New leasehold reforms are unfair

If there is one class of business government clearly does not love, it’s landlords — maybe just because they’re outnumbered by tenants. And call me a cynic, but landlords do seem to be treated as if they’re all immensely wealthy and if they go bust they probably deserved it.

This is not confined to the extension of tenant protection announced this week. There is a taste of it in the recent proposals from government on reform of leasehold. That’s not to say that some changes were not necessary.

The practice of imposing ground rents that doubled every few years on susceptible new owners was ethically questionable to say the least and there will be few who disagree with it being banned.

But some of the proposed changes are much more difficult to justify. The planned abolition of ‘marriage value’ charges paid by leaseholders to extend leases surely raises serious questions.

They are not righting a great wrong as might be argued in relation to those escalating ground rents. If the change was simply to prescribe the rates to make things simpler and setting them in line with market conditions to make the valuation fairer, then so be it. But what is being proposed is truly extraordinary.

It is simply depriving some citizens who happen to be landlords of their legitimate rights and instead handing large windfalls to speculators – particularly in London, where values are high – who can just buy out a property interest at way below value and pocket the difference.

Their intention from the outset is not to occupy the property but to take from landlords what should legitimately belong to them. And all done with government approval. I say that is a far greater scandal.

The second change proposed by the Law Commission is also grossly unfair. By lowering the percentage of residential space required for collective enfranchisement from 75% to 50%, they make it far easier for landlords to have properties taken from them than was the case before. That acts as a disincentive to developers of a critical part of the market from which the government expects a big slug of its housing targets to be met.

Creating a greater wrong

Part of the problem here is the failure by the Law Commission to recognise the danger of righting a perceived wrong by creating a greater wrong.

A former colleague of mine in the House of Commons, the late Brandon Rhys-Williams, was MP for Kensington at the time when the notorious slum landlord Peter Rachman was treating his effectively defenceless tenants abominably through intimidation and extortion.

Brandon believed something had to be done to protect tenants from people like Rachman and developed the idea of enfranchisement.

He lobbied then prime minister John Major relentlessly on the subject and eventually got his way. He was able to offer his constituents a way to get out from under bad landlords.

But in the process, he arguably created an equally unpleasant prospect. What he sponsored was the idea that property could be bought from an unwilling seller. That strikes at the heart of our belief that in a free society no person should be forced to sell what they legitimately own other than in cases where the national interest must prevail.

At the time, Gerald Grosvenor, the then Duke of Westminster, vowed never to give the Tory party another penny. I thought then and believe now that he had every reason to be angry.

The Law Commission should think again. When we meddle with the long-cherished notion that an Englishman’s home is his castle (with apologies for the multiple failings of political correctness in that phrase, for which I blame our ancestors) we do so at our peril.

Steve Norris is chairman of Soho Estates and Future-Built