Policy Report, 1st November 2023

---

Anti-leasehold grassroots campaign group, Commonhold Now, releases vital policy report on 1st November 2023 with easily deliverable law changes to liberate England's millions of flat leaseholders and to hand them rightful control of their homes in light of UK Government leaks to The Sunday Times suggesting yet more sticking plaster reforms in the eagerly anticipated Leasehold Bill set for the King's Speech on Tuesday. 

The report, entitled Misaligned Incentives: The Unique Problem With Flats in England and Wales, And What To Do About It, builds on the paradigm laid out in the highly regarded Law Commission reports of 2020, which were extensively researched and consulted upon. The Law Commission work involved millions of pounds of taxpayer money and working visits by officials to successful commonhold jurisdictions including Australia and Singapore. 

Among 32 concrete proposals, Commonhold Now urges the UK Government to require that all future flatted developments be sold on a commonhold and share-of-freehold basis for resident control from day one. Therefore, all new-build flats where the freeholds and management are not held and controlled by all homebuyers, as is the position north of the border and the rest of the world, must be banned going forward.

Commonhold Now also urges the UK Government to empower existing flat leaseholders by substantially relaxing the overly restrictive qualifying criteria on Right to Manage, collective enfranchisement (freehold purchase) and commonhold conversion, which currently prevent many from attaining control of their buildings, charges and service providers. This means going further than the Law Commission recommendations in some key areas, such as reducing the Right to Manage (‘RTM’) participation threshold to 15% or, in the alternative, requiring only a majority of occupying leaseholders to secure RTM. 

Commonhold Now protests rumours that reform of commonhold, a thoroughly democratic and peaceful form of flat ownership that cuts out investor freeholders and removes leases completely, will not make the King's Speech Bill. Commonhold Now proposes alterations be made to the first generation commonhold tenure in the 2002 Act to facilitate mixed-use developments and for the UK Government to reduce the farcical 100% unanimity rule for commonhold conversion that currently ties leaseholders' freedom on an existing development to securing full support of their leaseholders, lenders and freeholder to just 50% of the leaseholders. 

Report author Harry Scoffin, co-founder of Commonhold Now, says:

“The government’s leasehold reform plans, as trailed in The Sunday Times over the weekend, do little to nothing to liberate existing leaseholders in flats en masse, so that they can gain control of their buildings, charges and service providers.

“Leasehold will only be axed on new-build houses, of which only a handful are created each year anyway, and the opportunities for consumer detriment are minimal now with ground rents banned. The real money and abuse is going on in leasehold flats. The most shocking thing of all is that future flatted developments will not be required to be sold on a commonhold or share-of-freehold basis for resident control and democratic management, as is already the position in Scotland and virtually everywhere else in the world. This was low-hanging fruit for the government, would not have cost the Treasury a penny, and they ducked it again.

“So today we are going live with a report, Misaligned Incentives: The Unique Problem with Flats in England and Wales, And What To Do About It, to remind the government of the opportunities of moving against this fundamentally unfair feudal tenure which is confined to England and Wales in the world, and to go beyond the insultingly modest proposals floated in The Sunday Times. The high leaseholder expectations built up by Secretary of State Michael Gove’s talk of leasehold abolition earlier in this year cannot be satisfied by the current Law Commission proposals either. This report can bridge the gap. 

“There is nothing more Conservative than extending real homeownership and spreading land capital to hardworking people. Indeed, commonhold was coined by a Conservative MP, the late Sir Brandon Rhys-Williams, and was pursued by Margaret Thatcher and John Major. 

“I still believe Prime Minister Rishi Sunak meant it when he told me in a Bethnal Green living room over five years ago that ‘leasehold is a scam’. We need the mass shift to commonhold which governments have been tantalising us with for decades. Dignity, autonomy and control in the home isn’t too much to ask for.”

EXECUTIVE SUMMARY

Everyone agrees that England and Wales are burdened by a housing crisis, but everyone seems to disagree on what to do about it. This report puts leasehold, an archaic and arcane tenure unique in the world to England and Wales, at the centre of the housing debate. 

It argues that action against leasehold is a necessary, but not sufficient, condition for solving the housing crisis. The report shows how the misery and injustices faced by leaseholders intersect with wider issues such as the lack of suitable and quality housing, the inability to build enough homes for owner-occupiers and renters alike, the poor quality of new homes as well as the lack of maintenance of existing multi- occupancy housing. It is time to comprehensively reform and defang the leasehold system. 

The current generation of homeowners caught in this feudal system must be liberated, and for future generations, new-build flats should be sold on a commonhold or share- of-freehold basis only. Current generations and prospective homeowners deserve to be masters of their own home. 

This report first states the problem of leasehold as a misalignment of incentives and imbalance of power, which permits freeholders to exploit leaseholders through unjust rent-seeking. 

It then goes on to present 32 concrete policy recommendations for existing leaseholders and for the development of new homes in the future. These recommendations are made in the spirit of what we believe is politically feasible today, building on work already done by the Law Commission. Our policy recommendations are second-best to the ultimate, and in our view morally just, solution of leasehold abolition. But they would go a long way to give leaseholders control of their own home, and to liberate them from rent-seeking by freeholders. 

Finally, the report rebuts the most common and strongest-held objections to leasehold reform by the vested interests. 

The solutions proposed in this report do not cost taxpayers a penny, they lead to liberation of leaseholders without confiscation of freeholders’ legitimate property rights, and they offer freedom of choice, not compelled conversion to a new system. 

Leaseholders have waited long enough; now is the time for bold action. 

1 November 2023