The leasehold sector gathered for the Westminster Legal Policy Forum today to pool views on the government’s leasehold reforms and the introduction of a revived commonhold.
Sir Peter Bottomley MP, co-chair of the APPG on leasehold and commonhold reform, chaired the opening session and housing minister Lord (Stephen) Greenhalgh ended it with a firm speech underlining his determination that these reforms go through.
Law Commissioner Professor Nick Hopkins gave a robust reprisal of his reports, which are the basis of the government’s reform agenda.
The meeting was reported by the Law Gazette here: https://www.lawgazette.co.uk/news/commonhold-focus-on-new-builds-could-boost-lender-confidence/5108658.article
There was some carping from leasehold lawyers, but overall most of the speakers warmly supported the case for change in leasehold.
Lord (Tony) Berkeley chaired the second session, fresh from defending the interests of leaseholders of the Duchy of Cornwall in the Lords debate on Monday.
Michael Voges, executive director of the Association of Retirement Community Operators, repeated his view that ground rents have no part in a revived retirement housing market. Sadly, a question asking whether he blamed leasehold for the parlous state of the retirement housing market – fewer than 2% of over 65s live in designated retirement housing – was not called.
Below is the speech I gave earlier to the Forum on why – this time – the commercialisers in the leasehold sector might not get away with nobbling a successful roll-out of commonhold:
The leasehold sectors’ lobbysts and lawyers – invariably one and the same – will quibble and maybe win a few skirmishes. But overall the battle to keep leasehold rip-offs is lost …
Like all campaigners seeking change, I live in a state of optimism that this time we will get it right and that, for all the ups and downs, I have believed that our creaking political system nonetheless had the flexibility to reform leasehold ever since I set up the Leasehold Knowledge Partnership nine years ago.
I appreciate that this state of mind will seem odd to the more jaded advocates of “leasehold reform” in the audience: especially those alleged enthusiasts of reform whose primary ambition, in fact, is to ensure that efforts to bring fairness to leasehold are neutered and that the income streams from the homes of ordinary people keep on flowing uninterrupted.
There are a number of grounds for optimism, even about commonhold, the subject of this talk.
First off, it actually exists on the statute book and has done since 2002.
The commercialisers – and their ever obliging little helpers, lawyers, chartered surveyors, the leasehold trade bodies, the government quangos filled with stooges – did their best to render that Act a failure, and were largely successful.
But commonhold, at least in principle, got through the net.
To make it work is our task now.
It is impossible to separate commonhold from the rest of the political engagement with leasehold reform.
Core to this is the Leasehold Reform (Ground Rent) Bill which was introduced to an overwhelmingly sympathetic House of Lords on Monday.
This very short Bill does one simple thing: it removes the sole legitimate income stream in leasehold and deprives leasehold of a future.
Without ground rents banks won’t lend to the punters who speculate in residential freeholds and house builders will have to reconsider how they are sorting out the tenure of their apartment blocks. [This excellent article by commercial solicitor Liam Spender explains how these investors are funded:]
Indeed, they are already having to do so: Barratt has abandoned ground rents at its Blackhorse View site in North London, and Countryside Properties plc, Bellway, and Taylor Wimpey are doing the same, as is the commercially sophisticated Berkeley group, which builds prime Thames riverside flats.
All these companies are having to face the future without ground rents.
LKP states publicly and loudly – as I did on the BBC on Friday: absolutely no one should be buying a new property with ground rents anymore. That applies to the wider housing market, and – especially – to those considering a retirement property, where ground rents have always been very high because … well, because the developers could get a way with them.
Clear out ground rents and the path is clear for the wider reforms of leasehold outlined – at our prompting, by the way – by the Law Commission.
And those include commonhold.
But then look at what is going on right now in the wider leasehold world.
We have had the doubling ground rent scandal (18,000 homes) and aggressive more than 0.1% ground rent homes: around 100,000. And we have the long drawn out cladding and building safety scandal following the Grenfell fire, which impacts hundreds of thousands of flats.
These are blighted, and the leasehold resale market has collapsed by about half, according to Land Registry figures.
Leaseholders have always been the doltish, obedient consumers in this murky corner of the housing market. Moaning about its abuses, but quietly on the whole so as not to talk down the value of their homes. Dissatisfied consumers in this sector have one sure get-out: sell up and pass the problem on.
Now things are different.
We have seen demonstrations outside house builders sales suites in east London, and another in Ipswich. More are planned on June 5 and a big demonstration outside Parliament over leasehold cheating and cladding on July 15.
Around 35 Ballymore customers publicly spoke to the FT complaining about its inaction over cladding and excessive service charges. Think about that: they were publicly talking down the value of their homes in the media because they felt they had nothing to lose.
The message is absolutely clear to monetisers in the sector: you have plucked the golden goose and now at last it is getting angry and fighting back.
And they are informed, too. Cladding leaseholders know that the situation of commonhold flat owners in Australia is considerably better than that of those in England and Wales. (Scotland, very sensibly, is following the Australian road to remediation, not the English one.)
At risk blocks have been sorted first; loans have been issued to commonhold associations; legal actions have been taken against housebuilders and warranty providers. And to considerable degree this has long been done.
Who living in a flat in this country would not prefer the Australian approach to the cladding crisis compared with the expensive, delayed muddle that we have seen here?
And, of course, as yet we have not had any details of the forced loan scheme that the government is going to impose on leaseholders. That is, adding to the woes of young families coming out of lockdown with more debt to put right the cheating of cladding manufacturers; the incompetence of house builders – lack of fire compartmentalism etc – the failures of bureaucrats.
And who escapes scot-free from these disasters? Why the long term professional building owner, the freeholder.
The offshore private equity punter, hitching a ride on UK residential property values through the leasehold system.
He pays nothing. Indeed, he cleans up, putting right these build defects with his own management companies.
Billions are to be poured into the hands of these dubious entities, even though there is evidence ad nauseam of their sticky fingers.
These issues will be the motor that drives ahead commonhold.
The sectors’ lobbysts and the leasehold lawyers – invariably one and the same – will quibble and maybe win a few skirmishes. But overall this battle is lost.
Commonhold will come through because we are all living in the leasehold alternative, and it is a total failure.