At last! This month an all-party Parliamentary group was formed to focus on leasehold and commonhold. The leasehold reform charity LKP has been lobbying MPs for more than a year on this, and two of its directors, Jim Fitzpatrick, Labour, Limehouse & Poplar East, and Peter Bottomley, Conservative MP for Worthing are jointly chairing the group. So far 20 MPs and Lords have signed up.
Stella Creasy, Walthamstow’s MP, has for many years been supportive of local leaseholders facing difficulties, and has raised the issues in Parliament. We hope she will consider joining the group. If you think so too, please let her know.
Philip Rainey QC was asked in Jan 2015 to conduct a review of current leasehold law. “I have to say that I was initially amused” he said “but ultimately dismayed, that the rights of the parties under a modern statute reforming the law of landlord and tenant should depend on the vestiges of feudal land law.”
Yes, the legal framework of leasehold really does date from William the Conqueror, but few leaseholders see the funny side of it. Centuries of piecemeal reforms have created more complexity and inconsistency, and the mishmash only serves the interests of deep pocketed freeholders. They know most leaseholders can’t afford the legal fees of £5,000 plus to prepare even a simple case for tribunal or court.
Most leaseholders are amazed at how few rights they have under current law, compared to freeholders who enjoy the status of a feudal overlord. Increasing numbers of companies buy up leasehold portfolios to profit from ground rents, insurance commissions, service charges and ‘event fees – granting permission, day to day admin fees etc.
Philip Rainey found the main problems were management and the wasting asset issue. This refers to the way the cost of a lease extension is calculated. As a lease length declines, so the price of extending it increases, resulting in a windfall bonus to the freeholder and an increased debt burden for the leaseholder. Once a lease falls below 80 years, the property becomes more difficult to sell. Because the cost is indexed to market values that in some parts of London have increased by up to 30% per year, the cost of extending can quickly fly of of reach of a leaseholder who can’t add the cost to their existing mortgage. See our Act before 80 campaign for more on how to avoid this situation.
The problems of leasehold are most evident in London and big cities. Fifty percent of the capital’s housing stock is leasehold. And all new build is leaehold – even houses. Commonhold, a sensible modern form of tenure that puts stakeholders in a property on a more equal footing, was introduced in 2002, but is hardly used. Why? Because in most cases it’s landowners who get to decide tenure. And they like things the way they are. One easy win for the group would be to introduce a sunset clause on leasehold and require all new tenures to be Commonhold.