Removing leasehold won’t unshackle homeowners, it will only pile further legal and financial responsibilities on residents

In a recent article for ConservativeHome, Conservative MP Nickie Aiken argued that homeowners must be “unshackled” from the “tyranny” of the leasehold system, citing inflated service charges and lack of control as a reason for ending the form of tenure used by 4.9 million residents across the UK.

As Director of the Residential Freehold Association, I can safely say that removing the leasehold system may grant residents more control, but it certainly won’t reduce the costs of services.

The narrative peddled by the Government and opposition is that under the leasehold system, all building owners take money from leaseholders for nothing, charge excessive fees, and fail to deliver quality services that benefit residents.

The assumption stemming from this false narrative is that under a commonhold system, resident’s service charges will be reduced. This is simply not true.

Yes, a commonhold system does allow residents to have direct say in the management of a building, but buildings age no matter what type of ownership structure is in place – you can’t stop lifts breaking down by converting or by removing the system of tenure.

In 2020, The Property Institute used data from 250,000 leaseholders in blocks of 10 or more flats with either a third-party landlord or a form of owner/occupier management group such as a Right to Manage group (RTM) or Resident Management Company (RMC). Research found that there was little difference in cost between the two structures – the third- party landlord cost was marginally lower at £2,140 per year versus the RMC/RTM cost of £2,190 per year.

Put simply, the removal of leasehold won’t lead to reduced service charges, it will only give residents a greater say over the appointment of service providers and with that a greater level of personal liability.

However, whether greater control of services is beneficial for residents is another matter. In most cases, especially in large and complex buildings, professional freeholders are best placed to take responsibility for the safety and maintenance of large and complex apartment blocks, given their broad commercial, legal and building management expertise, and the scale at which they can acquire services such as insurance.

Were these buildings the responsibility of leaseholders – who in general have less expertise, experience and time for managing complex buildings (understandably, given they are not employed to manage buildings) – then it is less likely that necessary repairs would be delivered effectively, both in terms of speed and value for money.

Removing the leasehold system would not only make residents responsible for significant and complicated work but would likely lead to a decline in the quality of high-density housing, as seen in Scotland where 50 per cent of all properties have found to be in critical disrepair.

In her piece, Ms Aiken also references the Law Commission’s 2020 report into leasehold home ownership. Crucially, she fails to mention that the report recognises that a commonhold system does not provide a viable alternative to leasehold and that there is a “good legal reason” for leasehold in ensuring the “effective management” of such buildings.

What’s more, removing leasehold isn’t politically popular.

The Government’s own research  serves as a perfect example, showing that the vast majority of people have a positive or neutral view of the current leasehold system. This aligns with independent polling from JL Partners, which reveals only 18% of people would be comfortable assuming the legal and financial liabilities for managing their building, as they would under a commonhold system.

It’s important to recognise that, as in any industry, there are a minority of rogue actors. But the Government’s focus should be on regulating the sector to eliminate these actors, rather than abolishing a perfectly good system of property tenure.

In short, the Government must get a grip of the fact that removing the leasehold system will not reduce service charges, it will only make individual residents financially and legally liable for complex issues. I urge the Government to draw on their own research, the Law Commission’s findings and public will, before committing to remove a system that works well for the vast majority of leaseholders across England and Wales.