The replacement of leasehold by commonhold came up yesterday when Martin Boyd, chairman of the Government's Leasehold Advisory Service appeared before the Leasehold and Freehold Reform Bill Committee LINK.
Asked about the risks in the switch Boyd said:
Yes, there are risks. Currently, we do not have a viable commonhold system. Even if the Government were to come forward with the full Law Commission proposals, those had not reached the point where they created all the systems necessary to allow the conversion of leasehold flats to commonhold flats. I see no technical reason at the moment why we should not move quite quickly to commonhold on new build for extant stock. I think it will take longer—and, at the end of the day, conversion will be a consequence of consumer demand. People would want to do it. On my side, I would not want us to convert to commonhold, because I could not yet be sure that it would help to add to the value of the properties. It would make our management of the site a lot easier, but I could not guarantee to anyone living there that it would add to the value of their property—and that is what people want to know, before they convert.
Later in the session he added:
I am proud to say that it was LKP that restarted the whole commonhold project in 2014. At the time, we were told, “The market doesn’t want commonhold.” The market very clearly told us that it did want commonhold; it was just that the legislation had problems in 2002. One of our trustees, who is now unfortunately no longer with us, was part of a very big commonhold project in Milton Keynes that had to be converted back to leasehold when they found problems with the law.
I think the Government have been making it very clear for several years that they accept that leasehold’s time is really over. I do not see any reason why we cannot move to a mandatory commonhold system quite quickly. What the developers had always said to us—I think they are possibly right—is that they worry that the Government might get the legislation wrong again, and they would therefore want a bedding-in period where they could test the market to ensure that commonhold was working, and they would agree to a sunset clause. They had fundamentally opposed that in 2002, and we managed to get them in 2014 to agree that, if commonhold could be shown to work, they would agree to a sunset clause that would say, “You cannot build leasehold properties after x date in the future.” I think that that is a viable system.
Earlier in the Committee hearing Barry Gardiner, MP for Brent North, had asked about a potential right of leaseholders' right to withhold service charges:
You nicely lead me to my other question, which concerns something else that was in the 2002 Act but was never brought into effect: the provision that, if the landlord had not complied with the rules around service charges and the charges were unfair, leaseholders should be able to withhold their service charge. I have no idea why that was never brought into effect, but would it be a good idea? The Bill sets out extensive obligations that have to be followed in relation to service charges. If those are not followed, should leaseholders have the right to withhold the service charge?
Martin Boyd replied:
I can tell you why it did not move forward. One of the reasons it did not move forward is that, when there was a consultation, the organisation that I now chair argued very strongly against the implementation of that section. That was one of the things that annoyed me when I found out about it over a decade ago. It is not something that we would argue for now.
Asked by Gardiner if this would be a good clause to insert into the Bill, Boyd replied, 'It was a very good provision, yes.'
