Common Ground Comment – Why leasehold should be banned

Lets not mince our words. Feudalism shouldn’t exist in the 21st century but it does. It’s called leasehold.

The Government had the chance to end this practice in 2002 with the Commonhold and Leasehold reform Act 2002 but they failed to make commonhold compulsory so nothing changed. Why? Money as ever. Owning freeholds is a license to print money.

Most freeholders make their money in passive ways by enacting clauses in the leases meaning leaseholders have to pay ground rent, insurance (for which the freeholder usually gets a commission) and a variety of administrative charges for consents (to let, to alter etc) and by lease extensions which run into the thousands if not tens of thousands.

The principle of commonhold is that of indefinite freehold tenure of part of a multi-occupancy building (typically a flat) with shared ownership of and responsibility for common areas and services.

On 21 July 2020, the law commission published its long-awaited report on suggested reforms to the leasehold system.

A full copy of the report can be downloaded from https://www.lawcom.gov.uk/project/residential-leasehold-and-commonhold/

In summary, the three main points of the report are

1. Re-invigorate commonhold which allows people to own a flat forever, with a freehold title and no landlord – which could replace leasehold for newly-built flats. Recommended reforms would also give leaseholders a route out of leasehold by making it easier to convert to commonhold.
2. Improving the process by which leaseholders can buy the freehold or extend their lease (“lease enfranchisement”). Our recommendations would create an improved simpler and cheaper way for leaseholders in flats and houses.
3. Making it easier and cheaper for leaseholders to take over the management of their building without buying the freehold, by exercising the right to manage (RTM). The RTM lets leaseholders take control of services, repairs, maintenance, improvements, and insurance.

We welcome the proposed changes, and feel very strongly that leasehold should be banned in future and replaced by commonhold. The government of the day had it’s chance to make commonhold compulsory via the Commonhold and Leasehold Reform Act 2002 but by making it optional, it simply didn’t take off.