Gove cuts through the jungle of leasehold interests

Accused variously of being a “snake” and a “betrayer”, Michael Gove has not always been popular with his ex-boss (Boris Johnson) or even the public. However, he has always been an effective enforcer and reformer. 

Only someone with the equanimity to respond to his sacking as Housing Minister (July 2022) with the response that he’s going to "Have a glass of wine and a slice of salami and see what tomorrow brings" could execute the plan to get rid of leasehold interests before the end of parliament.

Today though, most houseowners have enfranchised their leases and developers of flats invariably now pass on their freehold interest (once all units have been sold) to the management company, which then shares this with all the residents of the development.

Large sum to pay into the Crown’s coffers

But what happens to the notable exceptions to the Leasehold Reform Act such as The Crown Estate etc., where leasehold interests still persist, and enfranchisement is barred? When extensions are granted to existing leases, invariably they are accompanied by draconian ground rent provisions, which can sometimes rise to 1/30th of the freehold value.  While this may be in 20 – 30 years’ time, it’s a burden for the lessee, who has to grub up a large sum to pay into the Crown’s coffers. Let’s face it, the sovereign’s public estate isn’t exactly signing on for Universal Credit. 

To add insult to proverbial injury, locals who live in the vicinity of the Crown’s considerable acreage are muttering about once-accessible areas being blocked – at a whim – to the public. This has happened in Windsor, Hertfordshire, and no doubt other places. 

The elimination of leaseholds is a clumsy media term, since although as a lessee you don’t technically own the land, a lease does provide a code of conduct to try to police the excesses of some residents who may not be instinctively as good a neighbour as one would like.

Runs the risk of forfeiture of the lease

Also, in a multi-occupied apartment building, the lease controls the service charges that one must pay.  Failing to do so runs the risk of forfeiture of the lease. Fear is a good motivator, as the saying goes and in this case, it instills discipline.

It is not just the lease that needs to be eliminated so much as the control of the land upon which the property is built.

Festering botheration

Whilst Mr Gove has his reformist scalpel at the ready, he needs to focus on the bottleneck of the planning process. At present it’s a festering botheration that’s overly political and barely objective.

This is because a rogues’ gallery of ecologists, conservationists, bureaucrats and petty local politicians all have diametrically-opposed selfish interests, which interrupt the forward flow of the planning process. Small wonder that at best, we’re building 50% of the minimum level of required housing across the UK.  If we are to cope with the burgeoning population then it has to be around 300,000 new homes per annum.

Six drivers to the planning bus

Invariably, there are six drivers to the planning bus – the problem is that these are all heading in different directions. Hence, many developers take the path of least resistance by doing … absolutely nothing.  

Although there was some hijacking of the Help-to-Buy initiative (amongst some opportunists), in the main it gave the vulnerable a leg-up onto the property ladder, which is no bad thing. 

Private landlords becoming an endangered species

My fear is that the exponential rise in mortgage rates means that the less privileged (i.e., ‘normal’) buyers will be driven back to renting. The government seems strangely hostile towards the buy-to-let sector and with private landlords becoming an endangered species, supply is more restricted. This just heaps upward pressure on rent levels.

As values rise, debt shrinks

The truth is that long-term renting is a pointless endeavour when that money could be used to fund a mortgage. As values rise, debt shrinks correspondingly, which leaves the homeowner with ever-greater amounts of exposed equity.

All homeowners become wealthier when assets rise. However, the obverse is true of salaried individuals who rent.

So come on Mr Gove – sharpen that machete, hack down the labyrinth of planning regulations and ‘move your blooming arse’ (My Fair Lady) and let housing fly free for the benefit of all.

* Trevor Abrahmsohn is founder and managing director of Glentree International agency in London *

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