Government ‘Playing With Electoral Fire’ in Weak Leasehold Reform Bill, Says Campaign Group

Free Leaseholders said it’s been overwhelmed by the response from angry Tory-voting leaseholders who complained over the lack of ’real' reform.
Government ‘Playing With Electoral Fire’ in Weak Leasehold Reform Bill, Says Campaign Group
Prime Minister Rishi Sunak and Michael Gove, minister for levelling up, housing and communities, during a visit to the Taylor Wimpey Heather Gardens housing development in Norwich, Norfolk, on Aug. 29, 2023. (Joe Giddens/PA Wire)
Lily Zhou
11/30/2023
Updated:
12/4/2023
0:00

The government is “playing with electoral fire” because its long-anticipated leasehold reform bill failed to include “real” reforms, a campaign group has said.

The group Free Leaseholders said Conservative leaseholders have complained that the proposals in the recently unveiled Leasehold and Freehold Reform Bill “fail to give them control and autonomy over their costs and their building management that normally come with homeownership,” and that they “specifically exclude abolishing leasehold for new flats and make no mention of commonhold at all.”

Founder of the group, Harry Scoffin, said Downing Street is “playing with electoral fire if it doesn’t heed these warnings from their own voters.”

Mr. Scoffin also said the bill didn’t address forfeiture, which he said is the “most vicious” and “arguably the most feudal” element of England and Wales’ leasehold system.

According to the latest government estimates, around 20 percent of all housing stock and 82 percent of all flats in England are owned on a leasehold basis.

Leasehold homeowners don’t own their homes outright. Instead, they have a tenant-landlord relationship with the landowners, who are called freeholders.

According to the Law Commission’s research, systems akin to commonhold, in which homeowners of an apartment block collectively own and manage the common areas and the land “feature extensively in other countries,” while England and Wales inherited a unique leasehold system because a small group of aristocrats owned large parcels of land.

In modern times, private landowners have often been replaced by corporations. According to an example given by the Residential Freehold Association (RFA), which represents the UK’s largest professional freeholders, a developer of a 100-apartment building can sell the flats to 100 leaseholders for a total of £25 million and sell the land to a freeholder for £625,000.

Leaseholders will then pay ground rent and service charges to freeholders who will get the building insured and manage it via a management company.

While the RFA argues that professional freeholders maintain buildings “by assuming responsibilities that most leaseholders are unable or unwilling to take on,” particularly in larger buildings, some leaseholders have complained about crippling and often opaque charges, the lack of control in the management of their properties, and the system’s depressing effect on the value of their properties.

The Leasehold and Freehold Reform Bill, unveiled in the King’s Speech this month, bans the sale of new leasehold houses, but not new leasehold flats.

Nick Hadley, a leaseholder from Bournemouth, told The Epoch Times that he has been left “bitterly disappointed” by the bill and the government.

Housing Secretary Michael Gove had been “giving everyone the impression that there was going to be a fundamental leasehold reform bill passed or presented to Parliament this year, and what we got ... in my view was watered down to almost nothing,” he said.

“If they had made a statement that they were going to abolish leasehold on new apartments, that would have been a big step forward. It would have made no difference to me as a resident, but it would at least signal to the freeholders that the days of leasehold are now starting to end,” he said.

“So that was a big disappointment, but there was really no concrete progress at all. There was just tinkering around the edges in my view.”

Mr. Hadley said the retirement block he lives in has an “absolutely appalling property manager” that the residents have been struggling to remove.

“We pay many thousands of pounds in service charges to a company to manage the building. We are not their customer, they do not care about what we think or do or say because we’re not the customer. The customer is the freeholder,” he said.

Estate agents To Let and For Sale signs in Islington, north London, on Aug. 12, 2023. (Yui Mok/PA))
Estate agents To Let and For Sale signs in Islington, north London, on Aug. 12, 2023. (Yui Mok/PA))

Current law permits residents to buy freehold, or to change management or take over the management responsibilities by applying to a tribunal, but the support of at least 50 percent of leaseholders is needed.

Mr. Hadley said the process to get the right to manage is “hard” and expensive, and there’s a unique challenge in his block, which is mobilising elderly residents.

Mr. Scoffin also told The Epoch Times the 50 percent threshold is high, particularly where there are high levels of buy-to-let or overseas leaseholders, and that 15 percent would be a much more realistic figure.

Homeowners Treated as Social Housing Occupants

Graham Lambert, a leaseholder from Leicester who lives in a flat in a converted Victorian mansion built around the 1850s, welcomed the proposal to extend the standard lease length, but said there’s “no meat” to the bill that would address many of the problems.

“If they can’t ban the whole concept of leaseholds and become commonholds, the right to manage is really important” so buildings won’t be managed by “giant conglomerates,” he told The Epoch Times.

According to Mr. Lambert, the residents contribute monthly to a sink fund for the maintenance of the building, which has accumulated about £200,000, to get “proper” maintenance and repairs, but the managing agent “put up the cheapest possible piece of work that they can get” when maintenance is needed.

“They treat us as if we’re effectively social housing because that’s 90 percent of their business,” he said.

Mr. Lambert said workmen are sent from 200 to 300 miles away, meaning it “takes a month-and-a-half for someone to come down,” and that maintenance can be neglected completely.

Mr. Lambert said he asked to see the maintenance schedule when he moved into the property.

“And they sent it to me when they found it, and they confessed in writing: ‘Oh, by the way, we forgot about your property. And we haven’t done any maintenance for the last 10 years on your property,’” he said.

“They had forgotten about our existence because we’re just one of 100,000. So no maintenance had been carried out. So when maintenance had to be carried out, it costs much more because they'd not been keeping up with the maintenance schedules, like the gutters, the lighting, fire systems, the door systems, that sort of stuff.”

Mr. Lambert said it would help if the bill can “make it far easier to take over the freehold of the building or even set up a right to manage company.”

The Conservative voter and member said: “I always thought the Conservative Party was the party of home ownership and individual responsibility. And clearly, I’m not being looked after, and they will not have my vote, and I will leave the party.”

Mr. Scoffin said his campaign group has been “overwhelmed by the response from angry Conservative leaseholders,” who, among other leaseholders, “wrote in from all over the country.”

“The message from Conservative leaseholders is overwhelming. Number 10 is playing with electoral fire if it doesn’t heed these warnings from their own voters. Under the bill, leaseholders will still be writing blank cheques to offshore freeholders and greedy managers. There’s still time to change this,” he said in a statement.

Forfeiture Threat

The bill includes proposals to make it cheaper and easier to extend leases or buy the freehold, require transparency in service charges, reduce ground rent to zero, and scrap the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice.

Mr. Scoffin said the bill missed the “most vicious” and “arguably the most feudal” element, which is forfeiture.

In rare cases, leaseholders can get evicted for breaking the terms of the lease and lose the whole value of their properties.

“On a £3,000 bill that a leaseholder could be disputing, they could lose the whole £300,000 value in the property,” and there’s “no legal obligation currently on the freeholder to say, ‘Look, I’m going to get my £3,000 debt back from selling the property, but the remaining value I will return to the departing leaseholder,’” Mr. Scoffin said.

While there are about “80 to 90 successful cases a year” in which leaseholders are evicted, forfeiture is “routinely threatened by remote freeholders to get lease holders to pay up inflated service charge demands and other costs,' he said.

Mr. Hadley said he doesn’t know anyone who has been explicitly threatened, but in principle “every person who has a lease is threatened with forfeiture.”

“When for months and months a managing agent is performing badly, the obvious thing that people ask is, ‘Well, why don’t we just stop paying our service charge?’ That will then make them see that they need to fix the problem. And the answer is always, if you do stop paying the service charge, you risk forfeiture. So that’s what I would call a threat.”

“Bitterly disappointed” by the Conservative government, Mr. Hadley said he doesn’t know what to do in the next election. Asked if he believes Labour would do better on tackling leasehold problems, he said while the opposition party is “promising” to do better, it’s “not the same” as actually doing better, adding, “As far as Lib Dems are concerned, I’m not even aware that they have a policy on leasehold.”

Asked to comment on leaseholders’ complaints on the bill, Mick Platt, director of the RFA, focused on the government’s recent consultation on scrapping or capping ground rents.

“The government’s proposals to cap, or even abolish, ground rents would be a massive own goal. It will cost the taxpayer enormous sums of money to compensate investors while transferring the wealth to thousands of buy-to-let landlords and leaving ordinary leaseholders with burdensome legal responsibilities and escalating service charges,” Mr. Platt said in a statement.

“The government’s own research shows there is limited interest from leaseholders for this kind of intervention. It’s time for [Secretary of State for Levelling Up, Housing, and Communities Michael] Gove to stop ignoring the evidence and start bringing forward sensible reforms that would actually improve the tenure,” he said.

The Department for Levelling Up, Housing, and Communities didn’t respond to The Epoch Times’ request for comment.