Could leasehold reform cause a new Tory split?

Now that the Conservative party no longer has the issue of the EU over which to tear itself apart, is there something else that could replace it? Although perhaps not on the same scale as Europe, there is an issue which splits two of the party’s client groups: leasehold reform. On the one hand are the aspirant homeowners, the voters who turned to Mrs Thatcher thanks in part to the right to buy and the wider promotion of home-ownership. On the other hand is the landed interest, an amalgam of new and old money which owns the freeholds to many of the country’s blocks of flats and leasehold houses.

Today’s announcement of reforms, giving stronger rights to leaseholders would appear, on the face of it, to be a victory for the former group. Besides the already-announced ban on new leasehold houses and the elimination of ground rent on newly-built flats, Communities Secretary Robert Jenrick has held out a few carrots for existing leaseholders. Instead of the right to buy a 90 year lease extension with no ground rent – as flat-owners currently enjoy – they will have the right to 990 year extension with no ground rent. Owners of leasehold houses currently only enjoy the right to a 50 year lease extensions, so the change will have a bigger impact for them. These were changes recommended in the Law Commission’s recent review of legislation. 

Jenrick is also promising to reduce the cost of ‘enfranchisation’ – i.e. leaseholders buying the freehold of a building. In theory, leaseholders already have the right to do this, if they club together. Jenrick’s proposal is to make it a little cheaper by abolishing obscure concepts like ‘marriage value’ and ‘development value’ which drive up the cost of buying a freehold, and to introduce an online calculator to tell people what they will have to pay.

There are, however, considerable gaps in the proposals. It is extremely difficult for people to club together and buy the freehold of a block with, say, 100 flats – the leasehold owners, who may include many overseas investors, will first have to be traced. What the government could do, but hasn’t so far, is to oblige all freeholds to be transferred to not-for-profit companies, and allowing each leaseholder the individual right to buy a share of that company.

Moreover, there doesn’t seem to be anything new in the proposals to prevent leaseholders getting ripped off by freeholders who overcharge them for repairs and maintenance. As Emma Byrne wrote here last August, about being caught up in the cladding scandal, leaseholders can find themselves footing the bill for things which many might assume were more rightfully the responsibility of the freehold owners of a building. 

But a Conservative government is always likely to have its eye on the landed interest. Previous efforts at leasehold reform have tended to attract much squealing from this quarter, not least from Gerald Grosvenor, the late 6^th Duke of Westminster, who resigned from the party in 2011, complaining that the party had 'ideologically gone off the rails'. Not that freeholders are all of his social calibre: many leases are owned by housebuilding firms, offshore trusts and the like. Not all freeholders, it has to be said, are necessarily wealthier than the leaseholders.

Last year, Jenrick gave freeholders a huge gift when he granted many of them the right to add a couple of extra storeys to their buildings – something which will give leaseholders no benefit whatsoever, and may even cost them if in future the building develops problems with overloaded foundations. That change was made in an instant; reforms for the benefit of leaseholder, meanwhile, have been dragged out for years. 

Jenrick has a chance to do something for leaseholders, a group which ought to be natural Conservative voters and which are far more numerous than freeholders. On what has been published so far, however, reforms will stop a long way short of alleviating what, in many cases, is misery.