years to come they may very well regret because they don’t quite understand the nature of leasehold, that it’s a long-term tenancy, and what the different obligations are on both the property owner and the lessee. Leaseholders are not consumer homeowners, sadly.
“What is also clear is that Sadiq Khan does have the power to be able to determine what kind of leaseholds are created by developers now and in the future. He does, for example, already set conditions for social rented and other affordable homes on many of the sites he is granting permission to. It should be open to him as a condition of any new development to be able to say that there must be some kind of common ownership, as close as we can get to commonhold, of a block of flats by the leaseholders themselves.
“There is work, then, that the mayor can do now to crackdown on the most unfair leaseholds so flat buyers are protected and do not experience some of the misery current leaseholders are feeling. We all know that laws take a long time. We’ve got Brexit and coronavirus filling up Parliament’s timetable at the moment and it just looks less and less likely that laws on commonhold are going to be prioritised any time soon. Come on, Mr Khan, I’ll be happy to support you if you do the right thing by taking the initiative on leasehold.”
As the chair of the London Assembly Planning Committee, Mr Boff’s words are salient.
Although he speaks to LKP in a personal capacity, he is the housing spokesperson for the GLA Conservatives.
He also happens to be a house lessee.
The London Housing Assembly Committee’s intervention is not only compelling, but perfectly timed, the third highly critical verdict on leasehold by an official body in a year.
England and Wales are unique in the sense that they have private blocks of flats run and controlled by speculative owners with hidden building income streams.
The headline recommendations of Mr Desai and colleagues are:
- “Continue to advocate to national Government to take action to ensure that existing leaseholders benefit from remedies as a result of any reform in the leasehold sector.
- “Once the Law Commission’s recommendations for reform of commonhold are published, the Mayor should advocate that the Government implement any recommendations which will enable the use of commonhold for mixed-use developments and shared ownership homes.
- “Encourage developers and councils to provide potential buyers with a copy of the lease early on in the purchase process and before the potential buyer has made a commitment to the purchase.
- “Ensure that any private sale or affordable home ownership home, that is listed on the Homes for Londoners portal includes a key features document and or explains the key features of the lease.
- “Work with the Ministry of Housing, Communities and Local Government to ensure data is available on the number and distribution of leasehold across London. If this data is not available, the Mayor should ensure the GLA starts compiling and publishing data for London.”
The letter to the mayor of London can be read in full here:
LKP has also obtained the original press release:
Footage of the evidence session has been made available by the London Assembly: