4 May 2023

Leaseholders are trapped in property purgatory


It’s over 100 years since the Scottish Unionist MP Noel Skelton coined the term ‘property-owning democracy’ – yet for young people, the dream of home-ownership feels like something from a far-off future that may never come.

One-quarter of 18 to 35-year-olds are considering leaving the country to own a home. Even those who do mange to scramble together a deposit may find themselves in the property equivalent of purgatory – lease-holding.

Leaseholders do not even own their home, but have a saleable right to occupy it. Once the leasehold period concludes ownership returns to the landlord.

It may sound straightforward, but the system is riddled with opaque rules. All too often Brits anxious to call their home their castle are seduced into this quasi-manorial arrangement, only to have their hopes of security shattered.

A new campaign ‘Commonhold Now’, calling for a replacement of leasehold tenancies with a fairer system, was launched earlier this year by Joe Douglas a 30-something Londoner who bought a leasehold flat using the Help to Buy scheme in 2015.

‘All I want to do is sell it and it turns out that may never be possible due to the actions of others. Nor can I rent it out profitably due to spiralling service charges and insurance. I’m currently paying £1800 a year for buildings insurance on a 1-bed flat while the freeholder pockets an undisclosed commission,’ he says.

Nor is Mr Douglas is the only leaseholder that has been hung out to dry. Indeed, the tenants of the 5 million leasehold properties across England and Wales have essentially been saddled with mortgage debt in exchange for a glorified rental deal with uncapped service charges that are often beyond their control. Douglas’ fellow campaigner Harry Scoffin told me he has heard from leaseholders who have been forced to seek permission, and pay a service charge, simply to repaint their front door. His mother has to dish out an astonishing £32,000 a year in service charges.

Thousands of leaseholders are trapped in homes they cannot afford to stay in, but are left with no choice given the difficulty of selling a property with under 80 years left on the lease.

It’s no surprise that 62% of respondents to a 2018 survey of leaseholders felt they were mis-sold their property, and 93% ruled out ever making the same mistake again.

Housing Secretary Michael Gove has described leaseholds as ‘outdated’ and ‘feudal’, and his Labour counterpart Lisa Nandy has echoed his sentiments. Yet both major parties have avoided any promises to abolish the entire system, with the Government’s new Ground Rent Act simply banning ‘ground rents’ for most new residential leases in England and Wales.

It doesn’t have to be this way. England and Wales are international outliers in keeping this unjust system alive. Most other developed countries use commonhold or ‘strata titles’ for multi-occupancy buildings, in which common holders own their flats and a share of any common parts. In 2018 a Law Commission consultation recommended that England and Wales adopt the Australian ‘strata title’ approach which has been thriving since the 1960s, but their advice is yet to be heeded.

Once again, the inertia of Westminster is out of step with the country’s thirst for change. The only recent publicly available polling on the issue, which was not commissioned by any particular sector evidenced solid public backing for abolishing the practice. That 43% of respondents said they ‘did not know’ their opinion suggests the issue’s lack of visibility among those with no experience or second-hand horror stories of the issue.

Given that its votes are more or less secured in the scores of metropolitan constituencies where leasehold flats are more common, Labour has less of an incentive to move on the issue.

But Starmer’s silence gives Rishi Sunak an opportunity to persuade the 10m voters who are affected by leaseholds. It would surely be a more sensible step than attempting to relaunch Help to Buy as inflation soars and would help to detoxify the bottom rung of the property ladder as the party scrambles for young supporters.

Margaret Thatcher used her final days in office to propose a draft bill which would have replaced leasehold with commonhold, and both John Major and Tony Blair initially made similar pledges.

As far back as 1884, Lord Randolph Churchill admonished the system which he said permitted freeholder landlords to ‘exercise the most despotic power over every individual who reside[s] on his property’. It is high time the UK’s ruling party brushed up on its own history, and dusted off its shelved plans to quash the leasehold scam once and for all.

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Georgia Gilholy is a contributor for Young Voices UK & Campus Associate for the Committee For Accuracy in Middle East Reporting & Analysis.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.