The Residential Freeholders’ Association has responded to Michael Gove’s recent attacks on the leasehold tenure system. Below is its vision of how to fix the building safety crisis.

In his recent Sunday Times interview, Michael Gove became the first Minister to admit that “faulty and ambiguous” Government guidance allowed the Grenfell Tower fire to happen.

The admission, and accompanying apology was welcome, if five years too late, given these failings were identified in the Hackitt Review’s Interim Report of December 2017. This is something that the Residential Freehold Association (RFA) – a representative organisation for the UK’s largest professional freeholders – has long been calling on Government to acknowledge.

Mr Gove is also absolutely right when he says that it is “completely wrong that people who had not done anything wrong [were] suddenly landed with these huge bills”, when it came to paying to fix dangerous cladding.

The problem is that whilst Mr Gove was no doubt referring to leaseholders, his remarks apply equally to freeholders. Neither group played any part in the creation of the building safety crisis. Instead, developers, cladding manufacturers and (as Mr Gove now admits) the Government’s own regulatory oversight failed. And yet, despite the failings of Government and the construction industry, it’s still freeholders and the institutional pension funds many of them represent (and therefore, ultimately, pensioners), who find themselves on the hook.

It is even more bizarre that Mr Gove has chosen this opportunity to say that he wants to completely abolish the leasehold system, which governs a fifth of the homes in England and Wales.
Demonising leasehold also completely ignores the role professional freeholders and properly regulated managing agents play in maintaining apartment buildings, and disregards the burden that would be imposed on residents if the role of a freeholder operating in a leasehold structure were removed.

It was not the leasehold system that created the building safety crisis. In fact, leasehold is the tried and tested tenure with effective mechanisms for managing both the delivery and communal funding for management, repair and safety of buildings.
You only have to look to Scotland to see this borne out.

That’s because one of the main alternatives that has been proposed to replace leasehold is a commonhold system – where, in effect, residents manage their buildings. The property tenure in Scotland is very close to this – and it has been a resounding, and frankly dangerous, failure.

While commonhold may be appropriate for smaller apartment buildings where residents can more easily assume management of a building, it is irresponsible to advocate for such a system in larger, more complex buildings. Especially when you have a new building safety regime that would see residents becoming criminally liable for the safety of their blocks, and where the cost of managing building safety has significantly increased as a result of the Government’s legislation.

For example, in Scotland, if the roof of a large apartment building needs repairing due to leaking, the residents will need to raise money from others in the building to carry out repairs. But of course some of the leaseholders on the lower floors may not feel the same sense of urgency for fixing the roof. There is an inherent, and often very problematic, conflict of interest. In other cases, some residents may disagree with what parts of the buildings are a ‘communal responsibility’ and therefore require communal funding.
The resulting delays and difficulties resolving what would otherwise be straightforward issues for an independent freeholder often mean the necessary repairs are not carried out.

In fact, recent studies, including a BBC2 documentary, suggest that 50 per cent of all residential properties in Scotland are in “critical disrepair” because there is no legally enforced maintenance system for buildings. Seen through the lens of Grenfell and the new building safety regime, this ceases to be a maintenance issue and becomes one of human safety.

This is the fate that awaits apartment blocks in England in 10-20 years’ time if leasehold is abolished. What’s more, removing leasehold could mean flat owners end up paying more to fill the obligations and responsibilities for a building’s upkeep themselves, than if they left such matters to a freeholder and paid ground rent. An issue we may be able to understand better had the Government substantiated this policy with an impact assessment or evidence review.

However, perhaps there is some hope. Mr Gove has already shown courage in acknowledging the role of Government in creating the building safety crisis.

If he can recognise that leasehold and freeholders are not the problem – and instead focus on delivering real solutions through funding, including holding the developers and cladding manufacturers responsible – then he might genuinely go down in history as the man who can fix the building safety crisis.