UK government must learn from Scotland’s mistakes when pursuing leasehold reform – Property Industry Eye

In December 2022, Director of the RFA Mick Platt wrote for Property Industry Eye urging the Government to learn from Scotland’s mistakes as it pursued reforms in the leasehold sector. The original piece can be read here.

Since a thumping general election win in 2019, the Conservative government has pursued a reckless war with freeholders in a bid to phase out the majority of such properties in England.

Its strategy, which has seemingly only been adopted to win political capital, will remove professional oversight in apartment blocks, putting residents’ safety at risk, whilst significantly increasing the number of dilapidated buildings.

You only have to look at the current situation north of the border to see this first hand.

Scotland has never had an equivalent to the role a freeholder plays in relation to flats in England, instead preferring a residential-led model of ownership akin to commonhold. Within this system, residents have control of managing individual flats and, collectively, apartment blocks.

Although there is certainly a case for using this model in smaller developments – as residents will likely have to resolve fewer problems amongst fewer people – it is completely unsuitable in more complex multi-storey blocks where residents are unfamiliar with one another. And unlike their counterparts in England, Scottish apartment owners don’t have the luxury of being able to choose their preferred system.

In Scotland, residents must raise funds from others in the block to carry out repairs, regardless of which individual apartments are affected. The situation is made more complicated by the fact that some residents do not live in the building, which is increasingly common as private rented levels increase in flatted properties, whilst others may dispute which parts of the buildings need communal funding, making effective property management almost impossible. For essential repairs to be actioned, there must be unanimous consent among residents. However, without a third party as in leasehold developments, neighbours are forced into a position in which they are having to take legal action against each other to ensure repairs are carried out.

Roman law sums up the situation as: “Communio est mater rixarum”, meaning “co ownership is the mother of disputes.” The issues outlined above, combined with a lack of a maintenance culture and increasing levels of low-income owner-occupation mean that what would otherwise be straightforward repairs for an independent freeholder to solve are rarely addressed. This has been reflected by reports suggesting that 80% of Scotland’s apartments need some form of repair, with 50% in ‘critical disrepair’.

Douglas Robertson, a recently retired Professor of Housing at Stirling University, has said that it’s not just old buildings being neglected. Modern blocks are also falling into disrepair due to residents in larger apartment blocks failing to pay managing agents to maintain their properties.

He argues that under the residential-led model of ownership in Scotland, the assumption is that blocks are inhabited by responsible owner-occupiers, who cooperate with their fellow residents and pay agents. Predictably, this hasn’t come to fruition because, as Robertson puts it, “society does not appear to consider the on-going maintenance of property a requirement of ownership.” In 2018, a Tenement Maintenance Working Group (TMWG), was set up, comprised of MSPs, surveyors, factors and other parties to find “stabilising solutions to aid, assist and compel owners of tenement properties to maintain their buildings”.

The very fact a TMWG had to be set up in Scotland casts doubt over the tangible benefits of phasing out the leasehold system in England and diminishing the freedom of choice residents must pick their preferred system. The disregard of complex blocks must not be repeated in England for the sake of short-term political will, especially given the current lack of suitable housing stock.

This situation in Scotland highlights the crucial stewardship role professional freeholders play, providing oversight and coordination, whilst removing the burden on individual leaseholders to solve issues themselves, which often requires funds, time and expertise.

This has never been more evident than throughout the building safety crisis following the Grenfell Tower tragedy in 2017. It is professional freeholders who are taking the lead in addressing building safety issues caused by the Government’s failed building regulations, despite having played no role in the construction of these unsafe developments. But how these issues could be addressed if there was no such thing as freeholders or if England moved to a commonhold system is never explained by Government.

As the UK government continues to pursue leasehold reform, its critical to learn from the problems in Scotland. In large apartment blocks, professional freeholders maintain a central role in keeping leaseholders safe. Alternative commonhold systems risk an exponential rise in the number of dilapidated buildings, significantly impacting residents’ quality of life.

Ultimately, Whitehall’s war with freeholders is counterproductive and does nothing to solve the building safety crisis.

What’s more, I suspect that once this war’s consequences are laid bare for all to see, it won’t prove that electorally popular either.