Leasehold is still very much a thing in Northern Ireland also.
Leasehold can be a good thing. The problem is the system is being abused. It would be better to tackle the abuse rather than chuck out the whole system.
The fact that Freeholders take a cut of insurance premiums for commission is baffling to me. In the not too distant past premiums of flats could be made of 50%+ commission. Thankfully, the FCA are incredibly hot on it at the minute.
The dumbest thing on Reddit today.
Unless we get, can the government please pay off my mortgage but I still maintain legal ownership, as a follow up.
> The situation for leaseholders in blocks with dangerous cladding was dire. They were not only now having to live with the fear of a deadly building, they were also lumbered with huge bills to fix the problem.
What on Earth does this have to do with leasehold tenure?
Answer, of course: nothing. If you discovered that your house, owned on freehold tenure, contained dangerous material, you would be lumbered with the bill (subject to any claim you might have against the builder / developer / person who sold it to you).
It is highly disingenuous to suggest (as is frequently done) that leasehold is the problem in this scenario. If anything, depending on the terms of the lease, the responsibility could be on the freeholder and not the leaseholder. The bottom line is that the money to fix things has to come from somewhere.
Leaseholds make perfect sense for flats, purely for building maintenance.
Hate seeing the trend of new build houses being leaseholds, that’s just cuntish and should be outlawed.
I currently have a leasehold and agree that it should be abolished. I’m sure it can work well with Freeholders that hold themselves to high standard. However, we are seeing more and more of developers with Freeholds that just farm out the management of it for the lowest price possible. The management company have no interest in fixing issues unless they really have to.
We have had exposed areas in our roof causing damp in multiple flats for almost 4 years now. For all of those 4 years, we have had to chase the Freehold and management company to get any progress. In theory, they are looking to put up scaffolding soon but they were so inept at getting that organised that they failed to ask the ground floor flat for access and turned up on a day that they weren’t in.
The problem with separating leasehold and freehold is the lack of ownership of the problem and the solution. When you live in the affected flats, you are encouraged to fix the problem in a timely manner. When you don’t, you are encouraged to pay as little as possible to keep the lights on.
The system is designed (probably unintentionally) to default the behaviour to reactive disaster control rather than proactive maintenance. An ounce of prevention is worth a pound of cure. It is [Conway’s Law](https://en.wikipedia.org/wiki/Conway%27s_law) in motion.
It should be banned for houses. 125 year lease on a new build? F that.
Property lawyer here.
Not a very well-considered article as to why to get rid of leasehold tenure. The article describes four problems:
1. Leaseholds are temporary. Many are for 999 years so aren’t in practice temporary. For those nearing expiry, leaseholders can extend their terms. Leaseholders also have a right to enfranchise and buy the freehold.
2. Cladding costs were passed on to leaseholders. That’s obviously unfortunate, but someone has to pay for it. If the homeowners owned the freehold, or a commonhold, they’d still have to pay for it. Freeholders have to consult before starting expensive capital works and leaseholders can go to the Tribunal if the costs are unreasonable. Some leaseholders will actually have been shielded from the costs, as the freeholder will have to pay instead.
3. Ground rents doubled. This is a failure by conveyancers to advise buyers about the consequences of a bad term in the lease, rather than a problem of leasehold. You can get exploitative small print in any contract. People should have been advised, and should have refused to buy.
4. Some landlords scalp through service charges. This is certainly sometimes the case. However, there is a lot of legislation which already protects leaseholders from excessive service charges, including a right to be consulted, a right to challenge the reasonableness of the fees, and a right to replace a management company.
Yes, they have to be enforced in the Tribunal, but that’s the case with any consumer protection which is ignored.
Abolishing leasehold tenure for residential property won’t solve that; it will just shift the problem elsewhere (eg charges to use estate roads instead of putting it in a service charge).
So, no, I don’t think this article explains why we need to get rid of leasehold. If it is felt that better protections are required, the government could appoint a body to investigate unfair service charge practices, so that leaseholders don’t have to go to the Tribunal themselves.
The English law of leaseholds is, I think, the most complicated part of English law by a reasonably wide margin. I now specialise in technology-related law including intellectual property and data protection. These are supposed to be complicated but they are as nothing compared with leasehold.
The law is like that because of repeated attempts to square the circle between protecting tenants and rewarding landlords and is the result of various kind lobbying and more or less misguided reforms by governments over a long time.
There was a time when I could literally say that I “wrote the book” on challenging service charges (up to third edition) but my life moved on.
However: to explain briefly the problem.
If you have a building divided into residential units (they might not be “flats”) , you have to find ways for the owners of the units to deal with problems affecting more than one of them. The roof, perhaps a staircase, perhaps surrounding land. All these may (or may not) be there.
The difficulty is that English law traditionally did not let you impose general financial and other “positive” obligations on subsequent owners of land (or indeed people you had no relationship with). You could impose a restrictive covenant (eg “no building a brewery”) but apart from some complicated oddities and exceptions and using only standard techniques and simplifying a lot (eg ignoring easements of fencing, enlargements of freeholds, estate management schemes….) you could not impose an obligation to build or maintain a brewery etc or indeed mend a roof.
But you **could** do this via a lease. So it became routine to make buildings divided into units governed by leaseholds rather than having each unit being owned as a freehold. Though that was possible (and indeed happens, and indeed makes some very complicated situations that go wrong). At the same time there were phases when selling houses (and therefore also flats etc) on long leases was a thing. It sometimes falls out of popularity, but it then comes back in fashion amongst developers and other people. You can perhaps charge a rent; you can perhaps get the property back after a period of time; you can perhaps abusively take cash in other ways.
Someone else then has to own the freehold. Or freeholds. There were places when local solicitors had upstairs own downstairs’s freehold and downstairs own upstairs’s freehold (two freeholds per house you see), to sort of mean each was each other’s landlord to make “fair play”. Do not do this.
I once dealt with a situation in which upstairs and downstairs flats each owned jointly the freeholds of upstairs and downstairs but in my case Mrs Downstairs had sold her flat but forgotten to sell her share of the upstairs flat and now could not be found. Do not do this.
But often the owner of the freehold is left with responsibilities (eg fixing the roof) since it seems to make sense to have one person who does that as a job. You don’t have to do it that way. I had a client once living in a building that had been split (in an higgledy-piggledy way) into four leaseholds. The freeholder had no obligations at all. Each tenant had bilateral covenants to help the other out with any property that involved the two (eg a roof). Ghastly.
So the freeholder then gets to charge money for those responsibilities (“service charges”) and then there’s lots of argument under s19 of the Landlord and Tenant Act 1985.
To protect tenants they have all sorts of rights: eg they can band together and buy the freehold of their building under the Leasehold Reform, Housing and Urban Development Act 1993 (owners of houses have rights of a similar kind under the Leasehold Reform Act 1967). But then you have a freehold company. What happens if tenants don’t all get on? What if they have different interests in the property, but all have one vote in the company. Eg one has a separate entrance on one side of the building and does not see why she should pay for maintenance of a lift she can’t use, but… etc. Sometimes the 1993 Act has to be used again.
And leases are time-limited. They are often created at stupidly short terms, eg 99 years or 120 years. It does not take long for these to become sufficiently short that it will become expensive to extend them or buy out the freehold. 999 years is better.
But note: the ball eventually has to be picked up again. I once was involved in a case involving a 16th century lease, made during Elizabeth I’s reign, where the tenant sought an extension because it was nearing the end of its term.
There is an alternative: commonhold. It sort of works. You have to set it up. Everyone has to want it (including mortgage lenders) if you want to convert to it. Commonholds are pretty rare.
My experience was that tenants would ask me: “can I do anything?” and I would respond that they could – maybe half a dozen different causes of action would be available; all of which might work; all of which were complicated (and therefore expensive) and problematic.
It would be great to see all that burned away, but I do not hold my breath.
Public sector landlords are not in any sense innocent either.
There is a staggering number of people here who a) don’t understand leaseholds and b) have completely forgotten that apartment blocks exist.
Every time this comes up – Charles and Andrew lobby to have the legislation quashed. They benefit massively from being slum landlords.
12 comments
Leasehold is still very much a thing in Northern Ireland also.
Leasehold can be a good thing. The problem is the system is being abused. It would be better to tackle the abuse rather than chuck out the whole system.
The fact that Freeholders take a cut of insurance premiums for commission is baffling to me. In the not too distant past premiums of flats could be made of 50%+ commission. Thankfully, the FCA are incredibly hot on it at the minute.
The dumbest thing on Reddit today.
Unless we get, can the government please pay off my mortgage but I still maintain legal ownership, as a follow up.
> The situation for leaseholders in blocks with dangerous cladding was dire. They were not only now having to live with the fear of a deadly building, they were also lumbered with huge bills to fix the problem.
What on Earth does this have to do with leasehold tenure?
Answer, of course: nothing. If you discovered that your house, owned on freehold tenure, contained dangerous material, you would be lumbered with the bill (subject to any claim you might have against the builder / developer / person who sold it to you).
It is highly disingenuous to suggest (as is frequently done) that leasehold is the problem in this scenario. If anything, depending on the terms of the lease, the responsibility could be on the freeholder and not the leaseholder. The bottom line is that the money to fix things has to come from somewhere.
Leaseholds make perfect sense for flats, purely for building maintenance.
Hate seeing the trend of new build houses being leaseholds, that’s just cuntish and should be outlawed.
I currently have a leasehold and agree that it should be abolished. I’m sure it can work well with Freeholders that hold themselves to high standard. However, we are seeing more and more of developers with Freeholds that just farm out the management of it for the lowest price possible. The management company have no interest in fixing issues unless they really have to.
We have had exposed areas in our roof causing damp in multiple flats for almost 4 years now. For all of those 4 years, we have had to chase the Freehold and management company to get any progress. In theory, they are looking to put up scaffolding soon but they were so inept at getting that organised that they failed to ask the ground floor flat for access and turned up on a day that they weren’t in.
The problem with separating leasehold and freehold is the lack of ownership of the problem and the solution. When you live in the affected flats, you are encouraged to fix the problem in a timely manner. When you don’t, you are encouraged to pay as little as possible to keep the lights on.
The system is designed (probably unintentionally) to default the behaviour to reactive disaster control rather than proactive maintenance. An ounce of prevention is worth a pound of cure. It is [Conway’s Law](https://en.wikipedia.org/wiki/Conway%27s_law) in motion.
It should be banned for houses. 125 year lease on a new build? F that.
Property lawyer here.
Not a very well-considered article as to why to get rid of leasehold tenure. The article describes four problems:
1. Leaseholds are temporary. Many are for 999 years so aren’t in practice temporary. For those nearing expiry, leaseholders can extend their terms. Leaseholders also have a right to enfranchise and buy the freehold.
2. Cladding costs were passed on to leaseholders. That’s obviously unfortunate, but someone has to pay for it. If the homeowners owned the freehold, or a commonhold, they’d still have to pay for it. Freeholders have to consult before starting expensive capital works and leaseholders can go to the Tribunal if the costs are unreasonable. Some leaseholders will actually have been shielded from the costs, as the freeholder will have to pay instead.
3. Ground rents doubled. This is a failure by conveyancers to advise buyers about the consequences of a bad term in the lease, rather than a problem of leasehold. You can get exploitative small print in any contract. People should have been advised, and should have refused to buy.
4. Some landlords scalp through service charges. This is certainly sometimes the case. However, there is a lot of legislation which already protects leaseholders from excessive service charges, including a right to be consulted, a right to challenge the reasonableness of the fees, and a right to replace a management company.
Yes, they have to be enforced in the Tribunal, but that’s the case with any consumer protection which is ignored.
Abolishing leasehold tenure for residential property won’t solve that; it will just shift the problem elsewhere (eg charges to use estate roads instead of putting it in a service charge).
So, no, I don’t think this article explains why we need to get rid of leasehold. If it is felt that better protections are required, the government could appoint a body to investigate unfair service charge practices, so that leaseholders don’t have to go to the Tribunal themselves.
The English law of leaseholds is, I think, the most complicated part of English law by a reasonably wide margin. I now specialise in technology-related law including intellectual property and data protection. These are supposed to be complicated but they are as nothing compared with leasehold.
The law is like that because of repeated attempts to square the circle between protecting tenants and rewarding landlords and is the result of various kind lobbying and more or less misguided reforms by governments over a long time.
There was a time when I could literally say that I “wrote the book” on challenging service charges (up to third edition) but my life moved on.
However: to explain briefly the problem.
If you have a building divided into residential units (they might not be “flats”) , you have to find ways for the owners of the units to deal with problems affecting more than one of them. The roof, perhaps a staircase, perhaps surrounding land. All these may (or may not) be there.
The difficulty is that English law traditionally did not let you impose general financial and other “positive” obligations on subsequent owners of land (or indeed people you had no relationship with). You could impose a restrictive covenant (eg “no building a brewery”) but apart from some complicated oddities and exceptions and using only standard techniques and simplifying a lot (eg ignoring easements of fencing, enlargements of freeholds, estate management schemes….) you could not impose an obligation to build or maintain a brewery etc or indeed mend a roof.
But you **could** do this via a lease. So it became routine to make buildings divided into units governed by leaseholds rather than having each unit being owned as a freehold. Though that was possible (and indeed happens, and indeed makes some very complicated situations that go wrong). At the same time there were phases when selling houses (and therefore also flats etc) on long leases was a thing. It sometimes falls out of popularity, but it then comes back in fashion amongst developers and other people. You can perhaps charge a rent; you can perhaps get the property back after a period of time; you can perhaps abusively take cash in other ways.
Someone else then has to own the freehold. Or freeholds. There were places when local solicitors had upstairs own downstairs’s freehold and downstairs own upstairs’s freehold (two freeholds per house you see), to sort of mean each was each other’s landlord to make “fair play”. Do not do this.
I once dealt with a situation in which upstairs and downstairs flats each owned jointly the freeholds of upstairs and downstairs but in my case Mrs Downstairs had sold her flat but forgotten to sell her share of the upstairs flat and now could not be found. Do not do this.
But often the owner of the freehold is left with responsibilities (eg fixing the roof) since it seems to make sense to have one person who does that as a job. You don’t have to do it that way. I had a client once living in a building that had been split (in an higgledy-piggledy way) into four leaseholds. The freeholder had no obligations at all. Each tenant had bilateral covenants to help the other out with any property that involved the two (eg a roof). Ghastly.
So the freeholder then gets to charge money for those responsibilities (“service charges”) and then there’s lots of argument under s19 of the Landlord and Tenant Act 1985.
To protect tenants they have all sorts of rights: eg they can band together and buy the freehold of their building under the Leasehold Reform, Housing and Urban Development Act 1993 (owners of houses have rights of a similar kind under the Leasehold Reform Act 1967). But then you have a freehold company. What happens if tenants don’t all get on? What if they have different interests in the property, but all have one vote in the company. Eg one has a separate entrance on one side of the building and does not see why she should pay for maintenance of a lift she can’t use, but… etc. Sometimes the 1993 Act has to be used again.
And leases are time-limited. They are often created at stupidly short terms, eg 99 years or 120 years. It does not take long for these to become sufficiently short that it will become expensive to extend them or buy out the freehold. 999 years is better.
But note: the ball eventually has to be picked up again. I once was involved in a case involving a 16th century lease, made during Elizabeth I’s reign, where the tenant sought an extension because it was nearing the end of its term.
There is an alternative: commonhold. It sort of works. You have to set it up. Everyone has to want it (including mortgage lenders) if you want to convert to it. Commonholds are pretty rare.
My experience was that tenants would ask me: “can I do anything?” and I would respond that they could – maybe half a dozen different causes of action would be available; all of which might work; all of which were complicated (and therefore expensive) and problematic.
It would be great to see all that burned away, but I do not hold my breath.
Public sector landlords are not in any sense innocent either.
There is a staggering number of people here who a) don’t understand leaseholds and b) have completely forgotten that apartment blocks exist.
Every time this comes up – Charles and Andrew lobby to have the legislation quashed. They benefit massively from being slum landlords.