Commonhold update

Way back in 1995, a Labour Party policy document entitled ‘An End to Feudalism’ set out a persuasive case to “replace the archaic and discredited leasehold framework” with commonhold on all future new-build blocks of flats. Indeed, the idea was so compelling that in 1997, it formed a manifesto pledge.

A bargain

But in office, Labour executed a dramatic volte-face on leasehold abolition. Even before its arrival on the statute book, the 2002 legislation introducing commonhold was described by Lord Falconer as “a bargain” with a property sector horrified at the prospect of commonhold becoming, well…common!

The bargain was that commonhold – the first new type of property ownership in over 75 years – would not be mandatory. So, there it sat, all but forgotten, with fewer than 20 schemes and only 150 units ever registered.

Although commonhold has spent over two decades quietly gathering dust in the parliamentary archives, calls for leasehold reform and wholesale abolition have grown ever louder. And last year saw the most significant reform to residential leasehold this century with the abolition of ground rents on most new leasehold properties. However, that was simply a response to a particular issue – the so-called “ground rent scandal”.

Leasehold reform bill

Then, early this year, Levelling-Up Secretary Michael Gove told The Times, “I don’t believe leasehold is fair in any way. It is an outdated feudal system that needs to go […] We need to move to a better system and to liberate people from it.” Sound familiar?

And he went further, suggesting we could expect a leasehold reform bill in the next parliamentary session. But things move fast in politics, and barely four months later, these plans were shelved amid reports of a heated disagreement between Mr Gove’s department and Number 10.

This latest U-turn coincided with Sir Keir Starmer’s keynote address to the British Chambers of Commerce when he pledged that a Labour government would enact the Law Commission’s 2020 package of reforms, which include “reinvigorating commonhold”. And his words were immediately reinforced by then-Shadow Levelling-Up Secretary Lisa Nandy. In a Commons debate on leasehold, she committed to introducing legislation to abolish leasehold in the first hundred days of a Labour government. Again, this all sounds very familiar.

The Law Commission’s report recommends boosting commonhold by making it more appealing to lenders, developers, and existing leaseholders. It also recommends changes to allow existing leaseholders to convert to commonhold either with the freeholder’s consent or, failing that, via a “collective freehold acquisition claim”. In addition, they say the government must consider banning the sale of leasehold flats altogether.

Stop press!

I rarely have to yell, “Stop press!” after submitting an article. But just last week, following an announcement in the King’s Speech, Mr Gove again materialised above the parapet to announce a bill to end leaseholds on newly built houses – but, crucially, not flats. However, on closer inspection, this half-baked bill currently contains no provision to achieve even the limited changes announced. Officials said they could not include the key clauses because of continued tensions between Mr Gove’s department and Number 10 over including the bill in the King’s Speech. We can expect the addition of the relevant clauses via a government-backed amendment in the Commons or Lords.

Comment

So, where does this rollercoaster of promises and U-turns leave us?

Of course, much depends on who wins next year’s general election. However, there are now substantially more leaseholders than in 1997, and calls for reform are considerably louder. So, I believe it’s pretty inevitable that a Labour working majority means the days of new leasehold flats are numbered. As the only realistic alternative, that means the spotlight returns to commonhold.

Yet, the devil is in the details, and I suspect we shall hear that past promises to “abolish leasehold” referred to new properties only. Not only are existing leasehold flats a web of competing interests, but as now with leasehold enfranchisement, a transition to commonhold will inevitably involve the twin hurdles of collective action and financial outlay for flat owners – rarely easy or palatable.

Watch this space!