Leaseholders are calling for feudal system to be abolished, but what will Labour actually change?
Photo: Alex Turner
“This was supposed to be my first safe, comfortable home. Growing up, I lived in extreme poverty in homes that had collapsing roofs, floors and ceilings… I have fought tooth and nail to be able to afford my own home, I’m now reliving my childhood nightmare once again.”
This was an email I received from a Bristol leaseholder after I’d written an article about residents of Orchard House in Brislington who were ‘abandoned’ by the owner of their building.
Sarah*, who wanted to remain anonymous for fear that identifying her building would make it even harder to sell her flat, tells me how after two years trying to get leaks fixed, she believes leasehold needs to be abolished.
The feudal leasehold system, where you buy a property but not the land it sits on, means you have a long-term lease and must pay ground rent and service charges to the freeholder. The system has been criticised for leaving leaseholders powerless and saddled with rising costs, especially during the building safety crisis after Grenfell.
From being trapped in a web of fees and bureaucracy if you want to sell your property, extend your lease or buy your freehold; to not having fire safety defects fixed, rising service charges and being beholden to unaccountable management companies – the list of issues facing leaseholders in the UK goes on. In the midst of Bristol’s rental crisis, where for some, home ownership represents an escape route out of insecurity and exploitation, leasehold offers false promises.
But now it appears change is on the horizon. In July’s King’s Speech, the new Labour government announced it would “take steps to end the feudal leasehold system”, in what campaigners described as a momentous day for leaseholders.
But how might the government do this? And what difference will it actually make?
Leasehold vs commonhold
The government has set out plans to reform the leasehold system by making it easier and cheaper to extend your lease or buy your freehold, tackling unregulated and unaffordable ground rents, removing the threat of forfeiture and banning the sale of new leasehold flats so commonhold becomes the default tenure.
Katie Kendrick, who founded the National Leasehold Campaign (NLC), told the Cable: “Today is a momentous day for leaseholders […] It feels like meaningful change is eventually going to be delivered.”
People are becoming mentally unwell, because they’re trapped in horrible financial situations
Under commonhold, you own the freehold of your home and join a commonhold or residents’ association that owns and manages common parts of the property. The idea is that you own your home forever rather than having a long-term lease, and you have more control over the management of the building.
Commonhold is used widely elsewhere in the world. In England and Wales it was introduced in 2004, but has barely been used. In 2020, the Law Commission (LC) made a set of recommendations for how to make commonhold work and how the five million current leaseholders in England and Wales could convert more easily.
These changes could offer a way out of the leasehold system.
Rising costs: Ground rents and service charges
Emma* regrets buying her flat on the edge of north Bristol back in 2015. “When I bought this, I wasn’t aware of the pitfalls of trying to sell a leasehold.”
Now, as her service charge and ground rent are rising, Emma is keen to sell. But the rising costs are putting potential buyers off.
“The fees are going up, but for what?… The service charge is already at £1700. Ground rent is £370.” She says her service charge was £700 and ground rent £275 when she first moved in, adding that the management company charges extra for basic services like setting up a direct debit or sending a letter.
“If I can’t pay the fees, they can forfeit my lease, chuck me out,” she says. “I’d lose everything I’ve put into my mortgage.
“You’re paying a mortgage but you’re actually a renter. You’ve got to pay all these fees you’ve got no control over. People are becoming mentally unwell, because they’re trapped in horrible financial situations. I’m not there yet but I’m getting there.”
In 2022, ground rent was banned for new build leasehold properties, but capping ground rents was not included in the Leasehold and Freehold Act (LFA), which passed just before July’s election. Now Labour is saying it will “regulate ground rents for existing leaseholders”.
Currently, anyone paying more than £250 a year of ground rent will automatically forfeit their property with no appeal if they fail to pay it. Kendrick says this issue is making mortgages harder.
Now, the government has committed to ”ending the injustice of forfeiture so leaseholders are protected against losing savings they have in their home for potentially small unpaid debts”.
Another proposal would make it easier to buy or extend the lease on a freehold – also known as enfranchisement. Labour says it will enact the recommendations from the Law Commission (LC), which include new rights to extend your lease for a term of 990 years with no ongoing ground rent, or “buy out” the ground rent under your lease without also having to extend.
The LC also recommends the government streamlines the enfranchisement process, prescribing the rate which dictates how much it costs to extend your lease, a common source of dispute, and protecting leaseholders from paying freeholders’ legal fees if the case goes to a tribunal.
Unaccountable management companies
Sarah bought her flat in 2022, and immediately had serious issues. “Almost instantly there were leaks… It really turned my life upside down. I had to temporarily move out, I was off work because the stress was too much.”
Inaction from the freeholder meant Sarah had to report the issue to the council, who declared her flat a severe health hazard. Only after the council threatened to take the freeholder to court were the leaks fixed, two years after Sarah moved in.
After months of worrying that the costs of fixing the roof would fall on her, Sarah’s service charge bill increased from £1,200 to £1,700 to factor in the repairs. “So we have had to pay for the roof even though I moved into this ‘new build’ property less than two years ago,” she says, adding that she plans to fight the increase.
Emma describes an unhelpful lack of transparency and accountability from management companies, who are “making a hell of a lot of profit, while we’re getting poorer”.
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Join the Cable todayFor years, she says, different companies have failed to fix a long list of issues in her home, from the front door to the roof being vulnerable to wind – which once saw wood, tiles and panels from the roof ripped off by a storm, causing damage to cars below.
The government says it will reform ‘Right to Manage’ to make it easier for leaseholders to take over management of their buildings.
But not everyone has the time or energy to get involved in managing their building. And notably missing from the King’s Speech were plans to regulate property agents. Kendrick says this was dropped from the LFA too.
What about building safety?
Also missing from the King’s Speech was building safety – another minefield in this absurd system.
Despite reforms prompted by Grenfell that were supposed to make tower blocks safe and shield leaseholders from footing the bill, there are remediation works outstanding up and down the country.
Recently, I reported how residents of Orchard House got a remediation order in the hope it would spur their freeholder into tackling fire safety issues that had been uncovered years before.
This failed to make any difference: the six-month deadline for action passed in June and the freeholder claims there is no money to pay for the works. Now dozens of leaseholders are stuck at Orchard House, unable to sell or remortgage their flats while they worry about their safety.
Labour’s manifesto pledged to “take decisive action to improve building safety” and “review how to better protect leaseholders from costs and take steps to accelerate the pace of remediation across the country”.
But campaign group End our Cladding Scandal said it was “very disappointed” there was no mention of the building safety crisis in the King’s speech and “not even an inkling of what Labour’s plans are to meet their manifesto commitments”. They said urgent action is needed after the previous government’s failure to fix the issue.
It appears leaseholders must keep waiting for action on building safety. And although Labour will bring a draft Leasehold and Commonhold Reform Bill, reforms won’t go through parliament until late 2025 or 2026.
In cities like Bristol where the rental market is so unaffordable and insecure, there can be no delay in turning the feudal leasehold system on its head.
