Commonhold Mark Two

Commonhold Mark Two

 

It is widely anticipated that the Government’s legislative programme for the next Parliamentary session to be announced on 11 May will contain two  Bills to deal with leasehold reform. There will be a ground rent bill and a bill to revive the commonhold tenure.

The leasehold system originates from the Norman Conquest. William the Conqueror seized all the land and gave it to his mates in return for political loyalty. The barons gave it to their mates in return for their services. There are problems with the English leasehold system. No matter what you paid for the original lease, if the lease expires and the leaseholder does nothing, they become a mere tenant. It is a wasting asset. The leaseholder does not own the land. They own the right to live in the property for the duration of the lease. The leaseholder is required to pay ground rent and service charges to the freeholder. If you are new to this area, watch the Law Commissioner’s excellent video on leasehold reform (  https://youtu.be/Hgebds_Ek00

The British Empire exported the leasehold system throughout the Empire. The former colonies did not think very much of this feudal system. In America, the ground rent system was so unpopular that an Anti-Rent party was set up in the nineteenth century. American states now have a system of condominium. Canada, Scotland, and Australia have all done away with the leasehold system. New Zealand has both leases and commonhold. France, Germany, and Italy all have a type of condominium. See work by the law commission on international comparisons.

In 2002 the Blair Government sought to abolish the leasehold system in the 2002 Commonhold and Leasehold Reform Act. A commonhold tenure would replace leases. Flat residents would own their own flats and a share of the freehold title through a commonhold association. The legislation was baldly drafted. 2000 mainly hostile amendments from the House of Lords did not help. Their Lordships wanted to protect their feudal property rights.

For newly built properties the commonhold system was optional. In existing blocks all flat owners and their mortgage holders had to agree to transfer to the new system. In practice it proved impossible to obtain such consents. As a result, only approximately 180 commonhold sites in England and Wales now exist.

The commonhold system removes the freeholder out of the equation. The thousands of leaseholders who are currently caught up with huge fire safety bills shows how unfair the current leasehold system is.

The fact that a Conservative Government is about to introduce such legislation reflects well on the campaigning skills of the National Leasehold Campaign, the Leasehold Knowledge Partnership, and a succession of critical reports by the all-party House of Commons Select Committee on Housing and Local Government.

Outside of Parliament, you will look in vain for books by housing academics on leasehold reform. The recent work commissioned by the Welsh Government on the use of leases in Wales is a very welcome exception.  The Land Reformers such as Guy Shrubsole barely address this issue in his interesting book “Who owns England? “. However, there is a very interesting map of land owned by leading developers though the content has not been given the coverage it deserves.  Is there no scope for a political alliance between land reformers and leasehold reformers?

The history of land reform in the United Kingdom shows a close connection with popular protests. The 1882 battle of Braes on the Isle of Skye and the squatting protests after the second world war led  to reform. Lloyd George championed land reform which the House of Lords blocked leading to the Parliament Act 1911.

The 1967 Leasehold Reform Act was introduced as the leases on the houses in the South Wales valleys were all due to expire at the same time.  The owners provided leasehold housing for industrial workers so they could charge ground rents and the property would revert back to them when the lease ran out.

Recent Labour Party Manifestos have of course contained commitments on leasehold reform. When Jeremy Corbyn was party leader, the Labour party published a discussion document on “Land for the Many “in July 2019.  This contained no mention of leasehold reform. It is remarkable for a discussion paper produced by a political party on land reform that it can ignore the views of over 4 million leaseholders in England. The House of Commons Librarian has shown that leaseholders often live-in marginal constituencies.

Over two thirds of leaseholders in England and Wales live in London. The Greater London Assembly is alert to the leasehold issue .There has been little interest in this issue by the local government association. Sadiq Khan’s manifesto contains a commitment to pioneer a commonhold development. The Welsh Labour Manifesto only briefing mentions leasehold reform.

The Government has announced that it will set up a commonhold council to be composed of developers and consumer representatives. There is a danger that this could be a damp squib as the fire safety crisis has shown that the Government are very protective of the interests of developers. Will the Government agree to implement the Law Commission’s proposals ?  Will the commonhold bill allow the Government to define by secondary legislation which properties are covered by the legislation thereby undermining the role of Parliament? What will be the role of the commonhold council?

Will the Government include mobile home sites within the bill? The biggest commonhold site in England is a mobile home site in Kent set up by a Canadian. Site residents own both the home and the land it stands on. They own a share in the commonhold association that owns the site. They elect directors to run the site. There is no third-party involvement.

Will the Government encourage the use of the commonhold tenure across government policy? In Bristol the commonhold tenure was used  creatively to bring back a derelict office block into use to provide residential accommodation and workshop. This was a self-build scheme.

Hopton Builders show that small builders can use the commonhold tenure. The builder can set up the commonhold association in advance of the building of the homes. All home buyers are provided with a commonhold site statement that sets out the right and duties of the unitholder/homeowner and the commonhold association.

Nor is the leasehold system very friendly to climate change policies. If the freeholder can charge permission fees to install conservatories, they will also charge for solar panels or ground rents. Commonhold is not a magic wand to make property management automatically easier for blocks of flats. However, it is significant that virtually all of the English-speaking world have moved away from the leasehold system. Progressive opinion in England and Wales need to celebrate the benefits of commonhold as an alternative to the leasehold system.

 

 

 

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  • Caroline Kennedy
    Reply

    Please keep pushing the need for reform!

    • Dermot Mckibbin
      Reply

      Caroline,

      I am keen to push for leasehold reform and the introduction of commonhold.

      Regards

      Dermot

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