Leaseholds – a hangover from Britain’s feudal system – have been in the news virtually non-stop since the ground rents scandal broke out a few years ago, and reports show leaseholders have been left unable to sell or remortgage their homes due to unsafe or untested cladding has only added more fuel to the fire.
Most recently, the Competitions and Markets Authority found major housebuilders guilty of mis-selling leasehold homes while in January Law Commission has come out with its own proposals to make it cheaper and easier for people to extend their lease or buy the freehold.
Blackstock Consulting has brought together Mary-Anne Bowring, managing director of residential property experts Ringley, and Sebastian O’Kelly, founder of the Leasehold Knowledge Partnership, to discuss the future of leaseholds or whether we should move to commonhold instead.
Along with host Andrew Teacher, founder of Blackstock Consulting, the two discussed the challenges of resetting the ground rent system. Bowring pointed out that the challenge is finding ways other than ground rents that would “remunerate a professional landlord for taking the risk of holding that building.”
O’Kelly summarised his stance, saying that “the problem with leasehold is we reform it every 15 years or so and it still doesn’t work. Maybe the solution is to stop creating more long tenancies as flats.”
O’Kelly added: “We should be realistic, people when they live together are going to squabble, and this is just as much in commonhold as it is in leasehold. What you don’t have in commonhold are the third party freeholder whose investment is 1% of the value of the block of flats. A person with a minimal financial stake has a preponderance of power. ”
This tied into the central issue raised with a commonhold system, which is who would have responsibility for ensuring that a building is kept in good condition.
When pressed for a solution, O’Kelly pointed to his aim of building a database of every apartment in the country, “so you can look up and see the lease, see what the ground rent terms are, and see how many years are left on the lease.”
Bowring felt that technology has a vital role to play, as it can help deal with the “complexity of understanding the array” of property transactions. But ultimately managing agents are still key because they are “managing people in the building”. Managing the building is the “easy bit” she added.