With a new government comes a new agenda, but some of the same arguments around leasehold reform continue to rumble on. This is perhaps to be expected, given that the UK uses a system of home ownership that is still rooted in medieval history.

Arshad Bhatti

Leasehold reform is a thorny issue and one where the law of unintended consequences can run riot. But one thing that is universally popular among nearly all leaseholders is the power to become freeholders.

It isn’t hard to see why; it gives you more control over where you live, makes it easier to sell your property and eliminates the need to pay ground rent. That’s why the government is looking at all available options to make this as smooth a process as possible.

No easy feat

With various obstacles in the way, this isn’t always easy. It can include getting other leaseholders in the property to agree to your plans, the fear that you’re taking on potentially unknown liabilities and the need to pay ‘development value’ for any benefits unlocked by taking on the freehold.

The first two issues can be resolved through a process of advice and education, reassuring tentative leaseholders of the benefits of taking on the freehold and guiding them through what can seem an arduous process.

The final issue though – related to development value – poses greater challenges. This is where leaseholders taking on the freehold need to pay the incumbent a fee based on the ‘value’ that any development on the property could add. Freeholders are, not surprisingly, keen on getting this fee as high as possible.

Planning and dev

Source: Shutterstock/MIND AND I

Calculating this value is often a fine art, and freeholders who are being made to sell their interest are, again unsurprisingly, keen on getting it as high as possible. However, this can often prevent people from doing something that the policymakers want to facilitate.

One of the most popular ways to add value to a block of flats is to maximise the airspace above it – something that we specialise in at Apex. The current law can discourage this from taking place, however, because of the fear that a big fee will have to be paid to the freeholder.

Given this, we believe any reform should bring forward a commitment for leaseholders taking on the freehold to only pay development value during initial build.

Unlocking value

In the first instance, this will stop the inequitable situation of new freeholders paying money for something they may not want to pursue. And, perhaps more importantly, it also means that if they do want to proceed with any development, they will have a means of immediately raising the cash through the value that they’re unlocking.

As with every mooted change to leasehold, there will be those who say it’s unworkable and unfair to freeholders. However, it’s an essential way to give them more control over their own homes, while helping unlock billions across the UK housing market.

Here’s hoping our policymakers step up to the challenge and creative positive change in a housing market craving modernisation and greater accessibility.

Arshad Bhatti is founder and chief executive of Apex Airspace