Commonhold was meant to be a shiny new replacement for leasehold, where each flat owner in a block of flats or each house owner on an estate also owned a share of the company which owns the site. A new system supported by all the main political parties throughout the 1990’s. A system which was meant to give transparency. A system which was meant to work in the interests of the building and the owners on the site rather than some third party private “landlord” whose interest is in making a profit – a system that now operates in various forms in almost all other parts of the world.
In practice the legislation introduced as part of the Commonhold and Leasehold Reform Act 2002 in England and Wales has been a total failure. Bluntly put, while the rest of the world has successfully moved away from leasehold officials in our country have overseen what could most politely described as a legislative disaster. A disaster caused by poor drafting and omissions in the law and a lack of oversight by Parliament. What then followed was a complete failure to make Commonhold any part of our housing strategy.
In the 13 years since the 2002 Act only 161 Commonhold homes have been build and of these only 150 have been bought. Of these the largest “block” is a group of 30 mobile homes. All the expenditure made by the private sector to provide systems to support Commonhold have come to nothing.
LKP has now become aware that officials knew from a very early stage that the legislation was fundamentally flawed. Despite this knowledge Ministers were persuaded not to conduct a review in the years that followed. Others had wanted to stay quiet about the problems, in case the few people who had purchased a Commonhold property now felt mislead. Instead Ministry of Justice (MoJ), and many of the bodies who also work in the leasehold sector, continued to hold meetings to understand what had gone wrong. Initially the Housing Department did not even seem to have been part of this “Commonhold Consultative Working Group” which was overseen by MoJ officials, even though the working regularly considered both Commonhold and leasehold issues.
Quite why Commonhold was, and is, a bill overseen by MoJ remains unclear. All logic suggests Commonhold should have been a Housing Department matter. None of the proposed amendments considered by MoJ working group, which might make the legislation work, have been implemented. The government has never offered any incentives for building Commonhold and it has never invested a penny of its own money in building a Commonhold site.
Perhaps officials wondered over the years whether they should tell Ministers how badly they had got things wrong. Or perhaps they felt it was better to create the myth that somehow there was no market demand, or that buyers were not sophisticated enough to even care? In the end it seems someone decided to sweep things under the carpet. Officials stopped speaking about the issue and in 2010 the last bit of very meagre funding for LEASE to offer advice about Commonhold law came to an end. It seems Commonhold was left to quietly die.
Then in June last year LKP organised another of its regular Parliamentary round table meetings on leasehold. Commonhold had been suggested as a topic by a number of professionals in the sector. As well as submissions by managing agents, solicitors, surveyors and academics, two QC’s presented their views of the law. Senior delegates from major developers, MPs, Lords, surveyors, accountants, solicitors and managing agents contributed at the meeting with nobody disagreeing that the law was badly broken.
The elephant in the room has always been what to do about leasehold and those extra profits which developers make from selling under the leasehold system. This is a problem of course for the Housing Department to resolve, not MoJ. The MoJ working group realised that there were a number of issues which impacted the leasehold market: the sale of lease extensions; the sale of the freehold ground rent reversions; the sale of control of a site with its potential for income streams; the strangely discounted service changes which apply in the first few years of a new site. Unfortunately since 2002 these types of fees and income streams have become much more professionalised with companies providing formalised models to help developers to maximise their earnings.
Unsurprisingly some developers are cautious, not wanting a government stick to make leasehold less profitable but perhaps hoping for a carrot to make Commonhold more profitable, or at least remotely workable. It should also be said that some developers who did not attend the round table hold to the view that leasehold is not broken.
The overwhelming message from the round table meeting seemed to be that Commonhold should reviewed and should be moved from MoJ to the Housing Department, so the errors and omissions in the legislation might be corrected.
Officials from both the Housing Department and MoJ then met with LKP again in July. They said they understood this message from the meeting and both departments agreed they would put to Ministers the potential for moving the legislation to the Housing Department. As time went past officials at MoJ gave reason after reason why no proposal had gone to their Minister. They had just not had time to set out their position, they claimed. Christmas came and went and the election loomed with political purdah imminent. We pushed time and again and were told something would happen soon. In the end LKP wrote to both Ministers.
On 2nd April (2 days after election purdah started) the office of the Housing Minister wrote acknowledging that LKP had been to no 10 Downing Street to raise the matter of moving the issue of Commonhold between departments and stated “I recognise there is some interest in Commonhold being transferred to my department” and that “A further meeting of senior officials will be arranged shortly to discuss the feasibility of a transfer”.
Then on 28th April, in response to our letter to the MoJ Minister for Civil Justice, Lord Faulks, an official wrote in his behalf:
“Lord Faulks had met Lord Best and a number of interested peers at a meeting in the House of Lords on the morning of 26 June [2014 – by sheer coincidence the morning of the LKP round table meeting on Commonhold] to discuss Commonhold and leasehold matters. The conclusion at that meeting was broadly that resolving the problems of Commonhold was a longer term project and that reforms to long leasehold tenure should not wait on it.
Due to pressure of other work we were not able to make the progress I would have wished on Commonhold before the election period approached and have therefore not been able to put any proposals for consideration to Ministers. The question of which department should be responsible for Commonhold was only one of the issues that such advice would have addressed. Any discussion of that point would, however, have been against the background that the allocation of responsibility for areas of policy between departments is a matter for the Prime Minister.
It will now be for the new government to decide its policy on these matters and as we are now in the election period it would not be appropriate for me to comment on the substance of that possible policy or which department might be responsible for developing it.”
Readers can probably guess what has happened to Commonhold since the election. Nothing. We assume that Justice Minister Faulks is still misinformed and somehow thinks Commonhold is something to be addressed in the long term and that Housing Minister Lewis and his officials should get on and sort out the problems in leasehold first.
Meanwhile Housing Minister Lewis is still somehow being told by his officials that leasehold is “mostly working well”. LKP is aware that officials have been informed that several sections of leasehold law are fundamentally broken and is perhaps not aware MoJ officials describe the leasehold sector as having an “apparently parlous reputation” and being “a feudal relic”.
It is therefore very disappointing that the Housing Minister has not taken this opportunity to fix a single leasehold problem in the Housing bill.
In our next article we report on LKP’s recent meeting with Australian government officials, and the latest changes in their law. We’ll try and explain how they’ve done so much better a job on housing and how leasehold is disappearing rapidly. In Australia leasehold is viewed as a broken system from the past. Their version of Commonhold, known as Strata title, is now the universal form of tenure on new build blocks.
One last note. Some claim Commonhold is only promoted by a “vociferous minority”. It became clear at the round table meeting last year this was far from the case. The next parliamentary round table meeting in December on leasehold issues will have the President of the Law Society speaking about a range of issues. He proposes to end his talk with “comments welcoming the renewed interest in a review of commonhold.“
Thanks to LKP for keeping the spotlight on this issue. One has to wonder about the motivations of those who resist fairness in society in favour of feudal traditions.
Could it be that the government’s attitude is informed by a civil service that is itself drawn, at the higher echelons, from those with moats? Or because some prominent freeholders given to ruthless monetisation are donors to the Conservative Party? Or because owning lots of freeholds is a nice little earner for the Astor family into which the prime minister married?
No?
Where is the evidence of any alternative explanation? Surely it couldn’t be that ministers are just getting the run around from their very own Sir Humphreys who are more concerned with their own empires than what is in the public interest?
Paul,
The motivation to maintain Leasehold is held with both the Labour Party and the Conservative Party who have a monetary interest in its survival.
There is no longer a monetary difference between these two party’s as they now both have a vested interest in Leasehold continuing, so much for “we are all in this together” David Cameron is correct they are all, its called “profit”.
failure of commonhold
interesting article. it is not quite clear what is wrong with law and way it is drafted.
It seems only problem is that developers and lawyers professions make a lot more money from leasehold than freehold. so law has to change to offer flat owners a fair deal. why is law in interest of a minority of very wealthy lawyers and developers against the interest on millions? worrying development: leasehold is now affecting houses -read “Money Mail” of 20 May 2015 on “Barratt homes” now selling leasehold..houses.
The law failed to consider a number of very important issues needed to make the market work.
It did not provide for the needs of either the mixed use sites or those where there were socially rented or shared ownership flats
It did not provide a tribunal system to cope with disputes
It did not provide for the eventuality of a forced sale being needed in the extreme case where someone not paying their share of the charges after a court decision.
While it was asserted the law provided a level playing field this was far from the case. All the incentives for developers to sell leasehold remain. The developers still actively lobby government to tell them consumers do not even care.
When hundreds of people are willing to queue to buy flats in Battersea power station without even having the vaguest of ideas about the terms of the lease its little wonder the Housing Minister is convinced things are working well.
5.52 pm From House of Commons 04/11/15
Jim Fitzpatrick (Poplar and Limehouse) (Lab): I am delighted to follow the hon. Member for South Norfolk (Mr Bacon). Housing is the biggest issue in my constituency, as it is in many others. I want to focus on two points. First, I shall deal with the elements that I believe to be missing from the Bill; then I shall cover the elements of concern.
There is nothing in the Bill on leasehold reform. The hon. Member for Worthing West (Sir Peter Bottomley) has been leading a campaign on this issue for some time. The Leasehold Knowledge Partnership has supplied a briefing outlining the key elements missing from the Bill. It states:
“The law commission report proposing the replacement of forfeiture with a forced sale through the termination of a tenancy has been with government since 2006.”
2 Nov 2015 : Column 760
It goes on:
“The government is aware that many leasehold landlords are delaying or stopping the ‘right to manage’ on very minor technical grounds”.
It also states:
“The basic right for leaseholders to form a Recognised Tenants Association is set at a needlessly high level”.
Furthermore, the so-called informal disputes tribunal procedures are far from informal or inexpensive.
Chas Says:
This is well known and yet nothing changes???
So true. I ve been trying to set up a Recoginsed Tenants Association, and not even the solicitors seemed to know how to set up a ‘constitution.’ Can anyone help with this?
A copy of a stranded RTA constitution can be found on the ARMA web site here.
http://arma.org.uk/leasehold-library/document/forming-a-residents-association/pages/1
Waiting to see if there are any positive developments. With house prices going up- what’s going to happen with our lease renewals? Are we going to be able to afford those, or is it more cash to line the pockets of the freeholder, their blood sucking solicitors, and smart accountants who know how to work the system to avoid paying tax?
It would seem to me the biggest obstacle to leasehold reform is the exposure the banks have to loans granted against enhanced freehold valuations. One bank alone could have as much as £63b at risk.
The Governments forgot the very residents that were prepared to fight in both wars, now they longer need you???
RIP Pensioners!!!
This is postings from About Peverel and Norman Greed who may have been singled out by his ex Managing Agents as retaliation for winning refunds at Tribunals,
Chas Says:
I remembered last night that part of the spite and intimidation began with Keith Edgar who decided to follow you to the lift at a meeting, not sure where? He approached you in the lift and introduced himself then said (non repeatable)? Please confirm this actually occurred?
The decision also to remove the money paid into the Guest Room which was maintained by the residents was no longer to be paid into the Service Charge and in future would be paid to the Managing Agent? Please confirm this is correct.
I also remember that there could have been a different scenario if the Respondents who had ignored a written determination and insisted going to the tribunal. Where it was heard that they had decided to “make an example of you and KK”. Please confirm if this is correct.
Posted by chas on 03 November 2015
Chas,
I have documented it in several of my comments. KE telephoned, and made an appointment with my wife to come to see me. When he arrived I asked why have you come to see me in particular he replied by saying” To listen to your Venomous comments”.This was said in front of witnesses.
The Guest Room income farce came about after the LVT chairman said that Guest Room Income was not a service charge matter (Ref Decision The Determination Chap 7. item 7.3 )
Case No : CHI/OOHC/LIS/2009/0030
It was Mr Rapley who made the comment that they would make an example of us if we took them back to the LVT.
I have all these comments documented.
Posted by Norman on 04 November 2015
Norman,
Can you confirm that the Keith Edgar you refer to is now a director of Freemont Property Managers, who E&M are encouraging residents to appoint as managing agents in preference to Peverel/Firstport?
Is he by any chance the same Keith Edgar that was summoned to a meeting with Prime Minister David Cameron and ordered him to “leave a development?”
Posted by Michael Epstein on 05 November 2015
Michael,
It is my understanding that it is the same Keith Edgar now a director of Freemont Property Managers, who E&M are encouraging residents to appoint as managing. I also believe it is documented on one of the web sites that David Cameron spoke to Keith Edgar
Posted by Norman on 05 November 2015
The parliamentary debate on the Housing and Planning bill may be found here.
Much of the debate focused on building new houses to replace social housing sold off by councils and on the impact of a shortage of houses on house prices, but very little on extent to which foreign money flooding into London is pricing taxpaying residents out, and further out, of the city. This has an enormous ripple effect on the price and the availability of property.
The discussion on the number of houses in the UK is in many ways a separate matter from one that could be held on the forms of tenure.
What is clear:
An Englishman’s home is not his castle if he’s a leaseholder.
Both Labour and Conservative parties are focused more on access to new homes for their constituencies (people in social housing and would-be home owners respectively) than on leasehold reform
Given that many more live in leasehold property now than are going to live in new (or newly purchased) homes any time soon, it appears that both are blind to what is immediately in front of their noses.
Paul Joseph,
Let us not forget the “trick” by which a customer buys a freehold house, but the land surrounding it is leasehold. The house owner is then subject to outrageous charges for the maintenance for the surrounding land(which is often never done) in order to service debt repayments built up by the freeholder.