Apart from impoverishing tenants through changes to the Local Housing Allowance, the Government has made it clear that it is no part of its philosophy to interfere with the operation of the private rented sector market, by regulation or by other means.
Today’s report from the London Assembly’s Housing and Planning Committee, following an inquiry led by a Conservative member, shows that the Government also has no intention of intervening to help improve the operation of the leasehold management sector.
The report’s rather timid conclusions, which do not seem to address the serious problems raised during the consultation, reflect the knowledge that the Government will not act in any more fundamental way. Evidently they believe that the existence of the Leasehold Valuation Tribunal gives the leaseholder an opportunity for redress and, as some leaseholders have made successful challenges, there is balance in the system.
The Assembly report concludes that: “There is therefore little realistic prospect that new regulation of the leasehold sector might be forthcoming.” And it quotes the Housing Minister as saying that the Government “have considered the issue of regulation in the leasehold management sector and believe that the current legislative framework can deliver that balance, if matched by an increasingly pro-active and positive approach by the professionals in the sector.”
The evidence of the report is that fairer and more accessible regulation is needed. There are 500,000 leaseholders in London, mostly with private landlords but many also with council or housing association landlords, paying an estimated annual service charge between them of over half a billion pounds. Social landlords get a lot of complaints about how charges are calculated, and the charge of a lack of transparency is levelled at all landlords. In the private sector there are many complaints that charges are inflated through devices that benefit the freeholder and/or the managing agent. The report includes examples of huge leaps in service charges, excessive agents’ fees, and managing agents which are effectively the same company as the freeholder. It comments on the extraordinary position that anyone can become a managing agent with no qualifications and no expertise. It also notes specific issues in the retirement leasehold sector and in the shared ownership sector.
As always, the better freeholders and agents are prepared to be more transparent but many landlords are intransigent about providing the information that leaseholders need. Leaseholders find the LVT process cumbersome, inaccessible and expensive. Many have to represent themselves against landlord experts; they often feel at a disadvantage and, according to the report, would prefer a compulsory mediation process before formal reference to the LVT.
The report considers the impact of the Labour’s attempt to reform the system in the 2002 Act (Commonhold and Leasehold Reform Act). This legislation introduced the ‘Right to Manage’ and Commonhold. The RTM is rarely used in London because blocks often include a significant share of absentee leaseholders and there is a 75% threshold before the RTM can be applied.
Commonhold is still little understood let alone acted upon. It combines the security of freehold ownership with management covenants which apply to each owner of interdependent properties. The Act made provision for Commonhold in new developments and also for the conversion of existing leasehold arrangements. A decade later, Commonhold is unfortunately still not common. The report notes that one policy option would be to give planning permissions only for freeholds or Commonholds, gradually excluding the option of leasehold over time.
More than a decade ago, in the Government’s consultation on the proposed reforms, the Minister Hilary Armstrong said that “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 – century.”
Not enough has changed, as this report shows. And if the Tories are unwilling to do anything, Labour should say that it is willing to finish what it started – and show that it is on the side of the squeezed middle.
* with apologies to Aaron Copland, who named Fanfare for the Common Man in honour of Henry A Wallace, and to Emerson Lake and Palmer, Bob Dylan and others who adapted it.