Commonhold is the ‘only way forward’ – but how?

Piecemeal reform has helped leaseholders, but the government wants to reinvigorate commonhold as an alternative; however, making commonhold mainstream is not straightforward.

There was a particularly arresting moment at Tuesday’s Westminster Legal Policy Forum conference on leasehold reform. It came when attendees were read a letter sent by a leaseholder to consultant Shula Rich ahead of a drop-in advice session.

Shula Rich read:

“I’ve been billed for £7,000, having paid £5,000.

“I can’t afford to go to court. It’s killing me.

“I’ve been battling with the agent for years.

“I’ve paid all my service charges as the lawyer said I would be in breach of contract.

“The damp continues to seep through.

“The lawyer said I could pay in instalments, but I’m cleaned out.

“I cannot sell because of the dispute.”

Rich told the conference the struggles highlighted in the letter are becoming increasingly common.

The government pledged in a 2017 housing white paper to improve fairness in leasehold. Reforms so far include legislation setting ground rents to zero for new leases.

Leaseholders now know someone cares and more are aware of the issues concerning leaseholds, Rich said, but it remains a poor system. The only way forward, she said, is commonhold.

A commonhold allows a person to own a freehold flat and be a member of the company that owns and manages the building’s shared areas and structures. But this change has struggled to gain traction since it was introduced in 2002. After asking the Law Commission to come up with reforms to reinvigorate commonhold as a workable alternative to leasehold, the government consulted on proposals last year.

Not everyone is convinced that commonhold is the answer, however.

One audience member at the conference said she failed to see how things would improve:

“The controls are going to be better, but for property owners the bills are not going to go away.

“The cost of maintaining the development and land is not going to go away.

“There is still a need for compliance in these buildings, whether it’s flick-testing every month (checking the emergency lighting), there is always going to be a bill regardless of what tenure you’re in.

“Hand out these contracts to private companies and they charge the earth. [Commonhold] is still going to create issues for homeowners.”

Harry Scoffin, co-founder of campaign group Commonhold Now, replied that leaseholders are paying far more through service charges than the services cost landlords.

Scoffin said:

“Businesses are not charities. They are there to make a profit.

“Leaseholders paying the bills [have] the majority financial value in these blocks.

“People who are paying these bills, living in these properties, who are having their own resale values trashed – give them the control.

“If people are ripping people off, you fire them. No one is saying “abolish service charges”.

“What I resent is being locked into providers you cannot remove.”

Beth Rudolf, director of delivery at the Conveyancing Association, said:

“The issue I have particularly in leasehold is if someone does not want to pay, other leaseholders have to foot the bill.”

However, commonhold regulations enable rent to be diverted from the tenancy agreement.

Rudolf added:

“How many leasehold flats are let out through the private rental sector and the owners are investors from other countries?

“That rent can be diverted to pay for the commonhold service charge.”

Further reforms promoting commonhold are expected in November’s king’s speech. But that offers little comfort to leaseholders right now.

Kindly shared by The Law Society Gazette