Learning From Lessons North Of The Border

Learning From Lessons North Of The Border

“Learning from lessons North of the border”, by Jack Spearman, Executive Director, Long Harbour

The Government is moving in opposite directions with its efforts to reform the leasehold market on one hand, whilst also strengthening protection for residents via building and fire safety regulations. Removing professional oversight in high-rise apartment blocks will not only leave residents unsafe but result in a huge increase in dilapidated buildings.

Let’s take a look at the situation in Scotland where, in 2012, the Scottish Government brought in legislation that abolished the traditional leasehold model of ownership, being replaced by a residential-led model of ownership like commonhold. This removed the role of professional freeholders, and residents were given control of managing individual flats and, collectively, multi-storey apartment blocks.

Since then, reports have found that most of the country’s private housing stock is deteriorating; specifically, 82% of flats need some form of repair. This is undoubtedly because of a lack of regular, ongoing maintenance, which had previously been overseen by the building owner.

In England and Wales, the Law Commission has been reviewing why commonhold remains an ‘unattractive’ model to homeowners and housebuilders; and are due to publish recommendations to the Government on how to ‘reinvigorate’ this system in Spring. This comes after legislation was introduced 18 years ago to start using the system, and currently there are only a small handful of commonhold developments in place – put simply, there is minimal demand.

Commonhold has had little success, but there could be a case for using it in smaller developments, as occupants will likely have to resolve fewer problems amongst fewer people when disputes arise. However, this is a completely different task in large and complex residential blocks.

Neither the Law Commission nor the Government have so far been able to identify how commonhold will stop such disputes or overcome the very real difficulties they create for effective property management, which often involves hard decisions with significant costs at stake.

Professional landlords provide recourse for tensions within buildings and take care of replacing communal functions when they break or reach the end of their serviceable life, such as the replacement of a roof. If such professional oversight and coordination ceased to exist, individual occupants would have to solve these issues themselves which, in many cases, require vast resources and expertise. Many residents won’t have the time, money or appetite to take on these onerous responsibilities.

This disastrous situation in Scotland, as evidenced in the RICS report published in 2019 (Common Repair Provisions for Multi-owned Property: A Cause for Concern), makes it hard to envisage a better picture for England and Wales if they were to adopt the same system, particularly in light of the failure of building and fire safety regulations that was revealed following the Grenfell Tower tragedy in 2017.

After numerous consultations, the Government is set to introduce an ‘accountable person’ for apartment buildings, as part of the Fire Safety Bill due to be brought forward this Summer. The Housing, Communities and Local Government Committee has recognised that professional freeholders have the necessary expertise and qualifications to perform this stewardship role – that comes with both significant financial and legal responsibilities – but it is unlikely residents will. And this role is more crucial than ever in the wake of the national challenge of cladding remediation.

Professional freeholders play a central role in completing remedial works on buildings with unsafe cladding materials. We are currently involved with the remediation of over a dozen highly complex buildings with cladding or fire safety issues. Alongside residents and leaseholders, we played no role in the development of these buildings. Using our expert resources we are able to undertake the immensely time consuming and painstaking process of remediation. Until you have sat in a room with professionals from all the relevant disciplines involved, it is hard to imagine the level of detail and focus required to successfully finish a project in a timely, considerate and efficient way. This coordination comes at a huge cost, both financial and time. We have witnessed first-hand the breakdown of hard-working resident management companies trying to do the same job. A well-resourced, responsible, regulated and professional building owner is exactly what we need more of, rather than less.

The Government must learn from these experiences in Scotland and, instead, look to imitate the approach taken in Wales, where the local administration has taken a more measured approach that focuses on professionalising the ownership and management of property.

As we move closer to the inevitable introduction of a new regime that encourages responsible stewardship of property, we must ensure that freeholders maintain a central role in keeping residents safe. In high-rise apartment blocks, this can only be delivered through a modernised and thoroughly regulated leasehold system – and one which provides a financial incentive (in the form of a reasonable ground rent) for professional landlords to operate.

Jack Spearman

16 Comments

  • Professional freeholders play a central role in completing remedial works on buildings with unsafe cladding materials, yet it is government and leaseholders who are bearing the costs, not the Freeholders who take the profits.

  • If 82% of buildings in Scotland have been discovered to be unsatisfactory and in need of repair, it’s clear that the previous presence of independent landlords didn’t help. Obviously the landlords weren’t doing their jobs properly. As stated in the last paragraph of the above article, the so-called ‘professional’ landlords just want the money. I acted for a relative recently who was going to buy a flat (not newbuild). The freeholder was a trust as the property was in a ‘garden city’ and the developer held a leasehold interest. The developer had sold out that interest along with its interest in countless other properties to some property company for over £9M. The Transfer Deed was 65 pages long. My relative decided instead to buy a different flat with a 999 year lease in respect of which the freehold was a company formed specifically for those properties of which the flat owners are members. The properties are managed by a managing agent. This model works extremely well and should be promoted over measly 125 year leases and developers selling off the freehold for as much as they can get which includes pegging the rent as high as possible too to make the freehold worth more money. However there’s no escaping that buildings will require repair eventually and that leasehold owners will probably be reluctant to pay (though if they owned their own individual house instead, they’d still of course have to pay for its repair and maintenance).

  • This article makes no sense. A freeholder does nothing to improve or maintain a building . All they do is take their ground rent and provide no benefit at all to a leaseholder…

    Common hold works in every other country in the world!!! Just look at every country in Europe

    A managing agent for a block of flats is a good idea but there is no need for a freehold/ leasehold arrangement for this to happen

    There is a reason nowhere else in the world this archaic structure does this exist. Leasehold is a scam for freeholders to continue to milk money for nothing

    • Absolutely; Freeholders are not property managers; most are financiers trying to beat interests rates and maximise cash flow.

  • Responsible freeholders are not the only route to keeping a building well maintained. Professional, pro-active managing agents have a massive part to play – coordinating the various factions within the building to find agreement – organising the finances to provide sufficient funds whilst keeping an affordable service charge – and supervising the physical works on-site, for example. Whilst freeholders play their part – and commonhold communities will play their part in years to come – the managing agent will remain the key to a well maintained and happy building. #ARMAonline #BWresidential

  • Jack, what I would like to know is why you feel “Leaseholders” cannot be trusted to maintain the building that they pay a mortgage on and live in? Do you think we are not capable? And that you are ‘more’ capable than us?

    Please tell me what are your qualifications? Why would you care more about the building that I live in more that I do?

    It does not make sense to me, or any other Leaseholder living in the UK.

    We see you, as the Freeholder as only an interested party in terms of how much money you can make out of Leaseholders. Really we are Cash cows to you aren’t we?

    Please tell me what Ground Rent actually covers? Go on, I dare you… I am all ears as so are many other Leaseholders in the UK.

    I had to pay £10,000 of my own money to cover my ground rent and extend my lease. Again, what does this money cover actually? Does it pay for your large swimming pool, your flash new car?

    Do you feel guilty that you are robbing from the poor to give to the rich? Do you lose sleep at night? Or do you just not care? I am guessing you don’t care. I am guessing you have no moral compass.

  • I’ve never read such a load of one sided self serving tosh! I own property in the UK and France. In the UK I live in fear of the next email or letter from the freeholders agent looking to charge me for another jacked up charge or invented piece of work. In France I’m part of a committee of owners who meet twice a year to decide what work, if any, is needed on our jointly owned building, tenders are sought and costs apportioned fairly with few arguments. The difference in the systems is stark.

  • A good managing agent working with the residents is very much needed.
    A parasitic, disinterested, remote entity now more or less unique to the English long leasehold system has no part to play in peoples homes.

  • So Jack Spearman, who represents Conveyancers, who have consistently failed to advise prospective leasehold purchasers of the leasehold terms and traps waiting for them when they buy a leasehold, warns about Commonhold…..

  • Grenfell Tower had 72 deaths with a building run by a professional landlord & managing agents. Now the freeholders time has come to make these buildings safe, they want the tenants to pay to remedy the defective buildings THEY OWN! Since that fateful day we’ve had further fires in Coolmoyne House in Belfast, Lighthouse Apartments in Manchester, Orwell Building in West Hampstead, Samuel Garside House in Barking, Beechmere Retirement home in Crewe, Richmond House / Worcester Park in London & The Cube in Bolton. Professional landlords aren’t custodians of buildings they are ground rent speculators trying their hardest to grow their margins through unaccountable service charge & permission fees. Commonhold is still better.

    • Stephen Bedford – 1) Grenfell was owned by a local authority and managed by a local authority ‘department … not a private freeholder, blood-sucking or not. 2) In addition to the fires you mention, there have been over 300 serious fires in blocks of flats since Grenfell. Not all were private freeholder owned. So the ownership of the building does not determine fire safety. 3) There is no such thing as “unaccountable service charge”. The Tribunals and Courts are dealing every day with blood-sucking landlords, incompetent managing agents and professional non-paying leaseholders … all of whom should abide by the hundreds of laws designed to make flat living more equitable. 4) Yes commonhold will be an improvement, if enhanced and upgraded, but it won’t solve all the problems we see in the leasehold world.

  • 75% of all housing in Scotland is in disrepair as stated in the Scotland House Condition Survey 2018. I’m not sure where the 82% of flats being in disrepair is from, as its not referenced and cannot see it in the report mentioned, but is hardly much difference.

    There is also no mention in the report referenced (Common Repair Provisions for Multi-owned Property: A Cause for Concern) that these disrepair numbers are due to a lack of freeholders.

    The report in fact is about how incremental legal reforms have not fully addressed some of the issues to do with common repair and calls in fact for further reform, not to bring back freeholders. You do not need a freeholder to appoint a managing agent who are the people that actually have the day-to-day experience in managing and maintaining buildings. Nobody ‘needs’ a freeholder.

    There are plenty of commonhold systems around the world – in fact England and Wales are the only countries in the world where leasehold continues so. Other countries never adopted it or abolished it for a reason.

    Commonhold in the UK has not seen success as there is no incentive for developers to offer it and wss poorly enacted. Its still more profitable for them to do leasehold.

    What is a total disaster is the current leasehold system in England and Wales, not that Scotland has abolished leasehold. https://www.theguardian.com/commentisfree/2018/jul/20/leasehold-money-making-racket-reform

    • Agreed Laura.

  • I have just read this article and feel that I must comment on the underlying inaccuracy on which it is based. Scotland has never had a system of residential leasehold tenure of the type common in the rest of the UK. Since the early 1970s it has not been possible for there to be a lease of more than 20 years of a residential property. The RICS Report referred to was highlighting the need to ensure that all multi-occupancy properties are properly maintained and for flat owners to recognise that they are not living in a bubble which does not rely on common interest among other owners in the building of which the flat forms part. Owners of flats in multi-occupancy buildings have to remember that they are responsible for a share of the cost of maintaining the common parts and services of the building. That is the starting point. Once that is established, it is perfectly common for management to be delegated to a professional factor or managing agent. Maintenance of multi-occupancy property is a problem north and south of the border which, it would appear, is not helped by the attitudes of certain leaseholders in England and Wales. Reform of leasehold tenure and the introduction of provisions to ensure maintenance of multi-occupancy property are really two different things. The RICS Report helpfully suggests a number of suggested improvements to the current system in Scotland which, if adopted, will be beneficial.

  • When faced with a choice a surprising number of municipal leaseholders have chosen to stay with the town hall

  • Found this is to be inaccurate; Scotland never had the equivalent of freeholders; This article seems to imply: “residential blocks used to be well maintained when they were managed by freeholders”; But Scotland NEVER had an equivalent to English Freeholders”; The rest of the world does have commonhold for blocks of all sizes and “complexity” (whatever complexity means); I have been to Madrid, Brussels and Paris and most blocks-some very old- are well maintained; Flat onwers can still appoint professional managing agents under Commonhold; The uglt truth is that Freeholders are “financiers” and not property managers; They are parasitic third parties that hold all the cards only because of the Lease. Abolish.

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