New leaseholds to be abolished

We look at the impact on co-housing & community-led housing

You may have seen in the press that the government has announced it will prohibit the creation of new leaseholds for houses.  The details are not yet clear and nor has a timetable been yet set.  However, it is obvious that there will be a dramatic overhaul of the current system of land holding. 

If you missed the initial publicity, the proposed legislation arose from the abuse of the ground rent system by some developers, which led to unmortgageable properties for some homeowners.  For an explanation of the background read our article 'Ground rents'.

The legal press has written a lot about the general impact of the proposals.  However, we at Wrigleys feel that the proposed ban will hit community-led housing groups especially hard.  Issues of particular relevance for groups are that:

• The government proposes certain exceptions to its proposed ban on new leasehold houses.  McCarthy & Stone lobbied to exempt retirement villages and these have already been mentioned as a potential exception. The National CLT Network has been lobbying the government to exempt CLTs and the UK Cohousing Network also encouraged members to respond appropriately to the initial government consultation.  Groups should consider lobbying their MP or the Department for Communities and Local Government to get community-led housing listed as an exception.  Many of the reasons that retirement villages are singled out as a potential exception would also apply to community-led housing groups. 
• Banning leaseholds will not make the traditional co-housing structure impossible; it will just make it more difficult.  It is possible to set up a cohousing group where freehold units are sold to members.  Control over how the group functions, membership and sales can be dealt with by way of direct deeds of covenant and restrictions on title at the Land Registry.  However, this is cumbersome and could open up new areas of legal challenge for disgruntled members over anything that they did not like. 
• Paying for shared services will become more complex.  Groups will find it much harder to insure globally or to manage and pay for community projects such as communal heating supplies or group-wide photovoltaic cells.
• Enfranchisement is likely to be made easier and more accessible.  This has always been a risk for community-led housing groups but is normally one that they are willing to take. However, enfranchisement may move up a group's agenda now and may be an additional area that they need to consider when setting up their group and its property holding structure.

To sum up, the community-led housing sector needs to co-ordinate its responses and lobby to get itself listed as an exception.  If not, all is not lost but groups will need to rethink their property holding structures quite radically and an already complex legal structure will only get more complicated.