Leasehold is Not Broken

The suggestion that once commonhold has been introduced, the sale of new leasehold flats will be banned raises the question, does leasehold need to be banned? If it’s broken, can it be fixed, rather than replaced in such a way that will result in considerable upheaval?

My view is that leasehold is not the failure that some have stated, but it’s not perfect either. There are aspects of leasehold which need to change: we recognise that there have been some abuses of the system and we are keen to work with the government to reform leasehold to the benefit of both residents and professionals. 

Many of the issues with the current system relate to property management and we believe that the proper regulation and control of the property management sector (managing agents) is long overdue. It is fixing this which is key to success in whatever system – commonhold or leasehold is used as a form of land tenure. 

Leasehold is very much embedded in property law and is effective in most circumstances. With some necessary adaptations, it can continue to remain effective. Leases have the flexibility to be varied, amended and extended during the lifetime of a development. The position can be altered to take account of individual circumstances and this flexibility is a benefit of the current system.

In the circumstances in which residents agree to collective management, the option for commonhold is already available. But the fact that there are currently more books on commonhold than there are instances of it should raise alarm bells. 

Last year ALEP surveyed its 1,200 membership on the question, “Do you agree with the general principle that leasehold should be abolished as a form of tenure for residential property?”. A significant majority (63.6 per cent) said that they did not support the abolition of leasehold, while 18.2 per cent  voted ‘yes’ and 18.2 per cent were undecided. 

The Prime Minister has repeatedly said that housebuilding is key to economic success, and to build 1.5 million in the current Parliament, many new homes will, through necessity, be situated in apartment blocks in high density areas. For the reasons outlined above, leasehold currently the only form of land tenure that can be used and is tried and tested. We need therefore to be conscious not to talk leasehold down – as this will affect consumer confidence and property values and adversely affect potentially millions of flat owners. There needs to be a recognition that the issues relate to poor management and abusive behaviour, rather than the system itself.

ALEP, like many others, was pleased that the government did not seek to abolish leasehold within 100 days of taking office, as had been suggested previously. With over 5m leases in existence in the UK, this would have caused substantial disruption for millions of residents and professionals, and would have been wholly impractical. 

We welcome the government’s staged approach to leasehold reform and look forward to continuing discussions with the MHCLG on behalf of the industry at large.

Mark Chick, director of ALEP and a Partner at Bishop & Sewell LLP