Here’s commonhold, but it won’t be mandatory. Shula Rich recalls the compromises behind the 2002 Act

Making commonhold the mandatory form of communal tenure was undermined in a deal with the sector, veteran leasehold activist Shula Rich told the Westminster Legal Policy Forum conference on March 12.

Ms Rich, speaking as vice chair of the Federation of Private Residents’ Association, told the meeting in central London that New Labour had been elected in 1997 on a manifesto pledge to implement commonhold ownership.

It said: “For new developments, this will provide a complete answer to many of the problems which have plagued flat-owners over the decades.”

Ms Rich was a member of the working group on commonhold set up by the Lord Chancellor, which drew on “An End to Feudalism”, a Labour policy document from October 1995.

“Commonhold should be mandatory [on new-build flats], we should have introduced a sunset clause on leasehold and we haven’t. So why haven’t we? Why is there no sunset clause on leasehold?

“On that commonhold working party, we had representatives of all stakeholders and at that time, the representative of the British Property Federation, who is now a representative of the National Landlords Association, said: ‘If you make commonhold mandatory, if you introduce a sunset clause on leasehold, the British Property Federation won’t support it.’

“So the well-known leasehold organisation that was minuting the proceedings said: ‘Oh well, in that case we won’t have it.’

“Later in 2001, Lord [Charles] Falconer, who was minister of housing, said to us all at a Labour party fringe meeting: ‘As you know, the 2002 Act was the result of a bargain.’

“And that was the bargain: we would have commonhold, but we would not make it mandatory.”

Ms Rich continues to believe in commonhold, but has concerns about its introduction into a housing sector where there are 5-6 million leasehold properties.

“Why do I believe we should have commonhold? The reason is that leasehold is the epitome of institutionalised inequality. Political parties agree that the system is feudal, but have done nothing more about it.”

She concurred with Nigel Glen, CEO of the Association of Residential Managing Agents, who also spoke at the Westminster Legal Policy Forum event, that a shift to commonhold would impact the property values of existing leaseholders, as leasehold becomes less attractive to consumer homebuyers:

“One big argument against making commonhold mandatory – which I can’t help but agree with – is that we do not want to create a second-class tenure in leasehold.

“If there are already 5 million leaseholds, can we fairly devalue it? I don’t think we can.”

But transitioning to a commonhold world could be done in a way that alleviates leaseholders who may be unable to buy out their landlord and trade up to the superior tenure, Ms Rich suggested.

Echoing the LKP view, the veteran campaigner said that government could take concerted action to strip out the unfair income streams, such as hidden insurance commissions. This would drive freehold speculators out of the market and guard against major property devaluation of the existing leasehold stock.

“What we can do is improve leasehold as an alternative to commonhold so that those remaining leaseholds will provide a viable alternative and still be saleable.”

In June 2014, the British Property Federation finally conceded the need for a more muscular approach to mainstreaming commonhold.

Speaking at an LKP-organised parliamentary event, a spokesperson said the organisation would accept a need for a sunset clause on leasehold – after being shown that the commonhold legislation was now working.