The popular clamour for the abolition of what has been dubbed ‘feudal’ leasehold risks unintended consequences.
At a business networking event recently I was chatting with a solicitor who specialises in all things leasehold – extensions, enfranchisement, Right to Manage as well as conveyancing.
While we all welcome proper regulation of unscrupulous landlords and managing agents, his view was that the tools were already in place to safeguard lessees and that dumping leasehold altogether for commonhold would have unwelcome consequences.
For a start, he reminded me that Commonhold has been available to developers of new blocks since 1992 but has only been taken up for 30 or so blocks. Why is this? Aside of the nightmare of living in a block in which management decisions are made/vetoed by a committee of residents, he suggested two reasons:
- Without a landlord underwriting the risk of failing to maintain blocks properly (if for example some of the commonholders dispute the necessity of works or won’t/can’t pay) there is no guarantee for anyone that the block will be sufficiently maintained
- Mortgagees and insurers don’t like this model as a result and either won’t get involved or will charge a premium
As a result, commonhold flats become harder to insure, sell or remortgage with higher costs, likely creating a two-tier market with many residents trapped.
And would residents be any better off managing their own blocks? Arguably not since unless they have the time and skills to manage their properties themselves they will likely still need to engage a managing agent, just like a landlord would.
Leaseholders can already extend their leases, enfranchise (purchase their freehold) – we have helped hundreds – and exercise the Right to Manage. Perhaps this is why there are only a handful of Commonhold blocks, despite the legislation having been available over 30 years.
So be careful what you wish for….
Lease Plus 90 