Housing secretary Michael Gove’s announcement that the government will pass further leasehold reform legislation before the end of this parliamentary session, which may include abolishing leasehold, has been met with outrage, applause and curiosity.
Debate on the worthiness of leasehold has created opposing camps. Many leaseholders have suffered with escalating service charges, brought to the fore by the remedial costs for fire safety and difficulties for some in selling their property as a consequence.
This has led to debates focusing on the outdated features of leasehold using expressions such as ‘feudal’ and ‘serfdom’ to express the lack of control felt by leaseholders. However, while it is easy to think of all freeholders as caricatures complete with top hats and cigars, individuals, charities, trusts and pension schemes also invest in freeholds of blocks.
Leaseholders themselves differ. Some are satisfied with the leasehold arrangement, making a financial contribution without the obligation to be involved in the management of the block itself. Others highlight the difficulties in understanding their rights to get involved, such as becoming directors of their management company or exercising the right to acquire their freehold. Clearly, more should be done to simplify this.
If the plan is to abolish leasehold, what is to replace it? The commonhold proposal is being dusted off once more. This form of ownership is famous for having more textbooks written about it than blocks using it.
Perhaps the general issues of communal living have stopped any preference over the freehold-leasehold structure. There is such a web of legislation and regulations concerning leasehold that it is hard to imagine how the government intends to abolish it without being heavy-handed. We could end up with a system with similar challenges but fewer protections for individuals.
In the meantime, the negative discussion is likely to have a detrimental impact on leasehold values. Is this really the reform leaseholders are looking for?
Leigh Shapiro is partner and head of the property leasehold team at law firm Irwin Mitchell