New flats being built

Labour’s leasehold announcement today is welcome – not only does it end the misery faced by too many leaseholders exploited by unfair ground rents, but it provides new democratic ways for homeowners to manage their properties together through a reform of Commonhold.

The leasehold scandal has grown to epic proportions. Today’s leaseholders have all the responsibilities of being an owner without having all of the rights.

Many leaseholders are subject to onerous ground rents, opaque service charges, high bills and arbitrary limits to changes to their property or lease. Too often, freeholds have been sold on multiple times, without notice, to investors who increase rent or impose new unfair conditions – leaving many households stranded in homes they can no longer afford but can’t sell either, as lenders won’t consider mortgages when there are escalating ground rents.

However, an alternative does exist. Commonhold offers a fairer system for homeowners. It gets rid of outside landlords, ends expensive ground rents or hidden charges, prevents your freehold being bought and sold, and gets rid of the concept of a ‘declining asset’ – meaning the worry about how many years are left on the lease is no longer a concern.

Importantly, on top of this commonhold gives homeowners a say and a stake in how their properties are run. In a block of flats, for example, it’s the owners of those flats who can make decisions on the communal garden or roof repairs, not an external company who owns the freehold. It’s a form of democratic, community ownership that makes flat ownership more equitable.

Commonhold is, in tenure terms, a new type of property ownership – although in reality it has been around for over a decade since its introduction under the 2002 Commonhold and Leasehold Reform Act. It was the first type of new legal estate to be introduced into English law since 1925.

However, in the seventeen years since the act was passed, very few developments have used this form of tenure and too many leaseholders remain subject to exploitative behaviour from freeholders. So today’s announcement that the next Labour government revitalise the model is very exciting.

Our Co-operative Party conference in 2017 agreed that it should be easier for existing leaseholders to convert their ownership to Commonhold through strengthening the legislation as part of the wider leasehold reform. Labour’s paper “Ending the Scandal” does just this, with proposals to lower the threshold for resident consent, increasing lender confidence and improving the flexibility of the current commonhold rules. And better yet for people buying flats in new developments: Labour has put forward plans for commonhold to be mandatory for all new developments – preventing exploitation from developers and freeholders.

We will be exploring these proposals and the opportunities that reform of commonhold offers at Labour Conference in September – we’re delighted that Sarah Jones MP, the Shadow Housing Minister who has developed these proposals, will be joining our panel alongside Helen Hayes MP and the Building Societies Association.

If you’re coming to Labour Conference this year, sign up here for information about our housing and commonhold fringe discussion.