May leaseholds rest in peace

By Melanie Bien

I have never understood how leaseholds can be justified. As a naive first-time buyer in London, I foolishly started out with the intention of buying a freehold property. But when it comes to flats, you quickly realise that it just isn't possible. Almost without exception, all properties come with leases of varying lengths. It came as quite a shock to the system but you have to accept it as a fact of life and get on with it if you want to get a foot on the first rung of the property ladder.

I have never understood how leaseholds can be justified. As a naive first-time buyer in London, I foolishly started out with the intention of buying a freehold property. But when it comes to flats, you quickly realise that it just isn't possible. Almost without exception, all properties come with leases of varying lengths. It came as quite a shock to the system but you have to accept it as a fact of life and get on with it if you want to get a foot on the first rung of the property ladder.

But now, at last, there are some long overdue reforms in the pipeline. The Government released details of its draft Commonhold and Leasehold Reform Bill last week. This contains a radical reform of property ownership which could eventually replace the discredited leasehold system.

It proposes a system of commonhold that enables a group of people jointly to own the freehold of their home, creating a management company to run the communal areas. There is also a reform which seeks to simplify the law under which people can jointly buy the freehold, and there are also new rights for leaseholders who cannot or choose not to buy the freehold but want to take over the management of their building.

These are important developments. Anyone who owns the leasehold of their flat will have run the gauntlet of dealing with a management company which sets the service charge for providing the cleaning and upkeep of communal areas. Most are probably okay - I know mine is - but there have been high-profile cases of leaseholders being forced to take their management company to court over exorbitant service charges. These reforms are aimed at helping leaseholders tackle those "incompetent, exploitative or abusive" landlords.

As well as getting rid of the landlord with a monopoly over the supply of services and maintenance, there are numerous advantages of commonhold above leasehold. Under commonhold, flat owners have all the rights in the property while there is no lease, which diminishes in value over the years.

Getting rid of archaic leaseholds also means that flat owners get more freedom. Many leases have outdated restrictions; I am not allowed to hang anything out of the window, not allowed to put up a satellite dish and not allowed to even have a window box. Other leases have included clauses such as no children under 12 allowed or no sub-letting without permission and a licence from the freeholder.

Other proposed reforms include extending the definition of service charges to cover improvements, extending the need for landlords to consult leaseholders on big works to a property, requiring landlords to provide clear information on how their service charges are calculated and how that money is spent, and reforms to ground rent charges, which would not be payable without a written demand.

It is unlikely that leasehold will be phased out completely. But it is likely that as the attractions of commonhold become obvious, leasehold will decline. Common sense dictates that it should.

 

m.bien@independent.co.uk

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