“There is no prouder word in our history than ‘freeholder’”, Margaret Thatcher once said. In opposition in the sixties the young Tory housing and land spokesperson championed the policy of leasehold enfranchisement, which Maggie claimed would create a property-owning democracy – long before she hit upon the idea of selling the freeholds of council homes to tenants. The Leasehold and Freehold Bill is scheduled to have its report stage and third reading next Tuesday (27th February 2024). It is a subject which is simultaneously of the utmost importance and boring to those who are neither leaseholders or freeholders. It could yet have great repercussions.
For those who are not sure what the Bill is about the first thing to understand is that if you are a leaseholder of your home you don’t really own it. Even if you have 100 years on your lease when you “bought the property”, you have essentially just paid, upfront, to rent it for 100 years. The leasehold system is feudal and non-existent elsewhere in most of the world. After 100 years the freeholder of the property will at no cost take back what you had leased. During the time you had the lease the freeholder can also charge you for the upkeep of the property. Often the freeholder quite legally gets kickbacks from insurers and maintenance companies whose inflated charges have been passed on to the unfortunate leaseholding serf. The freeholder can charge the leaseholder ground rent for no other reason than they can. Insane.
Leaseholders don’t really have full property rights. In other countries apartment blocks with common areas appoint their own management company to maintain the shared areas in common. This means the residents decide on matters and it is in their interests to be frugal. Commonhold is only seen in England in some top end mansion blocks.
Michael Gove, ever the moderniser, wants to update the leasehold/freeholder situation. In doing so he is continuing what Margaret Thatcher started. In her first term she embarked upon a programme of radical leasehold reforms to give leaseholders more control over their homes, greater transparency on service charges and new rights to acquire the freehold interest much to the annoyance of the Tory-leaning great estate owners. In 1986, not happy with the “unsatisfactory” leasehold regime governing flats and maisonettes, Thatcher ordered work to introduce a freehold flats scheme that removed corporate freeholders and provided for resident control, inspired by US condominium and Australia strata title, which would eventually lead to the phasing out leasehold tenure. Thatcher’s commonhold agenda survived her premiership and found its way into the 1992 and 1997 Conservative Party manifestos.
Despite some fifty years of Tory promises it has never come to fruition. The 2019 Conservative manifesto at least promised to ban the creation of new leasehold houses – a racket that the big house-building companies have somehow managed to maintain into the twenty-first century for no good reason. Despite the Kings’ Speech promising it there is no provision in the Bill to bring in the ban. Guido is suspicious that corporate lobbyists have nobbled this simple reform, which is clearly in the public interest.
Gove is today promising to make peppercorn ground rents just that – because they are something for nothing. If Gove can’t get substantive commonhold reforms past vested interests – of which a lot are Tory supporters and donors – at least he should be able to pass two Thatcherite measures;
Guido would love to see radical planning reform, sadly Tory vested interests have seen that off. Gove still has a chance to at least give householders one Tory legacy to remember for generations – increasing choice and competition for existing leaseholders and making sure there will be no more new leaseholding serfs. Come on Gove, expand the property owning democracy!
See also: Margaret Thatcher’s Unfinished Business [PDF]
