I support commonhold, but I would not make it mandatory
Local government should have been put in charge of implementation over building safety, not policy-makers in Whitehall
Errors were made in Building Safety Act over pensioners with small buy-to-let portfolios who are now non-qualifying leaseholders for remediation funding. It needs to be fixed
Ditto, it was never our intention to hinder right to manage or enfranchisement for leaseholders caught up in the building safety crisis
Robert Jenrick should be given more recognition from leaseholders for getting money out of the Treasury
In an exclusive interview, former leasehold and building safety minister Stephen Greenhalgh talks to Sebastian O’Kelly, of LKP
Sebastian O’Kelly: The Thatcher and Major governments were both capable of reforming leasehold and put through laws. I remember as a young reporter the Major leasehold reforms – which introduced enfranchisement and saw the then Duke of Westminster resign from the Conservative party. It was a big issue in the 1990s. The Evening Standard ran a huge campaign. The Conservative party then did have a very strong sense of a property-owning democracy, and that it was going to stick up for the little guy who was getting a toe on the property ladder. That seems to have eased off during these last 25 years of property boom, and the Conservative party gets so much of its funding from property interests. Do you think that this has delayed the progress of leasehold reform?
Lord Greenhalgh: I think that’s one narrative, and it goes with landlord interests and the Conservative party and so on.
But there’s also a political interest and political choices. I wrote to Michael Gove about this. For me, Thatcher is right. We need to do what we can to level up home ownership. For me, that was front and center the number one priority. You’ve got lots of issues with all the property tenures, but it is a question of what you prioritise.
For me, the private rented sector, isn’t that bad.
It’s had a huge amount of reform to it. The rights for the renter are quite considerable. Yes, I’m sure you need further reform. But the question is: do you delay reforming leasehold to focus on more of that?
That’s the kind of choice that you have to make as a government. I strongly believe in the leasehold reforms, particularly after all of the work done by the Law Commission which has made it essentially a “plug and play” once you publish the Bill.
Just get on with it is my view. I was very strongly in favor of getting on with the second wave of the reforms.
SOK: Do you think the reforms will be in the King’s speech in November?
SG: I don’t know. I am not close enough to it. I think, if I was a betting man, no. They won’t be in the King’s speech. But I hope I’m wrong.
There just has not been any evidence … I thought they were getting very serious around the time of lucy Frazer [housing minister, October 2022 to February 2023] as leasehold minister. I was called in, talked to her a little bit, briefed her and then she was kind of moved on.
I felt they were certainly getting ready for something but .. I know Michael Gove has made a commitment in some ways …
SOK: Yes, in an interview.
SG: In which case, if Michael has said it then I hope that I’m wrong in my prediction.
But the good news out there for leaseholders is that every single major political party wants this to happen. It’s now become above party. Everyone is in favor of reform. I would like it to be a Conservative government that does it.
Labour more concerned about social housing
SOK: But if it doesn’t get through with this government and it is a Labour government next, then leasehold is not going to be the priority of their housing policy.
SG: I don’t think that it would be. But there are many in the Opposition who are very positive.
But you’re right. Typically with Labour the Shelter lobby takes over with Labour and everything is around social housing. And the answer to every question is more social housing. So I can see why you might say that.
As well as, you know, increasing regulation in the private rented sector and maybe levelling up home ownership is not that number one priority.
There are also a lot of leaseholders in former council homes as well. When I became a council leader [Hammersmith and Fulham, 2006], I was always shocked at how a historically Labour council viewed the leaseholders’ as “class traitors” that left the system, and did not mind charging them a little more than they should do.
Reducing the costs for leaseholders was not a priority for the administration, which I tried to change by being a lot more transparent and fair to leaseholders. There’s a little bit of that, which isn’t really Labour party, it’s more the kind that infiltrates Labour from time to time. Momentum types, I suppose.
SOK: It is an article of faith of council leaseholders that they are seen by councils as a cash cow whichever party is in charge. Florrie’s Law introduced by Eric Pickles when secretary of state had been a complete failure and LKP is not aware of it ever having been applied.
SG: I love the fact that it was an idea. When Michael Gove said that leaseholders were not going to pay a penny [over the building safety crisis] and that was not going to work with the parameters that the Treasury provided, but Florrie’s Law provided the policy idea – and through you guys, Martin [Boyd, LKP chair] and yourself – that there was suddenly a way of capping liability.
If you could cap liability that meant at least that you could provide a degree of protection.
So, I think it works in the Building Safety Act as a way of protecting leaseholders. But you’re right in social housing, it didn’t work.
General election in 2024
SOK: What about the 2024 election also having an impact on the King’s speech and the prioritisation of leasehold?
SG: Yes, because we’re just running out of time.
I just not sure that at the back end of a Parliament that that’s when you get the big set-piece reforms.
Everyone is focussed now on keeping their seats and winning an election. Leasehold is going to be a very complex bit of legislation. But what would be nice, and a good way forward, is if we could at least publish the Bill.
The work has been done and the policy team is there. Even if you ran out of time, you weren’t able to get the Bill through Parliament, at least there’s something that can go through the pre-legislative scrutiny so you get a better Bill at the end of it. I am just sceptical of getting it through both houses. Yeah, in time in time.
SOK: Leasehold Reform (Ground Rent) Act 2022 is grossly under-estimated Act. It has cut off the future of this ghastly sector, including the gaming of ground rents in informal lease extensions, which was a major racket. Do you feel the government got its fair share of credit for getting that through?
SG: I don’t think LKP, both you and Martin, have been given due credit for getting it through, either. It was one of those small Acts that can make a huge difference. But wouldn’t it be great to make sure that we just finish off the leasehold reforms?
SOK: Is the property lobby so much weaker after the events of Grenfell? On top of the doubling ground rents scandal, didn’t it destroy the property lobby’s moral authority.
SG: Yes, I agree with that. But also the reality is that if we look at the construction record of the last 30 odd years it’s terrible. You just haven’t built very good stuff, have we?
Yet a lot of money has been made on the back of not very good stuff. I had an experience of developers and builders. I always liked dealing with Tony Pidgley [founder of Berkeley Group, which builds prime Thameside apartments] you sealed the deal with what you wanted from section 106 and then he focused on getting the stuff built out quickly. Not parking it.
You do need to bring the developers along, because if you want them to fix buildings and close deals with them they need to able to trust trust you.
Commonhold: will it happen?
SOK: Commonhold. You are a commonholder in a condominium in France –
SG: It’s how I learned about this tenure.
SOK: They are always scrapping, in my experience, but over piddling amounts. There is no Vincent Tchenguiz around, for example.
SG: What happens in France is you need to have some very active “co-proprieteres” on the board, who like walking around as though they own the place, which of course they don’t. They’re on the board and from time to time they seem to sack the managing agents. What I can say about my experience in France is that it’s not cheap, but what you get is a very good product. It’s a marvelous experience. You pay your allocated share and everyone benefits. And no one really complains that much.
There’s a little bit of difference between those people live there all year round and those who don’t.
They don’t necessarily want to have a person managing the blocks as well who lives there and would take deliveries at odd times. But if you live there yourself, you don’t really need that, so now we have got someone who works nine to five during weekdays.
It is a tenure that works. You are feel that you are not subservient to anyone. You’re a co-owner of the property.
SOK: We are very excited about commonhold and have been advocating for it since we set up LKP in 2012. We now have motivated officials and the Law Commission report on it, which as you implied is sort of oven-ready. Do you think that commonhold will become the de facto tenure for blocks of flats and do you support it being the mandatory tenure for blocks of flats, supplanting the leasehold system?
SG: Once you have taken the money out of the system, which we’ve effectively done with the first wave of reforms [Leasehold Reform (Ground Rents) Act 2022], then what’s in it for developers not to want to embrace commonhold?
So, yes, I think it will become the de facto tenure of choice. But I need to be convinced that abolition of leasehold is the right way forward. I would rather continue with making enfranchisement easier through reform. I like to continue with all the measures by which leaseholders can get control. I think what you do with existing leasehold blocks a slower, evolutionary way of people eventually getting hold of the freeholds is better.
That’s better than trying to abolish it on day one.
SOK: I think we all recognise that it will take some decades to flush all the leaseholds out of the system, even with commonhold widely accepted.
SG: Anyone who thinks you can wave a magic wand and get rid of leasehold is going to be disappointed.
We should get over those barriers that the Law Commission looked at and make enfranchisement easier. Particularly for mixed-use blocks, where we looked that at what the threshold should be [between commercial and residential areas].
The freeholders’ lobby resisting reform
SOK: You must have encountered the freehold interests as a lobby. What is your take of them? They are based in the British Virgin Islands, or the Channel Islands and hide beneficial ownership. How persuasive are they? William Waldorf Astor, Vincent Tchenguiz, Count Luca Padulli, an Italian hedge funder, and the rest.
SG: Well, I never got to meet any of them particularly. I might have seen Tchenguiz on a Zoom once, or maybe just people working for him. I did not really get lobbied. The lobby is more subtle rather than overt. You made me more aware of these guys, really. I never met Astor, but the Long Harbour people made their representations, largely as people managing property. It is a very murky world, and not particularly savoury. I mean they basically fleece the property interests of others to make their money.
I did come across a retirement housing lobby, that seems to be a small number of firms, but essential one family and one business model [McCarthy family own Churchill Retirement]. They were the least polished in their representations.
There is a need for more retirement housing, but I just said we are going to follow through and make the reforms that we’ve outlined. But, you know, it should not be the wit of yourselves to come up with business model that prices things to what people pay for, rather than hide it from them on purchase, and it then sort of hits them later.
SOK: I hope that you feel that what we have been doing has been a valid campaign. Property ownership has – disastrously – become hyper-commercialised in this country, but I have been passionate about the young having a material stake in society from when I was a property journalist. In those days, say 2004, Chelsea properties were going up 37 percent in a year, and then I was being taken to lunch by the head of the British Property Federation to tell me that young couples have really got to get used to having children in rented accommodation. Surely, you are going to have a revolution on your hands if you deprive the young and talented from real ownership and a material stake in society?
SG: I agree with you. I always found people who said the future is renting were the people who they themselves own their own homes. I used to find this with people who are running social housing, I mean 89% of them were homeowners. They were lecturing values on others that they themselves hadn’t followed. You can’t take the dream of home ownership away from the next generation.
SOK: Do you think this disparity in home ownership and a generational divide are going to appear as issues in the next general election?
SG: We are a nation of shopkeepers and homeowners and an Englishman’s home is his castle. And we want our children to own their own home. We have got to do what we can to give them that foot onto the property ladder. And when they buy a home they need to know that they’re going to get a fair deal. They deserve the same opportunities that my father had, and I had, to own their own property.
Small-scale buy-to-let landlords on the hook for building safety defects
SOK: LKP has been contacted by numerous buy-to-let leaseholders caught up in the building safety crisis. Many are just retired people outside London who invested in new build flats as a pension. I am thinking of one example in Newcastle and another in Sunderland. If these rather amateur investors own more than three residential properties they face the full remediation bills for their block. Often the collective value of these properties is less than that of a prime central flat in London. The Building Safety Act elsewhere limits assistance to leaseholders whose asset is worth more than £1 million; and another category above £2 million. Would it not have been fairer to make the qualifying category the value of the assets rather than the number of different flats?
SG: We were worrying about this when the Building Safety Act was passing through the Lords and there was a bit of ping pong around the number of properties and we increased the number of properties from two to three.
But, yeah, I think there’s always been this issue that for a lot of people their property portfolio has been their retirement income. Lord Naseby [Michael Morris] bought this up in the Lords.
But, you know, you’ve got the hand of Treasury on these things, haven’t you? I think it’s one of those anomalies, and I think that it is hard on leaseholders.
I would have liked to see that threshold possibly higher than we ended up with. But we’re, you know, running against the end of the session if you like. This is one of the things I regret a little bit. I think it’s hard on those people because, you’re right, they sound like they’re big landlords, but they’re not. They’ve just got a small small number of low value properties in the North-east.
SOK: Will it’ll be revisited?
SG: Well, always can revisit and review things. I don’t know how easy it is now. It’s primary legislation to change these things. But it’s also one of the things that’ll be a drag on remediation, because you have these people who are non-qualifying leaseholders and they don’t have the money. And that stops the whole building getting remediated.
It’s one of those things that I think could be looked at again. The whole point of the Building Safety Act was to protect leaseholders, as well as introducing a new regulatory system for high-rise residential buildings.
And I think we got the regulation in place, and we protected a whole heap of leaseholders, but these are things around the edges where the legislation is, perhaps, not as ideal as it should have been.
I’d like the building safety minister today, that’s Lee Rowley, to have a look at some of these things.
SOK: I can’t see that this cap of three properties is going to have the desired effect because even if these investors dump their flats in the auctions, what sort of money will they get for them?
SG: Yes, and when the actual overall building is unremediated, then the value is lost as well. So, it is a difficult. I think we were toying around with looking at value rather than number of properties. But it’s one of those things that at the time didn’t get resolved. And there could have been a move to increase the numbers of flats as well, maybe from three to four or five. But that didn’t happen either.
You always finish your time in government feeling that you’ve done as much as you can in the time that you had. And then you realize that there are areas that still remain unresolved. It is not satisfactory, in short.
Building Safety Act hinders enfranchisement and lease extension
SOK: Can I ask you about another issue with the Building Safety Act? This may not affect many leaseholders as the leases of high-rises are generally quite new, but if a lease extension is sought now and obtained then the leaseholder would not be a qualifying leaseholder for financial assistance to remediate a building. So this means s/he has to watch the lease run down until the building safety fund or other source pays out. How can this be fixed?
SG: This was certainly raised by LKP. What we certainly didn’t want in policy terms was for the Building Safety Act in any way to slow down the means by which a leaseholder could strengthen their title. In other words, we did not want this to be a drag on reform. So, I was always very keen for my policy group – and I was the leasehold ministers as well as the building safety minister – to make sure that that didn’t happen. If that is happening, that’s that’s not what we intended to do. And hopefully that again, is something that can be looked at.
It doesn’t seem to be right. But you are coming up with everything went wrong. I just want to say that there’s a lot that there’s a lot that I’m happy about.
What was good about the Building Safety Act
SOK: OK, fire away with the stuff that you’re happy about that then.
SG: The reality is that we hadn’t engaged with the “who pays?” question adequately when I when started my my time as a junior minister. It really worried me at the time. I though it [the building safety crisis] was going to be a slow train wreck.
We forget that actually Robert Jenrick got a lot of money out of Treasury. And you know, he went back and did an Oliver Twist and got more money.
And then Michael Gove realized that the developers weren’t stumping up. I felt this for a long time. And I think that was a big step forward. So we got the polluter to pay far more and we got quite a lot of money out of Treasury. And then we also got the legislation in place to make sure that rather than the leaseholders being the first port of call, as they were in law before the Act, they became the last port of call in the waterfall.
I think that was, again, a significant achievement. And what we’re talking about are those areas where it doesn’t seem fair if you are a non-qualifying leaseholder. So we have got to recognize that there would not have been a question of fairness before we had the legislation, it would have been a sort of disaster. Now we’re talking about the areas where, perhaps, the legislation hasn’t gone far enough. But that’s the balance that you’re striking with the Treasury officials that are worried about taxpayer liability. That’s the reality of government.
SOK: It is interesting that you are defending Robert Jenrick’s record on this. He is perceived less favourably by leaseholders, on the whole, and not given his credit in your view?
SG: Well, he secured a billion pounds out of Treasury, then he secured: what was it? From memory, he secured £700,000 for the ACM, and then he got another £3.5 billion Or was it £3.3 billion? So he got a billion and then another three billion: £4 billion out of Treasury. And those were hard meetings, and he did it. I wasn’t in the final meetings, or very close to the deal. He secured that. I do think, and want to put on record, that that was an achievement of a Secretary of State, and it mustn’t be forgotten.
Yes. More had to happen. But that was his achievement.
Michael [Gove’s] achievement was to focus on that we had had a disease, if you like, that extended well beyond high-rises. A lot of medium-rise buildings were also affected as well. Then he had to have a plan to deal with that and that polluters had to stump up.
So, I don’t, you know, have the view that one was bad and one was good. They both tried to do their best.
SOK: Yes, although obviously with Gove he made that announcement in January last year which laid it on the line that developers were going to have to cough up and that he wanted £4 billion.
SG: Yeah, but at the end of the day what you’ve got to recognize is that you’ve got to get the developers to pay. I don’t know how quickly the remediation is going. And how quickly these these buildings are being remediated by the developers.
This is a long one, isn’t it? This is not one that’s easily fixed.
He deserves significant credit for going after the developers, who had had some glory years against the backdrop of these disasters, if you like. Margins had increased, and you know this very well, they had had some very, very good years and they had had a huge profits, and it was about time that they fixed a lot of the mess that they had themselves had created.
So it’s absolutely right to do that. I supported it in that, and persuaded a number of the developers to sign up at the eleventh hour. So, there you go. I was very glad to be his wingman on that.
SOK: Government now always refers to the “waterfall” of funding protections, which as as you know was a phrase coined by LKP trustee Liam Spender [leaseholder, City solicitor]. Government always knew that enfranchised blocks could sit at the bottom of the waterfall and had always said it would add protections. These protections have never come forward so isn’t the net impact of the Building Safety Act that it actively stops all sites from enfranchising and discourages leaseholders in existing blocks from becoming RMC and RTM directors?
SG: Martin and Liam are raising an important point, and it was something that actually during the passage of Bill Lord Young [of Cookham, former Conservative minister Sir George Young] mentioned several times. What you don’t want to happen is a perverse effect that where someone takes over the freehold they effectively increase their liability as leaseholders because they move up the waterfall by normally being the freeholder.
I think that’s something again that we need to put in the “to be sorted out box”.
The commitment at the time was that we can look at making provisions and secondary legislation and guidance to deal with that particular issue.
But it is important. We want to see more leaseholders enfranchised and that goes with a grain of the kind of reforms we’re seeking. We don’t want to put a break on that through legislation that’s designed to make sure that the buildings are safe.
SOK: Should Whitehall officials actually be responsible for delivery of building safety?
SG: I do remain concerned at the pace of remediation. Obviously, if you can get the developers to fix their own buildings, that’s one thing. But then there are other “orphan” buildings. And I’ve always felt that the best way to drive progress would have been to have a service level agreement with local authorities to do this in their own patch.
They are closer to the buildings themselves. They can monitor the works more more closely than working through a national agency, like Homes England. I always felt that the right way round this was to get local government to step up. They also have the interest to ensure the buildings in their own authority are safe. So I would certainly have looked to more leadership from local government rather than to try this as a central project through Whitehall.
Effectively, that’s not really a delivery arm. Basically, my experience [of Whitehall] is that it’s a bank in Treasury and lots of general policy officials.
There’s no one there with a competence to manage a project like this.
SOK: Why didn’t it happen that way?
SG: I think there’s a sense that Whitehall knows best. They have their preferred agencies like Homes England and partners like the Greater London Authority. But my experience is that those aren’t the bodies that are the delivery arms. They are more strategic arms.
Certainly, the GLA is not a delivery arm either. It’s a strategic authority.
But if you go to Wandsworth Council with 13 buildings that need to be fixed, then make them responsible for it. And you can do the same in Manchester and Leeds. Get the local authorities to lead and give them the resources to do that.
SOK: Maybe building safety implementation will end up with them in the end.
SG: I’ve always made that case, but then someone will say ‘Oh, he comes from local government’.
After 16 years as a councilor, a six years as a council leader, four years in City Hall [London, under mayor Boris Johnson] and two and a half years as a minister my view is that Whitehall is about policy, but you get more strategic oversight in regional bodies. Local government is where responsibility should have been given, and the funding.
It was a mistake, not to do that.