Discussing alternatives to leasehold: Martin Boyd (left) of LKP holds Westminster discussion with hosts Jim Fitzpatrick (Labour MP, Limehouse and Poplar) and Sir Peter Bottomley (Conservative MP, Worthing West)
Last Thursday (June 26) Campaign against retirement leasehold exploitation / the Leasehold Knowledge Partnership held an all-party meeting on commonhold in the House of Commons.
The meeting was organised by Martin Boyd, co-director of LKP, and hosted by MPs Ed Davey (LibDem), Sir Peter Bottomley (Conservative) and Jim Fitzpatrick (Labour).
More than 50 delegates attended from the Commons, the Lords, the civil service and the leasehold sector.
Commonhold has been worked on and promoted by all three main parties since the 1980s as the alternative form of tenure to residential leasehold.
More than 50 representatives from the sector attended the LKP meeting on commonhold, including QCs Guy Fetherstonhaugh and Phillip Rainey, and Professor James Driscoll, who had a role in initiating the 2002 Act
It is the system adopted by the entire world with the exception of England and Wales, which alone persist in perpetuating a form of residential tenure that derives from feudal times.
Commonhold finally became available in England and Wales following the introduction of the 2002 Commonhold and Leasehold Reform Act.
Only 15 schemes were ever built and commonhold failed to take off as Britain gorged on its sustained property boom, and professions and mortgage lenders had little appetite for the novelty. The only major housebuilder to attempt to build commonhold was Crest Nicholson, but with no sunset clause establishing a date after which commonhold would become mandatory, interest faded away.
LKP’s Westminster meeting was the first high level discussion of the subject since 2002, and a number of speakers addressed how the system could work.
The meeting considered papers provided by property law QCs Guy Fetherstonhaugh and Philip Rainey, together with input from Professor James Driscoll, a professor of law and property tribunal chairman, who had been part of the original advisory group.
A detailed review of the legal aspects of the discussion will appear over the next few days on barrister Amanda Gourlay’s web site “Law and Lease” which can be found here http://www.lawandlease.co.uk/
Guy Fetherstonhough explained that nobody would ever invent leasehold if it did not exist, and he set out a number of advantages for commonhold.
He also took the audience through a number of weaknesses in the 2002 Act and how those might be addressed.
Philip Rainey professed himself to be a little more agnostic, arguing that we should try to fix the many issues in leasehold law. He also warned that commonhold also faced some problems.
Professor Driscoll, who was part of the original advisory group on commonhold and a keen enthusiast, took the meeting through a number of misconceptions on the subject.
The lawyers also made clear that something would need to be done to persuade the housing market to favour commonhold.
Rob Plumb, the CEO of the HML Group plc, which is accredited to oLKP, highlighted the various additional and unjustifiable income streams that are widespread in leasehold.
Mr Fetherstonhaugh reinforced the point by stating that a housebuilder adopting leasehold effectively gets to sell an asset twice. First, he sells the leases, then he sells on the freehold reversion with its right to ground rent and other potential incomes.
The QC also put forward the need for the government to somehow offer either incentives to build commonhold, or disincentives to building leasehold.
Philip Rainey suggested that perhaps ground rents could be abolished as an income stream on new build developments or, alternatively, that there be some relief on stamp duty for initial commohold sales.
Martin Boyd, co-director of LKP, made the point that the government had failed to use its influence in the social sector to help prime the commonhold system.
At the suggestion of Sir Peter Bottomley a number of MPs have proposed to meet the Homes and Communities Agency to find out why it had not done more to promote commonhold.
What was clear from the meeting is that although some have their concerns over commonhold – in particular, the weaknesses in the legislation compared with what has already been established with leasehold – that it is a system that would be welcomed by the sector if it could be made to work.
Liz Peace and Ian Fletcher, respectively chief executive and policy director of the influential British Property Federation, supported the idea of incentives being provided to ensure commonhold could be allowed to work.
The meeting was attended by representatives from the Ministry of Justice, the Department of Communities and Local Government and the whole of the senior team from the Competition and Markets Authority, who are currently conducting a market review of the leasehold sector.
Senior figures in the sector also represented the Royal Institution of Chartered Surveyors, the Home Builders’ Federation, British Insurance Brokers Association, AgeUK, Which? ACCA, ARMA, FPRA and LEASE.
That commonhold falls under the jurisdiction of the Ministry of Justice, rather than the housing minister at DCLG, has not helped its cause. This was something the meeting felt might be changed.
Lord Best, a crossbencher and chairman of the Hanover Housing Association, explained to the meeting that he and other Lords had also met Lord Faulks, Minister for Justice in the Lords, earlier that day to discuss ways in which the commonhold legislation might be improved.
Baroness Gardner of Parkes, who has been a staunch supporter of commonhold from the outset, again gave her full support.
At the end of the meeting, Sir Peter expressed his wish that the forum would continue and would meet again.
LKP would like to thank all those who gave up their time and effort to attend and make so many positive contributions to the meeting.
Formal notes of the meeting will be circulated next week to attendees and those who were unable to attend.
An assessment of the meeting can be read on www.lawandlease.co.uk here
The comment from Campaign against retirement leasehold exploitation regarding:-
LKP would like to thank all those who give up their time and effort to in making contributions, is not only for the likes of those attending meetings?
The sending of emails by contributors, who in their own way, do provide continuing comments and involve the single individual, should not be asked to remove the email address from any person involved at Campaign against retirement leasehold exploitation as has happened?
I have seen the copy from my friend in London and feel that request to remove them from one of the Campaign against retirement leasehold exploitation/LKP directors was insensitive and uncalled for?
Please confirm that we as commenters provide valuable contributions to all the websites and an apology will be sent to my friend?
I will expect a call confirming this action???
Campaign against retirement leasehold exploitation / LKP welcomes comments from all. Many are extremely useful and help others. They are an important part of pressing for change in this sector.
But we will remove malicious or defamatory remarks and references to employees of companies that commentors disagree with.
We also are not a forum to promote a particular company or group that a commentator wants to advertise.
LKP refused to remove readers’ comments following complaints from Deep Sagar, the LEASE chairman, who used lawyers to threaten compliance. You can read of that here
Chas,
Campaign against retirement leasehold exploitation/LKP are in a different position from other campaigning sites.
Because they have moved on from being just a blog to being a fully respected negotiating force that can forever end the blight that is leasehold.
Our enemies would love it, if an item was ever posted that could lead to the demise of Campaign against retirement leasehold exploitation/LKP.
Some of my posts are not published, purely because the risk is too great! Campaign against retirement leasehold exploitation/LKP have to be very careful. That does not mean every word you write is not true, but their can be wider implications.
Because they operate in different spheres, About Peverel does tend to allow more controversial posts.
Michael,
Thanks for your comment. This article gives an indication of the line we tread
We are attempting to report this under-reported, murky sector ethically and fairly. That will involve disagreeing with some leaseholders.
Open reporting – of the tribunals, the regulators, the trade bodies, the lawyers, the game-playing freeholders and managing agents – is the best service we can do.
We are almost certainly making mistakes and could do it better. But at last people who are in positions to make changes to this sector are listening …
Campaign against retirement leasehold exploitation,
Yes, you could do it better and you are listening?
Why not make a comments section that can open discussion?
We have to break into comments, ask Martin???
Chas,
I believe Campaign against retirement leasehold exploitation/LKP did try a forum section (which was not too successful)
On a purely personal basis, i feel that their is a danger of “diluting” the brand if your idea is adopted. Campaign against retirement leasehold exploitation/LKP websites for understandable reasons operate like a newspaper, with story led comments. About Peverel offer an open comments section. They are very strong supporters of Campaign against retirement leasehold exploitation/LKP.
Michael,
Comments noted, thank you.
Chas
Random “I am angry” type postings typically those without evidence to a level sustainable in a criminal court viz “beyond reasonable doubt” are worthless and dilute the value of a campaigning web site.
Such evidence was collected carefully on the TTAS web site which was brought down. By whom and for what reason is not known: therefore peverel cannot be blamed – but it is suspected that they were behind it – BUT it may also be that the guy who ran the site lost the need and motivation – maybe he got married and sold his flat for a house …. wise man.
happy days
Reviewer,
Point taken, hope you are well?
Possibly the sudden demise of TTAS was because the guy who ran the website had finally revealed his name that left him open to direct legal threats from Peverel? Sounds about right. A bad move! Whether it was intentional or not we will never know.
But the problem with some anonymous websites/comments is they only expose the wrongdoing and don’t get the real change that is needed. Such sites are invaluable though; they do great work on which those in the know can share their knowledge to assist others – as indeed I have been helped.
TTAS was closed by the Owner, not, because of any reason other than he was now Free From Solitaire et al and any other Management Company. He declined any financial support from those who followed his comments and who wished to support him. Bristol is worse off without his input and we in general are the losers without his input observations. Am I not right M.E. and Fleeced?
Chas, I can assure you that an open forum is just as open to litigation as this format. Those of us elsewhere on the web have to be careful of that, as do the forum providers, with one of the regular suspects even trying to take the matter to the professional body of a member( who threw it out), and in my case, some quite unpleasant tactics used to try to identify me.
Unlike LKP, the forums will remove the names of landlords agents and people.
If Commonhold can work effectively everywhere else in the world why is it so difficult to adopt the system here? When the Commonhold and Leasehold Act was passed in 2002 surely those who were instrumental in bringing it about had looked at other countries where it operates on which to compare and model our own system? Am I being naive here? Have I missed something?
Yes you have missed something Elizabeth.
Comonhold means that the landed gentry of this country lose out on the profits from all the property they hold the freehold on, or banks can’t make massive profits out of the misery of leasehoders if commonhold is introduced.
Micheal,
The biggest problems in leasehold tends not to come from the long established landlords but those who see leasehold as a means of turning a quick profit. One of the reasons for holding the meeting was to show government that there is a lot more support for commonhold from the “vested interests” than most had thought.
The banks have learned to their cost that lending money of freehold reversions is not always the safe bet they assumed. Instead of making massive profits as hoped a number of the loans made by the banks have turned into nasty liabilities.
Getting Commonhold back on the agenda is a long term project but the reaction to the meeting has been very positive.
Elizabeth you are correct those involved with the 2002 Act did look to other countries particularly Australia. However, the legislation implemented has some serious failings which need to be rectified. Economically something also has to be done to balance the profit potential between the two forms of tenure. To counter the extra profits available in leasehold commonhold will need to be able to gain a premium or government will need to introduce a disincentive for leasehold that will not suppress the building sector.
Because commonhold does not exist in the rest of the world. Residential leasehold tenure still exists, and new ones created in other parts of the world, in both Africa South America and even in parts of Australia.
What is common is ownership of flats on an outright basis without the end date that all leases have.
What is clearly poorly understood is that, contrary to the expectations of some, it is not a simple title, like that of a house, as most of the clauses in a lease still exist in the Commonhold Community statement and assessments.
Unlike a lease which is binding, most of the clauses in the above can be amended by majority vote e.g you paid a premium for the flat for the in house gym, but it is closed now as the majority voted not to pay for it and close it……
While forfeiture is removed as an issue our commonhold system doesn’t have as many forms of flat ownership elsewhere do have, is the power of sale by a vote of the board to remove an owner .
AM sorry you are wrong on this one. Commonhold is the standard form of tenure in every other part of the world other and England and Wales. It has different names in other countries.
Quote:”Mr Fetherstonhaugh reinforced the point by stating that a housebuilder adopting leasehold effectively gets to sell an asset twice. First, he sells the leases, then he sells on the freehold reversion with its right to ground rent and other potential incomes”.
Actually he is wrong, it is three times -lease extensions in the future.
So, legislate for
-all leases to be 999 years @ peppercorn rent
– Freehold to be transferred for £1 to an RMC
Done.
Quote “To counter the extra profits available in leasehold commonhold will need to be able to gain a premium or government will need to introduce a disincentive for leasehold that will not suppress the building sector”
That is, fundamentally, the wrong way to approach it. The primary income stream for the blocks is the ground rent income which can be preserved, if felt necessary, by allowing these to remain in the 999 year lease above, or permit new rentcharges on the freehold title ( after transfer to residents). The long term lease extensions are less important to the value under 125 year leases, and the income streams from commissions and management earnings are normally quite modest, and only distorted to ” enormous” by the practices and set up the former “Dark Empire”.
I explained earlier,the huge amount of added value of the freehold to the developers, but it is unlikely that its loss will lead to them to “stop building”. Rather than a disincentive, it is far better to require that the leases be 999 years@ peppercorn rents and that freeholds be transferred @ £1, by legislation and incentivise building with tax relief for doing so for a number of years. Markets, as always, will adjust.
Whatever happens to new build sites still leaves 5M existing owners with leases and we are far better off then focusing our efforts on making that work. After all having now understood the value of freeholds, existing leaseholders face, as some know, a very high price to buy out the freeholders interests in existing schemes.
Quote”AM sorry you are wrong on this one. Commonhold is the standard form of tenure in every other part of the world other and England and Wales. It has different names in other countries.”
Sorry Martin but you have to do your research on that-leaseholds are not peculiar to E & W. That said ownership elsewhere, leaseholds aside, break down, broadly, into either
-community ownership of the building and exclusive occupation of the flat
-community ownership of “everything thats not a flat” and lot ownership of the flat by the owner
Commonhold here is a rather quirky take on that,. as you will have now learnt in the instance of insolvency. That is why we need to create, very simply, a bipartite contract ( and not the ridiculous Community Statement) between the flat owner and the freeholder ( owned by a Your Block residents Commonhold Company Ltd) where both own their bits “fee simple in perpetuity” eg freehold/commonhold or “flathold”?! No maybe not the last one… 🙂
Imagine a lease, which is just a contract, without the words “lease” “forfeiture” “term or “rent”.
AM,
Most of the rest of the world has a system where there is a relationship between the ownership of the flat and the ownership of the building rather than our leasehold system where you do not own your own property.. Or as you put is a system without a lease, without a rental fee, without forfeiture, and without a time limited period.
The point of organising the commonhold meeting was to encourage those who do understand the issues to consider how the system might develop in the future..The 2002 Act had a number of problems so now a way needs to be found to address those problems. That means trying to influence the politicians, the civil servants and most importantly those working in the sector.
.
To Martin
Legislation that requires the compulsory transfer of the freehold does that too. Making leases forfeiture free and 999 years, or longer, Perpetuity- 1 day, gives ownership as the reversion is so distant, it can only annoy the pedantic.
The remainder of lease terms are alive and well in any community statement, the difference being is that the freeholder can’t change my lease terms, but the commonhold association can change the statement.
When they decide they don’t like lettings and restrict them advocates might sit up and listen, especially when they find that all the existing protections don’t apply to them; no consultation on major works for example, and no Tribunal as that creates a risk of insolvency if the T reduces the contribution.
It does next to nothing for 5 million existing owners.
Some will say that “you just want to preserve your gravy train”, however commonhold is, and mk2 will be, a brand new one, because some fail to realise that most of the issues that lease terms address, still have to be addressed. Mk1 or Mk2 needs a new regulatory and legal framework, and will only have legislation, not case law and precedent.
All we need do is create a new tenure which operates on the terms of a lease or community statement, as they are much the same, free of rent and forfeiture and unending, but under the existing leasehold regime, so we can fix that, for everyone.
One point from the meeting was permitting the granting of leases by exempting social housing and shared ownership leases from the protections of the LTA 1985 et all. The second class council and RSL leaseholders will be pleased to meet their new neighbours, the third class one 🙂
Thats why I am not so sure bearing mind to who that comment was attributed, that they really do understand the issues.
Again don’t misplace my pov, while I believe leasehold can be made to work to achieve the desired ends, I fully support and advocate outright ownership in a contract that is free from rent forfeiture and unending.
it can operate in the existing, and reformed, L&T legislation and rights, rather than a new and virgin one, but, crucially for new and enfranchised schemes, the flat owner is dealing with a freeholder who is a residents owned body, not “evil landlord (BV) plc” and “their little friends….”