Leasehold reform – will it make any difference?

Reform slide

Well, the consultation is over…

Sajidjavid tweet 21 09 17

Six thousand is significantly up on the 956 responses in 1998, which seem to me to have been largely ignored in favour of predetermined notions of what was needed to reform the sharper edges of leasehold tenure, despite the then government’s clear view, always worth repeating:

“…leasehold tenure is almost unique to England and Wales. It has its roots in the feudal system and gives great powers and privileges to landowners. It is totally unsuited to the society of the twentieth – yet alone the twenty-first – centuryand The Government believes the leasehold system is fundamentally flawed.

This was a British government openly going on record that many of its citizens were uniquely being subjected to a “totally unsuited” form of feudal tenure.

Is this not the definition of scandalous?

You might be forgiven for thinking that, almost twenty years on, the scandal is to be eradicated. Especially when yet another government senior minister feels compelled to say, “I don’t see how we can look the other way while these practically feudal practices persist”.

This time, surely, the government would move without ambiguity of purpose to eradicate a long admitted, totally unsuited, fundamentally flawed, feudal system? Of course they would, no?

Sheep

I fear many hopes may be dashed. I can’t find a single clear cut suggestion to abolish leasehold. I may have missed it?

Responses

I thought I would try to pull the strands together as at 2017 to assist keep an eye on the overall picture as things progress. I want to comment on a sample of suggestions by various major actors in the ‘field’:-

But before moving on, it is worth calling out one argument often employed when objecting to meaningful reform of residential leasehold: the “expropriation” defense.

The expropriation defense essentially argues that freeholders have property rights under the feudal leasehold system. This defense is never linked to terms such as ‘unfair’, unjust, or ‘unsuited’, let alone feudal. Apparently, as long as something is legal, however malodorous to others’ justice, this is sufficient? I think it may come back to the application of terminology such as ‘Landlord’ to an investor.

How about making ‘Out of Pocket’ not ‘Loss of Profit’ the legal test of expropriation?

‘Out of Pocket’ not ‘Loss of Profit’

 

In other words, the ‘right to a profit’ is not a legitimate test to apply when abolishing an unsuitable feudalistic form of tenure. If a freeholder faced with compulsory commonhold conversion cannot show that they would be left out of pocket over their original investment sum (deducting the value realised for the original leases), no expropriation applies. No ‘reversion value, no marriage value, no ground rent capitalisation. If the freeholder at least made back their investment, end of issue. Nobody ever suggests leaseholders have a right to profit from their far more significant collective investment. Nothing unfair. Merely a balancing of justice?

 

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