By Sebastian O’Kelly
Leaseholders have every reason to be wary of government assurances that it will get on with ending the leasehold system in England and Wales or, alarmingly, just make things ‘fairer’.
This was the wording of an MHCLG New Year’s Day to-do list on X/Twitter (below):
In spite of the near complete silence from ministers on the subject of reforms we actually thought they would publish a draft Commonhold and Leasehold Reform Bill before Christmas, as they promised.
It is only a draft, after all, with plenty of opportunity to sit on their hands and dither and consult for eternity etc, and all the thinking was done years ago. So what was the downside?
The Law Commission reports that are the template for reforms – which LKP was so instrumental in bringing about – go back to 2016, when we first met Professor Nick Hopkins, the Law Commissioner.
Martin Boyd, our chair and chair of the Leasehold Advisory Service, got his first Westminster meeting to reinvigorate commonhold in 2014, backed by MPs Sir Peter Bottomley and Jim Fitzpatrick.
And then the Conservatives – with considerable energy and enthusiasm from Michael Gove, Lee Rowley and Rachel Maclean – had pushed through the Leasehold and Freehold Reform Act 2024, which half did the job (with the secondary legislation we are still waiting for) and Labour MPs hadn’t opposed it.
So one might have thought that the government’s promise to get moving on leasehold and commonhold was credible, especially after the judges’ careful and calculated ruling in October roundly defeated the freeholders’ judicial review to keep marriage value and other lucrative revenues in the enfranchisement process.
Liam Spender analysed the ruling here:
But it was not to be: government did not publish the Commonhold Bill in 2025, and we will have to see what remains.
It is possible – even at this stage – that the news won’t be all bad and that whispers among valuation surveyors are true and that there will be some compromise on existing ground rents. Let’s hope so.
Meanwhile, there is no shortage of explanations where it went wrong.
Conservative supporting critics – Michael Gove, now editor of The Spectator, and Dominic Cummings – blame the intellectual paralysis of the Starmer government on excessive legalism, in thrall to lefty totems such as the Human Rights Act and the European Court of Human Rights.
There may be a good deal of truth in this, but ministers unthwarted by legalism are just as capable of messing things up, such as HS2 or the financial profligacy of Covid.
Gove seems to think that the government’s reforming impulse left with Angela Rayner, although she never had much to say about leasehold.
Another Conservative grandee, William Hague, wrote in The Times in December that Starmer has five months to achieve some significant things in government, or he will be gone after the May local elections.
The pity of this is that Labour has a talented and intelligent housing minister in Matthew Pennycook, who is actually on top of his brief.
He is more than capable of delivering the Commonhold Bill and speeding up the secondary legislation to LAFRA, like balancing legal costs in leasehold disputes, ending the fiddles in leasehold insurance and tightening up right to manage, which should have been done by now.
He understood the critical importance of capitalisation and deferment rates in enfranchisement two years ago. These rates, plus a government on line calculator to end the court-steps bartering, were delayed by the judicial review but can be started now.
Unlike most of his Conservative predecessors, Pennycook has taken the trouble to understand leasehold. And he was one of the few impressive MPs who would turn out in the evening to attend meetings addressing the cladding crises some years back.
For those tempted to swallow Gove/Cummings analysis of Labour inadequacy here are Pennycook’s Conservative predecessors as housing minister, 16 of them in 14 years, with each of whom LKP tried to engage (often with minimal success):
Grant Shapps (May 2010 – Sept 2012); Mark Prisk (Sept 2012 – Oct 2013); Kris Hopkins (Oct 2013 – July 2014); Brandon Lewis (July 2014 – July 2016); Gavin Barwell (July 2016 – June 2017); Alok Sharma (June 2017 – Jan 2018); Dominic Raab (Jan 2018 – July 2018); Kit Malthouse (July 2018 – July 2019); Esther McVey (July 2019 – Feb 2020); Christopher Pincher (Feb 2020 – Feb 2022); Stuart Andrew (Feb 2022 – July 2022); Marcus Jones (July 2022 – Sept 2022); Lee Rowley (Sept 2022 – Oct 2022); Lucy Frazer (Oct 2022 – Feb 2023); Rachel Maclean (Feb 2023 – Nov 2023); Lee Rowley (Nov 2023 – July 2024).
Of that collection, Lee Rowley, Rachel Maclean and Gavin Barwell were the best. Michael Gove, as Secretary of State, was by far the most effective – in spite of being spitefully sacked by Johnson, which interrupted his efforts – with a nod to Sajid Javid, who made a start on leasehold and the post-Genfell building safety scandal.
But while Pennycook understands leasehold, he either does not see it as a priority in housing, or as a junior minister he simply can’t set the housing priorities.
Meanwhile, his boss housing secretary Steve Reed – who LKP helped several times over cladding and other leasehold issues in his Streatham and Croydon North constituency – is dressing up in high-viz jackets, and repeating the Trumpian nonsense “Build, baby build” to boost supply.
I suspect that Pennycook was shocked and disapproved of Michael Gove’s gung-ho brinkmanship over leasehold reform, launching a consultation in January 2024 that offered the option of expropriating all existing ground rents and setting them to zero. (Of course, LKP could not believe its luck and urged leaseholders to respond in favour: flat owners would have been mugs not to.)
Gove was making a tactical ploy, telling bottom-feeding freehold owning punters precisely what he thought of them and that he was prepared for the drastic action necessary to be rid of them.
But he had no more belief that he could pull off simply ending ground rents than LKP did.
The government’s own impact assessment put the lost value at £27.3 billion. So who would pay?
However exaggerated that number may be, it is going to be a tall order for any government to say that all existing ground rents should be swept away with no compensation paid at all.
When things sound too good to be true, they usually are.
We shall have to wait and see what government proposes, and whether it has found a neat solution that avoids the appalling notion of giving public money to offshore entities owned by some of the richest people on the planet (where it has been possible to identify them at all, that is).
There was no reason for Labour to follow the same strategy as Gove, and even before the election Pennycook was appalled at the prospect of getting involved in years of expensive litigation.
He may also believe that public money should not be spent on bailing out leaseholders, who signed leases paying significant ground rents with legal advice.
After all, millions of taxpayers are living in rental accommodation, or shared ownership contracts, and do not own a home at all. And leasehold homes that aren’t barnacled with developer / freeholder wealth erosion can still increase in value; think Victorian conversions.
But if Pennycook has not been sorting out leasehold, what on earth has he been doing for the past 18 months?
First, he had to sort the Renters Rights’ Act 2025, ending no fault evictions and giving the unpropertied some vestige of security.
He has also been working on increasing housing supply.
To this end, he has been busy on the new National Planning Policy Framework, which has been heralded by the campaign group Britain Remade as “quite possibly the most radically pro-growth planning document since 1947”.
It will make local authorities approve building projects around railway stations and similar, which one planning consultancy reckons has the potential to build 630,000 new homes.
A considerable number of these new homes will be leasehold. Sadly – given the way the UK has made tenants of its own people – many homes will very likely be complex shared ownership contracts as well.
So what government seems to be doing is open the spigot of supply and get construction started, and then address the legal business surrounding property tenure.
The Starmer government probably will manage to see through some missing leasehold reforms in the next five months: including the prescription of enfranchisement rates.
But existing ground rents?
Contrary to many views on social media, the Labour manifesto did not promise to end them, or to bring about a £250 cap. The words are that they would “tackle unaffordable and unregulated ground rent charges”.
Fulfilling this promise will probably involve some kind of limitation on existing ground rents that make sales and mortgages impossible – extending, in short, the work of the Competition and Markets Authority on mis-selling of homes with aggressive doubling ground rents (which came about after LKP exposed the scandal nationally from November 2016).
But it should always be remembered that what the Competition and Markets Authority did involved a tripartite deal between the leaseholders, the ground rent speculators and the original housebuilders.
The action only worked because the freehold speculators were compensated by the developers for the lost income they would otherwise have received from the leaseholders. Otherwise, nothing would have been achieved.
Related posts:
Shadow housing brief passes from Mike Amesbury to Matthew Pennycook
Every other major economy has moved away from residential leasehold so why not us, asks shadow housing minister Sarah Jones
At last a housing minister who seems to want to reform leasehold, and knows legal costs are being gamed to keep freeholders on top
Lee Rowley and Matthew Pennycook duel political points over leasehold reform Bill
Labour to cap ‘legalised extortion’ of ground rents and end leasehold houses … Opposition and government now compete to reform leasehold
Court of Appeal victory over St David’s Square £500k ‘contract for eternity’ door entry system
Quote “However exaggerated that number may be, it is going to be a tall order for any government to say that all existing ground rents should be swept away with no compensation paid at all.”
This makes no sense. Our freeholder bought our small development title for £52,250 in 2005. (when the developer could have gone the Commonhold route?) but wanted some more easy and greedy cash, fast forward to now and the freeholder (an off shore global ‘investment’ business paying hardly any tax in UK) is rewarded by doubling that sum to £105,000.
Compensation enough surely when WE pay for everything and get nothing from them except pain, financial loss, and anxiety. Oh, and yes we have the 25 year ground rent review to look forward to in 2028. What joy!
Come on Labour, actually DO something for a change – that will be CHANGE.
“I suspect that Pennycook was shocked and disapproved of Michael Gove’s gung-ho brinkmanship over leasehold reform, launching a consultation in January 2024 that offered the option of expropriating all existing ground rents and setting them to zero. (Of course, LKP could not believe its luck and urged leaseholders to respond in favour: flat owners would have been mugs not to.)”
I’m not sure this is true – setting existing ground rents to zero is an arbitrary transfer of wealth that would have been deeply controversial at best and likely challenged, causing more delays and problems.
I have given up predicting or caring what the future holds (ultimately the fundamental problem with leasehold is buyers paying “freehold prices” for leasehold interests due to a failure to (be advised?) to make a suitable discount to reflect any ground rent, management issues or non-infinite lease term). Ending ground rents, sub-999 year leases and (ultimately) all leases makes perfect sense, but there is no point considering moving forward without sensible proportionate and realistic plans. Simply setting ground rents to zero is not sensible proportionate or realistic, apart from perhaps in communist countries or any other authoritarian hell-hole that completely ignore property rights and individual liberty.
I seem to have replied before reading the whole article where you seem to acknowledge that abolishing all ground rents was always unrealistic.
Too many powerful entities working behind the scenes to scupper any real substantial benefits to the plebs. The only victory of the little people in the world of property investment that I can recall is when we triumphed against the West Bromwich Building Society during 2016 in the matter of the wrongful charging of interest on Buy to Let mortgages where they were forced to make substantial repayments. In a significant, the West Bromwich Building Society lost its appeal in a dispute with buy-to-let landlords over unlawfully increasing interest rates on tracker mortgages. The Court of Appeal ruled the lender was not entitled to vary the rates without a change in the Bank of England base rate.
Under section 19 of the Human Rights Act 1998, the Minister responsible for a Government Bill is required to make a statement as to its compatibility with the European Convention on Human Rights. For a number of years, Michael Gove indicated his intention to introduce peppercorn ground rents, or alternatively a fixed cap of £250 for an interim period before reverting to a peppercorn. Ultimately, however, he was unable to sign off such legislation because the legal advice received by Government was unequivocal: a measure of that nature would breach Article 1 of the First Protocol (A1P1), insofar as it would interfere with freeholders’ lawful property rights to receive income.
The Government’s manifesto commits to “tackling unaffordable and unregulated ground rent charges”. In pursuing that objective, it must acknowledge that a significant number of leases have been extended on the basis of higher ground rents in exchange for lower premiums. In those circumstances, an exemption akin to that contained in the Leasehold and Freehold Reform Act 2024 would be required to accommodate such transactions. The difficulty is that it would inevitably be argued that the lease terms were carefully negotiated, with the benefit of professional valuation and legal advice, and that the burden of the ground rent was fully reflected in the agreed premium. Competing comparables would be advanced by both sides to support or challenge that position and, absent a clear statutory solution, disputes would be channelled into an already overstretched First-tier Tribunal.
Against that backdrop, a relatively straightforward “modified cap” has been proposed as a means of resolving these issues and enabling more substantive reforms to proceed. When a lease is originally granted or extended, the initial ground rent is transparent and assessed as affordable at that point in time. If subsequent increases were limited to the lower of the contractual review mechanism or RPI, the ground rent would never rise in real terms over the life of the mortgage. Leaseholders subject to 10- or 15-year doubling provisions would be immediately relieved of that burden and left with a fair and predictable rent. Large institutional investors, whose portfolios are predominantly index-linked, would be unlikely to oppose such an approach, having long distanced themselves from short-term doubling structures. In this way, the Government could deliver on its manifesto commitment while preserving the UK’s reputation for upholding contract law.
Leaseholders who agreed to an initially high ground rent would not see an immediate reduction of several hundred pounds per year and would therefore derive less benefit from such an approach. However, this does not leave them without recourse. Once the 2024 Act is fully implemented, they will be able to enfranchise or extend their leases with the ground rent capped at 0.1%.
Ultimately, the most significant issue within the leasehold system remains control over service charge expenditure. Aside from genuinely pernicious ground rent arrangements, the ground rent debate risks becoming a distraction. Proposals for universal peppercorn rents carry a real risk of delaying or derailing more meaningful reforms, while reinforcing a narrative that leasehold is inherently dysfunctional. Many residents’ management companies and right to manage companies would strongly dispute that characterisation. While leasehold may not be ideal, in many cases it operates effectively, and there is growing frustration that the continuing rhetoric is depressing the value and marketability of all flats, regardless of their management structure.