Matthew Pennycook, the housing minister, outlined his plans yesterday to bring the leasehold system to an end – which leasehold home owners have been awaiting since Labour was elected.
The measures will include banning new leasehold sales, pushing through commonhold instead and encouraging existing blocks to convert, as well as capping existing ground rents to £250, redressing unbalanced legal costs in leasehold litigation, standardising service charges and replacing draconian lease forfeiture with “a more modern, proportionate lease enforcement system that addresses breaches fairly”.
Some of these measures will be dealt with under the new Commonhold and Leasehold Reform Bill and others through secondary legislation to the Leasehold and Freehold Reform Act 2024.
Mr Pennycook’s speech, to the think tank the Institute for Government, can be viewed here and read here and a BBC website report is here
The minister’s whole approach to ending leasehold has been to understand it and to dismantle it, while countering the inevitable legal challenges by commercial interests as they see their grip on other people’s homes be prised away.
Mr Pennycook rejected an immediate outright ban on leasehold without considering the consequences to an issue of land tenure which involves five million homes.
“If outright abolition had been our intention, we would have stood on a manifesto that promised as much.
“We did not do so, and for good reason, because anyone, with even the most rudimentary knowledge of leasehold, knows that the outright and immediate abolition of circa five million English and Welsh leases is almost certainly impossible.
“Those advocating for such an approach cannot answer how it would be lawful; how the impact on the mortgage market would be managed; how it would even be feasible for the Land Registry to delete millions of leasehold and freehold titles and replace them with commonhold ones overnight; how millions of commonhold associations could instantly be established with hundreds of thousands of directors corralled into overseeing them; or what the consequences would be for buildings that have already enfranchised or exercised the Right to Manage.
“They can’t answer these questions because abolishing leasehold outright is a glib soundbite rather than a serious policy proposition.”
The speech, from a minister who actually understands these issues, robustly defied the freeholders, who Mr Pennycook said – “I have no doubt whatsoever” – will be off to court again over the proposed £250 ground rent cap, and the setting of enfranchisement deferment and capitalisation rates as well.
This is in addition to appealing their defeat in the high court over the judicial review in October, which they have already begun:
In questions after the speech, Mr Pennycook rejected scaremongering that commonhold risked creating a two-tier market, on the grounds that different leases are already multi-tiered (he could have added that the markets in new build flats, Victorian conversions, ex-council properties, retirement, retirement communities and the 1.1m leasehold houses are all markedly different as well).
Also in questions, he emphasised the primacy of ensuring that leaseholders have control over management of their homes and above all of their own money in the service charges.
He downplayed the regulation of managing agents as a secondary, superficially attractive course, which has actually been an effective freeholder-friendly lobbying line from The Property Institute, with some take-up among Labour MPs.
Mr Pennycook made clear that the flaws in the leasehold system lay much deeper than individual managing agents such as FirstPort, and that regulation is secondary to control.
All these points delighted LKP, which had said the same sort of thing to the Housing and Communities Select Committee last month.
“While our detractors will continue to cry betrayal, and opportunistic populist parties will continue to try to sell false promises to hard-pressed leaseholders across the country, we will continue with the hard graft of doing what is necessary to bring the system to an orderly end in this Parliament,” said the minister.
The Green Party leader Zach Polanski has accused Labour of reneging on its promise to end leasehold and has made it an issue in the May local elections, although Green MP Carla Denyer said her party’s pledge was “not to abolish leasehold immediately but to phase it out”.
It is certainly the case that Mr Pennycook’s speech would have been more welcome in the autumn of 2024, not 18 months later. Not least as the minister reminded us: “Week after week sees new leasehold horror stories emerge …”
Unfortunately for leaseholders, the government decided that the Renters’ Rights Act took priority to finishing the job of reforming leasehold, including the introduction of important but relatively simple secondary legislation.
It was also disappointing that senior government figures – Mr Pennycook is a junior minister – displayed no serious engagement with leasehold – apart from a few brief asides from Angela Rayner – whereas Michael Gove in the previous government had been passionate on the need to end leasehold, and delivered the 2024 Act.
Mr Pennycook avoids overt criticism of Mr Gove, but deprecates the Leasehold and Freehold Reform Act 2024 as a flawed, late effort that “cherry-picked” the Law Commission reports that are the blueprint for the reforms that will end leasehold.
On the other hand, LKP would argue that the 2024 Act including its defects made further effort unavoidable by any future government, and reduced the scope for wriggling out of it altogether, which is understandably a tempting option with a fundamental overhaul of land tenure.
The speech also lacked reference to the appalling state of today’s market in flats: new ones aren’t being built to the same extent as the recent past and older new build is difficult to sell, owing to building safety issues or aggressive lease terms. This means flat owners have experienced chronic wealth erosion, often in properties bought with Help To Buy government subsidies.
Mr Pennycook began his speech by referring to two leaseholder constituents in his Greenwich and Woolwich seat: Tara, whose service charges have increased 260% in four years from £1,230 to £4,400; and Andy, who pays £800 a year ground rent – rising to £1,000 as linked to inflation – for “no service whatsoever’.
“This is not what home ownership should entail. Leasehold is blighting lives. Leasehold is a barrier to a fair and efficient modern residential property market. Leasehold is an anachronism in the twenty-first century,” he said.
“The aim of this government, by the end of this Parliament, is nothing short of its dismantling and the corresponding emancipation of leaseholders.”
Amen to that.
Leasehold ban in England and Wales unlikely before next general election, minister says
Matthew Pennycook says ending system must be done slowly to avoid hitting housing supply and legal pitfalls
Service charge caps could have ‘detrimental impact on leaseholders’, housing minister says
Housing minister Matthew Pennycook has said he does not see the need for a regulator to oversee service charge reform and that a cap would not work.
Related posts:
Lee Rowley and Matthew Pennycook duel political points over leasehold reform Bill
Shadow housing brief passes from Mike Amesbury to Matthew Pennycook
Pennycook promises to end leasehold this Parliament
In Pennycook government has a good housing minister: let him finish the job by finishing off leasehold
Pennycook, give us equal arms to fight freeholder bullying in the courts
Six arguments of freeholders in search of an economic justification (and failing to find one)
Disappointingly, only a passing reference to the iniquitous Marriage Value (which massively inflates the cost of extending a lease and shovels more money into the freeholder’s pockets) and no indication of how soon it will be scrapped.
Marriage value abolishment is part of the LAFRA bill which Pennycook stated will be implemented within this parliament. 2-3 years from now.
I understand that he said he doesn’t think it’ll be this parliament but the next and then the next and the next..No doubt the freeholders appeal would put a spanner in the works .Fool me to believe otherwise.
I put this question re likely implementation date for marriage value reform to the leasehold advisory service 2 month ago. They advised it would be late this year/early next year.
I would appreciate a better understanding of what the reforms might mean to the social leasehold system. While not engaged in outright profiteering through ground rents, our social freeholder (housing association) has been found guilty of severe maladministration by the Ombudsman over building maintenance neglect issues, which is now set to cost leaseholders a huge sum to rectify. With housing associations, leasehold seems to be a life sentence of time-consuming pursuit of basic services. How will the reforms affect housing associations? Will they help to ease this grindingly constant situation?
EMLM
We are in a similar situation with a major Social Housing provider who operates in London and the East Midlands. They have been fair in that they no longer collect Ground Rent from Leaseholders but their management of our retirement complex leaves a lot to be desired.
Lack of maintenance and updating services over many years has resulted in many essential works now having to take place and our Sinking Fund falls very short. Also we suffer numerous mistakes made to our finances.
I cannot see Commonhold replacing Leasehold here as we have an average age of around 85 years, many dependant on the Landlord for Care and only half of the flats are leasehold with the others being rented. What we do require is for the Landlord/Management to be far better regulated as at present they can ignore us at will, despite us having a Residents Association.. Like you I would like to know if the reforms in the pipeline are going to help us
It was disappointing that the speech made no mention of shared owners. During the Q&A, the Minister acknowledged that the shared owner customer experience needs to be “drastically improved,” yet pointed only to minor changes—ones that will apply, if at all, only to future shared owners.
For shared owners, the discussion of commonhold is largely academic. There is, for example, no realistic path to commonhold in blocks where housing associations own a majority of units. We face a distinct set of challenges that private leaseholders do not encounter.
Seb, why not put Ellies very pertiinent question to the govt for explanation?
Vinny,
The next time bomb to go off when it’s eventualy discussed.
What about all that tax payer cash shovelled by the bucket full in to private pockets, and for what? Is this the new supercharged “Fleecehold”. Without a doubt in my opinion!!
Pennycook is a wanker, He has made a right cock up of the renters reform bill, a subject he knew nothing about and now he will do the same here. I was about to take on an empty leasehold flat and bring it back to the rental market, well not now. It can sit empty for another four years until these clowns are out of office.
David,
I sense your anger through your straight forward comments. I have very limited knowledge of the renters reform Bill so welcome more input on what you clearly perceive as a major issue?
On balance, I would say that more has been achieved with the LAFRA Act in the last few short years than in previous decades., clearly more needs doing.
I disagree with your “word” regarding Mr Pennycook it is not true with regard to the aforementioned paragraph, in my opinion.
Just for the record, I had part of a recent post on LKP redacted for publishing extracts from a quality National Newspapet and a fire risk assessment about the home my wife and I reside in that makes it abundantly clear to any reasonable man or women that our property managing agent is ineffective (idiot) at there job, allegedly. I believe that from the bottom of my heart and would give my oath on the Holy Bible.