Could Leasehold be outlawed after the next election?

Layout 1 In the latest News on the Block magazine (issue 89) they discuss the issue of leasehold with reference to the sale of new-build houses possessing scandalous leases which involve developers selling the freeholds of homes to private companies and leaving the leaseholder with rocketing ground rents. In some instances, the fees have doubled every decade which has made the property almost impossible to sell.

This is just one of the issues about leasehold which could be raised as an example for the ‘abolish leasehold’ debate. For years leaseholders have been put at a disadvantage. Despite the many legislative initiatives and amendments made to existing legislation, which have tried to address problems, the problems remain.

Money bag   At 2 Rivers, we ask just one question. Who pays the bills? For us it comes down to one statement ~ ‘The people paying the bill should be the people making the decisions.’ If there is disagreement between those paying the bills, it is like an election. Whoever we vote for individually, we must all live with the party which wins most votes.

So, in terms of leasehold and to our credit as a nation, this has been made possible by Right to Manage and Resident Management. They are similar, but they are not the same and that is a discussion for another day. The point for this debate is, it gives the power of the £ back to the leaseholders. These two systems free the residents to start a debate not just of how they control their management costs, but the culture and environment in which they all live.

At 2 Rivers, we have seen something of the way systems in other countries run blocks of flats. We know them as common-hold but in these countries, they have never known leasehold. In 2014 at the IRPM Annual Seminar there was an invited speaker called Michela Hancock from the USA. The title of her talk was a presentation on the Build to Rent sector in the US and UK. She gave a positive impression of how involved US residents become on residential sites in the US and in so doing create a community with their neighbours.

She introduced a culture not common in the UK (our observation) except among certain resident associations.

2 Rivers believe this community based resident driven agenda is the future for us. Most importantly it would help unravel the past where the landlord and his agent had too much power and sometimes it was abusive power.

lease-agreement  The legislation is already in place for us to create a residential community. Right to Manage is a wonderful opportunity and has been in existence for more than 10 years to encourage residents to take charge of their management and build a community driven culture with all their neighbours. You have control, you get a vote and you are all service charge payers. No more landlord or managing agent acting the bully and doing things without your knowledge or approval.

If it is so wonderful why aren’t there far more RTM companies than there are? Well several reasons.

 

Firstly, the issue of responsibility. Blocks of flats have common areas even if they are just a staircase. This can make coming home a heaven or a hell. Entrances can be warm, clean and attractive or cold, dirty, choked with things like bikes or rubbish and dangerous if threadbare carpeting is causing a trip hazard. Who will take responsibility for that. Those three things, involve cleaning, heating and repairs. Who will ensure the building is insured properly in case of fire or these days the likelihood of a terror attack? If the site has a garden, even a small one, who will supervise the gardener? If security is an issue who will supervise the door entry systems, and for that matter fire alarms and sprinkler systems.

On this point, one of the issues which cause a problem for the managing agent is this issue of responsibility. Residents love to demand a course of action in any given situation but often won’t take responsibility if their decision backfires or produces unintended consequences. Authority and responsibility are inextricably linked and residents who want the power of decision making must take responsibility for their decisions. When that happens, they will be more inclined to consult other residents to ensure the final decision is more collective and not made however tempting by one or two people.

Secondly the issue of time. Resident leaders don’t always want to devote their down time to liaising, consulting and researching for a building where their efforts may be taken for granted and involve a lot more hassle than they expected.

Thirdly the issue of our own approach to leadership. We still think of our leaders holding a privileged position of power over us, not a thankless position of responsibility in which we are all shouting at them to do a good job. We don’t do support very well or acknowledge as residents, we all take responsibility once a vote has been taken and a corporate decision made.

Fourthly if we overcome these, we have the First Tier Tribunal to negotiate. This can involve cost if we hire a specialist solicitor to help us navigate the procedures through this minefield.

So, because of some of these challenges, we are having the discussion in the context of getting rid of leasehold altogether instead of making use and gain what we want from the legislation already in place to help us. No-one wants to be at the mercy of property developers always looking for ways to create what Robert Kiyosaki calls an “asset,” an income stream which needs little if any work.  There are good and bad “assets.” Robert endorses the former. The ground rent scenario described in our first paragraph in News on the Block is a bad “asset.” Nor do we want crumbling buildings with no landlord, managing agent or resident looking out with strong support from his/her neighbours, for all that must be done to keep it pristine.

So, to answer the question ‘could leasehold be outlawed by the next election’ ~ in our view, it is doubtful, for 2 reasons. Firstly, we have not discussed social housing, but we have a huge amount of social housing and some of the people there have disabilities and serious health problems. They need the support of a landlord managing the building.

Secondly as explained, if the landlord is removed from the mix and residents don’t want the responsibility either, the building and its grounds if there are any, will deteriorate and leave, what can be a safe attractive and well-maintained building, into a place where no-one wants to live. At 2 Rivers, we don’t want to see that happen to any resident.Smiley Face 1

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