How leaseholders left waiting for reforms have taken matters into their own hands

Leasehold flat owners have been venting their frustration over the slow pace of the Government’s programme to reform this reviled form of property tenure, which is unique to England and Wales.

And a further blow came last week when freeholders got the go-ahead for a review into aspects of the Leasehold and Freehold Reform Act.

This was passed last year by the Conservative government just before the election in a bid to make it easier and cheaper for leaseholders to buy their freehold.

The freeholders claim it breaches their human rights by removing income streams, acquired by things like ground rent, or giving leaseholders greater advantages when it comes to lease extensions and enfranchisement, which is when leaseholders seek to buy the freehold.

A showdown with the Government will take place in July.

But there is, at last, some good news.

Chelsea Bridge Wharf, a prime Thameside site beside the old Battersea Power Station, has just won the right to manage.

This means that the 1,100 flat owners are now in control of the site, worth well over £1bn, which includes social housing, a hotel and two office blocks – including, ironically, the headquarters of the Berkeley Group, the developer that built the site.

Understandably, campaigners are pointing to Chelsea Bridge Wharf – now the biggest right to manage site in the country – as just the sort of leaseholder empowerment that should be the norm.

Freehold: Freehold means to own a property, including the land it’s built on, with no fixed time limit.

If you buy a freehold, you’re responsible for maintaining your property and land. You should budget for these costs.

Most houses are freehold.

Leasehold: Leasehold means to own a property for a fixed amount of time, leasing it from a landlord who owns the whole building or land it’s built on.

Usually, your lease will be between 90 and 999 years. The length of your lease will be in your lease agreement with the freeholder.

Most flats and maisonettes are leaseholds. This means that while you own your property within the building, you don’t own any part of the building it’s in. And you might need to pay monthly or yearly maintenance charges.

They argue that as leasehold is entirely discredited by the government’s programme of reforms, all housebuilders should be building blocks of flats with a residents’ management company included as a matter of course. Starting yesterday.

This means flat owners, not offshore property punters, run the site for the residents’ benefit.

It has long been seen as an absurdity that investors in residential freeholds, which are worth only a fraction of an entire block of flats – usually less than 3 per cent – are the landlord under English law and the flat owners are merely long-term tenants owning leases.

It is a system routinely gamed by some of the most unsavoury figures in residential property.

The rest of the world, meanwhile, has long adopted versions of commonhold where flat owners themselves jointly own the building and the land on which it stands, and co-operate to manage the site. There is no parasitical and irrelevant third party landlord at all.

A site as large and as complex as Chelsea Bridge Wharf is going to require professional property managers. But now this company will be employed by the flat owners.

Leaseholder Larisa Villar Hauser, one of the right to manage directors at Chelsea Bridge Wharf, said after the ruling: “The prime advantage of right to manage is the ability to change managing agents when things are not working. You become the client and the managing agent knows that he is answering to you rather than the freeholder.”

Control and improving the place where they live were the main motives, but they might save money, too.

“It is very difficult to say whether there will be any immediate cash savings, however,” said Hauser. “Obviously, leaseholders are hoping that that will be the case, but given the state of the site it is uncertain.”

The most important aspect in all this is the conduct of the Berkeley Group, which pioneered glitzy Thames riverside apartment schemes under its legendary but now deceased founder Tony Pidgley.

Mindful of its reputation among high-end purchasers, it has long regretted its decision to sell freeholds to its sites that were then monetised by freehold investing punters, a notable example being St George Wharf.

There was a widespread feeling that its valued customers had been legged over.

So when dissatisfaction emerged at Chelsea Bridge Wharf, and a credible group of leaseholders emerged to take control of the site, Berkeley evidently decided not to fight them.

As the court acknowledged last week when it granted flat owners management rights, Berkeley “took a passive role in the proceedings” and just wanted reassurance that the right to manage was lawful, while punters who had bought five head leases at the site “took a more partisan approach”.

But without Berkeley resisting the flat owners, the landlords’ case was hamstrung and the right to manage was granted.

This is a landmark case of a major housebuilder voluntarily handing over control to leaseholders, with the added irony that its own headquarters is now part of a leaseholder managed site.

Berkeley is widely regarded as perhaps the brightest and most successful among the plc housebuilders.

It also distinguishes itself by not being a member of the lobbying group the Home Builders Federation.

If a company this influential is no longer standing in the way of leaseholders being in control of their homes, then it is a near certainty that other housebuilders will follow.

Sebastian O’Kelly is a journalist and CEO of Leasehold Knowledge Partnership