Westminster Forum: rare meeting where freeholders, leaseholders, professionals actually discussed leasehold reform … together

It is rare for those involved in leasehold – the consumers and the supply side – ever to come together to discuss issues but a venue was provided today by the Westminster Legal Policy Forum.

It was precisely this sort of forum that the co-chair Susan Bright, professor of land law at Oxford University, called for at the end of the morning meeting: urging leaseholders, freeholder representatives, developers, officials and relevant legal experts to come together to thrash out what they can agree upon in reforming leasehold.

A possible explanation why it has never happened was suggested earlier, when comparing the “inequality of arms” between small, under-funded consumer groups such the Leasehold Knowledge Partnership and the National Leasehold Campaign and the professional lobbyists deployed by the commercialisers in the sector.

Why bother with talking to leaseholders if you can run off to Westminster and have a word in the sympathetic ear of minister?

And as Lord (Richard) Best, who chaired the earlier session, pointed out, we now have a government ideologically opposed to regulation and government intervention.

Lord Best also said, however, that opportunities to reform leasehold only come every other decade or so and so campaigners need to make the most of it, ensuring their message is heard not just by the ever shuffling pack of housing ministers but by officials and others, who will ultimately deliver the outcomes.

The morning saw a series of excellent presentations: from Sue Bright on “leaseholds in England and Wales: progress so far and areas for further reform” and Beth Rudolph, director of delivery at Conveyancing Association, discussing “The Leasehold Reform Act – implications for sector and market”.

One implication of the end of new ground rents in the Leasehold Reform (Ground Rents) Act 2022, might be the sector’s renewed enthusiasm for rent charges and managed private estates: 11% of the 100,000 or so sites with rent charges were created within the last 10 years.

Sebastian O’Kelly, of LKP, argued that the post-Grenfell building safety crisis and the doubling ground rent scandals had destroyed housebuilders’ moral authority with government and given birth to a host of informed and organised leaseholder groups: the National Leasehold Campaign – whose founder Katie Kendrick was an active question poser in the audience – UKCAG and Manchester Cladiators among them.

Without the post-Grenfell crisis, the important Leasehold Reform (Ground Rent) Act 2022 would have received the full barrage of the commercialisers’ lobbying. It would have almost certainly been postponed to be included in a full leasehold reform initiative where reformers could have been “wrong-footed and obfuscated with endless arguments about the detail of enfranchisement with cap rates, relativity graphs, hedonic regression and the rest”.

“LKP argued strongly for ground rents to be ended. Full stop. Then reform enfranchisement, refresh commonhold, sort forfeiture and right to manage,” he said.

All these presentations will be the subject of separate articles.

Among the other speakers were Siobhan McGrath, who is president of the First Tier Tribunal (Property Chamber), Courts and Tribunals Judiciary.

She touched upon the inequality of arms in leasehold disputes where most are won – that is, don’t start – because landlords can get their legal costs under the lease.

Judge McGrath did reference limiting the level of legal costs recoverable under the lease, but she would not be drawn further than mentioning the possibility as it is “policy”.

Professor Bright raised the issue of the inadequate and unsearchable property tribunal database as an overlooked example of inequality of arms. It is an issue long lamented by LKP.

Jeremy Dharmasena, partner and department head, leasehold reform and litigation at Knight Frank, said that while reforms could possibly prescribe capitalisation and deferment rates and even relativity – although it gives valuers flexibility – marriage value should not be got rid off, as recommended by the Law Commission.

The aim should be to “compensate landlords fairly rather than abolish marriage value, which will only result in litigation”.

Mr Dharmasena said that Knight Frank equally represented leaseholders and landlords, and actually stated when challenged by Mr O’Kelly of the Leasehold Knowledge Partnership that the number of leaseholders out-numbered landlords at present deploying Knight Frank.

This may well be the case, but LKP would argue that the importance of the large prime London landlord holdings is far greater for an estate manager like Knight Frank than leaseholder clients, however well heeled.

In his talk, Mr Dharmasena acknowledged that the enfranchisement mathematical modelling used in the courts had been commissioned by the prime London estates, creating a sense of unfairness among leaseholders.

Robert Bryant Pearson, an chartered surveyor and valuer, seemed to argue precisely the opposite in a pre-recorded presentation from his seaside villa.

His message was: there have been 50 years of interventions and the position was still complicated; the enfranchisement process was weighted against leaseholders; prices demanded were not fair; time in disputes is on the side of the landlord … “freeholder has to be compensated but this can be dealt with by an online calculator”.

This view seemed to be echoed by Bernie Wales, a leasehold consultant, who argued that an online calculator “gets to a ball-park figure”.

He had earlier argued for an easing of enfranchisement to include sites with some commercial element, which could be lease back to the landlord, and praised the Leasehold Reform (Ground Rent) Act 2022 as “a step in the right direction”.

Mr Wales also introduced the interesting point that environmental targets and improvements – such as electric vehicle points – were enhancements under most leases, and restrictions on these improvements should be lifted.

Sally Ireland, director of legal and compliance at the Association of Retirement Community Operators, made her trade body’s case for a “leasehold plus” tenure reform to address the highly managed retirement sites run by ARCO members.

Her presentation included reference to ARCO supporting a buy-back model – whereby the executors of former residents who have died sell the flat back to the provider. This happens with the Extra Care Charitable Trust and is an option with the Methodist Housing Association and is warmly applauded by LKP – given the catastrophic fall in retirement apartment values on resales evidenced at the Land Registry.

Cracks in the leasehold racket as Barratt London drops ground rents

There was also a panel discussion on commonhold. Among the contributors was Matthew Jupp, principal, mortgage policy at UK Finance, who pointed out that a considerable number of lenders were prepared to lend on commonhold, given the absolute paucity of product since 2002. He was less enthusiastic about the detail of conversion of existing leaseholds to commonhold.

Missing from this discussion was a developer: now that ground rents cannot be charged, what do developers do about the legal structure of the sites they build?

Do they empower the customers – the leaseholders – in the form of a residents management company, as Barratt has done at Blackhorse View in Worpleston, North London? And then what do they do with the freehold?

If there is no extra turn to be made over the form of tenure – as there was with ground rents and the selling on of the management rights under leasehold – what resistance is there likely to be from developers for commonhold?

A good subject, perhaps, if Susan Bright’s idea of a sector wide conference ever gets off the ground.