'Millions remain trapped': Leaseholders still 'cash cows' despite update on abolishing 'feudal' system

21 November 2024, 14:09 | Updated: 21 November 2024, 21:59

Long-awaited legislation to abolish England's "feudal" leasehold property system will be published in the second half of next year, the government has confirmed in a major update for the millions of people affected.

In a Written Ministerial Statement (WMS), housing minister Matthew Pennycook gave the first details of how quickly Labour intend to axe the controversial form of homeownership, as promised in their manifesto.

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The minister said there will be a consultation and white paper early next year to get the plan in motion, with the aim to make commonhold "the default tenure" by the end of parliament in 2029.

The news has drawn a mixed reaction from those caught up in the system, with some hailing an end in sight and others saying it is too little too late.

What is leasehold?

Leasehold is a centuries-old form of tenure that is unique to England and Wales. People who buy their home with a lease buy the right to live there for a given number of years but don't own the land itself, regardless of whether it is a house, or a flat in a building.

That is the preserve of the freeholder, who can charge expensive ground rents simply for owning the land, as well as service charges for the maintenance and insurance of the properties.

There have long been concerns around leaseholders being exploited, especially by unregulated managing agents who are typically contracted to oversee the day-to-day running of buildings and can charge large fees on any works they arrange.

Criticism intensified after the building safety scandal that emerged post-Grenfell with many homeowners facing crippling bills for remediation, leaving them stuck in worthless properties they cannot sell.

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'I see no way out'

That's the case for leaseholder Peter Batt, who has not been able to live in his "once lovely" flat in Kent for the past nine months because the roof of the building has "completely failed and is disintegrating".

This has caused damp, black mould and leaks so severe his neighbour's ceiling below him has collapsed

The problems were raised to the building's managing agents in February but no remediation has occurred.

Last week he was told he'd need to cough up £18,000 for his share of the works before any repairs can go ahead - money the 60-year-old doesn't have.

"I genuinely see no way out unless I win the lottery, it's been an utter nightmare", he told Sky News.

Mr Batt and his neighbours want a temporary tin hat cover to be prioritised, given this was recommended by surveyors back in April to stop the situation deteriorating - which they say it now has.

But they have "no say over this despite shouldering all the costs", Mr Batt added.

"The government need to look at root-and-branch reform because, in my experience, all the parties currently charged with maintaining building such as my own are incentivised almost solely around maintaining their revenue stream.

"Under the current system, no one is on the leaseholders' side and that has to change."

'Death knell of leasehold'

In his WMS, Mr Pennycook said the government will introduce a "comprehensive new legal framework" on commonhold, including banning the sale of leasehold flats and converting existing leasehold tenures to the new model.

Proponents of commonhold say it would drive up safety standards, as it would give flat owners more control of the maintenance of a building while removing the cash incentive for developers to build homes on the cheap - knowing leaseholders can pick up the costs.

Sebastian O'Kelly, of the Leasehold Knowledge Partnership, welcomed today's announcement as the "death knell of leasehold".

He advised people not to buy leasehold properties as "the market will force pace on this", pointing out that some developers have recently come out in support of commonhold while others "whose reputations have been shredded by the Grenfell findings will follow".

He told Sky News: "With this momentum the reforms to improve the blighted lives of existing leaseholders will be eased. Government may think this process will be slow, but house builders will know that the leasehold game they have played so assiduously is busted."

Delay in implementing Tories' 'half-baked' reforms

But there was a more muted response from the National Leasehold Campaign, which has spent six years trying to dismantle the system.

As well as announcing a roadmap for abolishing leasehold, Mr Pennycook set out a timeline for implementing reforms in the Tories' Leasehold and Freehold Reform Act (LFRA), which just about made wash-up when Rishi Sunak called the July election, after being watered down by then housing secretary Michael Gove.

The LFRA promised to abolish leaseholds on new houses but not new flats, which make up 70% of the estimated 5 million leasehold properties in England.

It also aimed to give leaseholders more rights and protections, but Mr Pennycook said the act was "half baked" so there would be delays in implementing some of its measures.

Crucially, that includes rules around new valuations, which will be consulted on next summer, he said.

'Endless cash cow continues'

The NLC called this "very disappointing" as the mechanism was designed to make it quicker and cheaper for people to buy their freehold or extend their lease "enabling them to sell their properties and move on with their lives".

"Our main concern now is the fate of existing leaseholders who are currently suffering at the mercy of unregulated managing agents and unscrupulous freeholders," it added.

"The government's published intention to 'act as quickly as possible' will not be quick enough and we are already seeing the despair from some NLC members who are facing bankruptcy due to escalating service charges.

"Since 2018, leaseholders have heard time and time again from former government ministers that they will end the abuses but in reality nothing has changed for existing leaseholders. Using our homes as an endless cash cow continues and millions remain trapped."

(c) Sky News 2024: 'Millions remain trapped': Leaseholders still 'cash cows' despite update on abolishing 'feudal' system