All sections of the Labour Party need to unite around the need for leasehold reform if they wish to win the forthcoming general election

Dermot Mckibbin is a member of the Labour Housing Group and blogs at getcommonholddone.co.uk

Leaseholders in England and Wales are angry that the recently published Leasehold and Freehold Reform Bill does not implement the Government’s repeated promises to abolish the medieval leasehold system.

Leaseholders do not own any bricks or mortar in their properties. They merely own the right to live at the property for a period.  Once this time expires, if they do nothing, they become mere tenants. Under the British empire the leasehold system was exported across the globe. Nearly all the English-speaking world has now rejected the leasehold system. Instead, they favour a system where the freehold title is owned collectively.

Leaseholders are frustrated that freeholders can charge huge service charges which are very difficult to challenge. Even if they win a legal challenge, the freeholder can pass on their legal costs on to leaseholders.

The law of forfeiture allows freeholders to take possession of a leasehold property when a term of the lease has been broken.  This allows the freeholder to recoup all the equity in the property that has been built up without compensating the leaseholder.

In 2002 the Labour Government introduced the commonhold tenure. The building would be owned by a Commonhold Association Company. Each flat resident would own a share in the company.  The Company would decide how to manage the block with no third-party involvement. This attempt failed. Commonhold was not made compulsory for new developments. It was too difficult for existing leaseholders to convert to commonhold.

However, Labour did introduce right to manage companies.  Leaseholders could form these companies and take over the management of their blocks from their freeholders. This enabled leaseholders to decide their own level of service charges with no freeholder involvement. There are believed to be over 10,000 right to manage companies in existence.

A leaseholder rebellion broke out over the issue of leasehold houses in 2015. Houses were being bought by members of the public with pressure to use the builders’ solicitors. Residents would then discover to their horror that they had in fact been sold a leasehold interest and not the freehold title that they had expected. The ground rent was then sold without their knowledge to third parties who would increase the ground rent. The level of increase was such that mortgage companies would not lend on such properties, making them unsellable.

Pressure by the National Leasehold Campaign and the Leasehold Knowledge Partnership led to a highly critical report by a House of Commons Select Committee in 2019 and an investigation by the Competition and Market Authority. Some redress was achieved. Legislation was introduced to limit ground rent increases though it was not retrospective.

Leaseholders complained that they lacked even basic consumer protection. In response the Government asked the Law Commission to review the law. The Tories agreed to implement these recommendations but were very slow to act on them.

The Conservatives are now proposing to outlaw the sale of leasehold houses even though this has already been Government policy since 2017. However, there is no provision in the bill on this issue.  The bill reforms   the right to manage process and to make it easier for leaseholders to buy the freehold to their properties.

Crucially there are no proposals to make Commonhold the default tenure as recommended by the Law Commission and repeatedly promised by successive Secretaries of States. This U-turn in Government policy is due to the close connections between the Conservative party and developers.

Labour is on record that they will abolish the leasehold system and implement the Law Commission’s proposals in full. Matthew Pennycook MP, the shadow Housing Minister has described the Government’s proposals as “thin gruel.”

Unfortunately, the Labour Party outside of Parliament appears to shows little interest in this issue. Leasehold reform has not been discussed at Labour Party conference for years. Housing think tanks ignore the issue. The only recent report on leasehold reform was commissioned by the Welsh Government. The Labour movement has not been represented on leaseholder demonstrations over excessive fire safety bills. However, the Co-op party  now supports leasehold reform.

There are approximately 5 million leaseholders in England and Wales. The House of Commons Library has produced spreadsheets by parliamentary constituency to show where they live, often in marginal seats.

All sections of the Labour Party need to unite around the need for leasehold reform if they wish to win the forthcoming general election. Keir Starmer will struggle to increase the number of home-owners unless the leasehold system is abolished. Owner occupiers tend to vote Conservative. If Labour can persuade these voters to switch their votes, this will mean one less vote for the Tories and an extra vote for the Labour Party.  Labour needs to appeal to a coalition of housing groups to tackle the housing crisis.

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