Did the Tories mean to ban all leaseholds in their manifesto?

    4 December 2019

    A few weeks ago I wrote here about the Conservative leasehold reforms and how they seemed in danger of being forgotten after they failed to appear in the Queen’s speech.   Since then, the Conservatives have published their manifesto which promises that the reforms will go ahead.   The manifesto states:

    “We will continue with our reforms to leasehold including implementing our ban on the sale of new leasehold homes, restricting ground rents to a peppercorn, and providing necessary mechanisms of redress for tenants.”

    There are two notable things about this paragraph.    Firstly, in what I presume is a mistake, the party appears to promise to abolish residential leasehold for good – which would be going far further than its previous policy has done.     I suspect that the word ‘homes’ is supposed to read ‘houses’ – unless the Tories really are planning to stop flats, too, being sold in leasehold form.    If it isn’t a mistake, it wouldn’t be such a bad idea.  Most countries seem to get by perfectly happily without leasehold.

    An alternative form of tenure called commonhold, where all leaseholds would jointly own the freehold of the building in which they live, was created by the Blair government in 2002.    It was, however, taken up by only a few developers and has since been undermined by George Osborne’s Help to Buy scheme, which excluded commonhold properties.   Have the drafters of the Tory manifesto made an error?       I have tried to find out via the Conservative press office but I have not received a reply.   Maybe they are too embarrassed to admit to having put out a manifesto with a blooper in it.

    The second thing to note is that the manifesto makes no reference at all to what was previously part of the Tories’ leasehold reforms – it holds out no promise to make it easier for owners of existing leasehold properties to buy a share of their freehold.    While most leaseholders do theoretically have the right to buy a share of their freehold – assuming they can form a majority with other leaseholders in the block – in practice it can be very difficult.   Firstly, it requires fellow leaseholders to track each other down and speak to each other – not easy when the leaseholders in many blocks are buy to let investors scattered around the world.    Secondly, leaseholders wanting to exercise their right have to pay the freeholder’s legal costs.   If a reluctant freeholder offers an unrealistic price and refuses to budge, costs can quickly escalate.

    On the other hand, some of the proposals put forward by campaigners – such as limiting the price of a freehold to a certain multiple of annual ground rent – have the problem of being open to legal challenge. It would be hard to accuse Corbyn and McDonnell of expropriating private property at below market value (as Labour is planning to do with shares of utility companies) while acting to try to deprive freehold investors of their assets.

    Either way, it means that there is little in the Conservative manifesto to help existing leaseholders, some who have complained of being stuck in unsaleable properties with ground rents which double every 10 years.    That will come as severe disappointment to a group of natural Tory supporters: people who saved hard to afford to get on the housing ladder but who now find themselves trapped on the bottom rung thanks to onerous leases.    They might have thought they had become homeowners yet the reality is that, thanks to the leasehold model of ownership,  the vast majority of flat-owners in England and Wales are mere tenants.