You are better than commercial developers and freeholders so be kind over the cladding catastrophe, LKP urges housing association conference

LKP had a simple message for 300 or so delegates to the Social Housing Annual Conference 2020: You are better than commercial developers and freeholders so be kind over the cladding catastrophe.

The nationalisation of the economy owing to Covid has delayed the awful reckoning facing 10,000s of leaseholders, which is almost certainly going to ruin many.

Whereas our publicly subsidised housebuilders have paid their executives absurd salaries and speculators in residential freeholds seldom miss a trick monetising their assets, housing associations should behave better.

“You inhabit a different universe to them, thank goodness,” Seb O’Kelly, LKP director said.

On the other hand, LKP welcomed the BBC1 Panorama programme into shared ownership last week. It urged dropping tiresome leasehold games, such as issuing short leases of 99 and 125 years to shared owners’ flats.

All shared ownership leases should be 999 years or the length of the housing association’s headleases.

The text of the speech is below:

Thanks.

Just for those who do not know us: the Leasehold Knowledge Partnership is a registered charity and the secretariat of the All Party Parliamentary Group on leasehold and commonhold reform.

The reasons why both the government and the opposition are committed to reforming land tenure in England and Wales is dues to our efforts.

We are responsible for getting the doubling ground rent scandal into the public domain; for ensuring that the Law Commission revisited leasehold reform with its exhaustive reports on enfranchisement, right to manage and commonhold. We prompted the Competition and Markets Authority which has established that there was mis-selling of properties with doubling ground rents: this issue will be resolved by developers before the new year, or there will be a court case.

2017 was our most active year, getting the doubling ground rents issue firmly addressed by all media and Parliament, and we had a commitment for action: the ban on leasehold houses and ending future ground rents, possibly with the exception of retirement developments (for no good reason at all, in our view).

On June 14 the Grenfell tower burned down, which held up British high-rise safety standards to worldwide attention.

The Leasehold Knowledge Partnership had realised that the ramifications of Grenfell for all flat owners would be enormous, and that the unique leasehold system of tenure would come under unprecedented scrutiny. We doubted – and doubt – whether it will emerge from this without substantive reform.

Not only do our plc developers build with predatory forms of tenure, they build very badly as well – as 90% of the EWS1 surveys are now demonstrating.

There are to be huge bills to put this right.

For about three years, government ministers were all emoting along the same lines: leaseholders should not pay; freeholder “building owners” should do the decent thing and pay up. Some developers – but absolutely no speculators in ground rents – have done so.

About £1.6 billion of government money has been set aside. Which is not enough. Housing associations have asked for £10 billion for their stock alone.

This autumn things have changed: now we are seeing moves for individual building funds to be established and with loans issued to leaseholders, up to £25,000, to sort the defects.

This is a significant change of gear. We are holding an All Party Parliamentary Group meeting on December 10 to learn more and we are also putting forward our scheme for a sector-round levy on developers and freehold owners, and call for an increased tax on non-UK domiciled residential property purchasers, which comes in in April at the insignificant sum of 2%.

So, how do housing associations come out of all this?

No well, frankly. There has been an eagerness to dump costs on the most vulnerable leaseholders, and no hesitation to escalate costs – waking watch etc on buildings not seriously at risk – to cover their compliance backside at someone else’s expense.

I am delighted at the BBC1 Panorama programme last week on shared ownership, which demonstrated what flawed, complex “affordable” model this is.

I assume the shared ownership sales have been very slow this year, and I certainly hope so. It needs drastic re-thinking.

We gave our views on shared ownership to the London Assembly in a two-hour session here:

LKP is DELUGED by leaseholders caught out in local authority major works schemes …

It is utterly depressing to see housing association playing the angles of leasehold in shared ownership contracts: that short leases of 99 years and 125 years are issued, catching out those few who staircase to full ownership with the smokes and mirrors expense of a lease extension.

Your shared ownership leases need to be 999 years or the length of your headlease where you don’t own the freehold.

This message has now been delivered loudly to Kate Henderson.

This is from a young 40% shared ownership leaseholder in a cladding site:

“Before purchasing my property in May 2018, I was homeless and living in my family friend’s spare room with temporary permission to do so. This was due to a family breakdown and my mum suffering from mental illness and addiction. I haven’t seen her in years and have learnt to look after myself since a young age. I went from being head girl at my local secondary school passing all my GCSEs to homeless, missing out on going to sixth form and university due to a terrible circumstance out of my control.

“I have just turned 23 and have slowly tried to turn my life around from something that has been extremely hard. I have had a job since I was 14 and have saved to get myself a shared ownership property because I thought it was the right thing to do and in a better direction. Unfortunately, this hasn’t been the case and I now find myself in this terrible trapping situation. We even have a 24 hour firewarden on the complex due to the risk ….

 My intention is to be able to remove myself from this situation and this flat, moving on with my life somewhere safe. I have already done lots of research and gathered lots of letters and reports to support all of the above.  If there is anything you or Leasehold Knowledge can do to help, I would be very grateful.