The History of Leasehold and its Reform

Medieval feudal law permitted tenants to live and work on land. The work would generally involve farming or craft. The produce was sold or given to the landowner to pay rent.

By the 11th century, the monarchy took control of the land and imposed tax on landowners to standardise the feudal system.

The 13th century saw the creation of estates. A tenant could live and work on an estate in fee simple and it could pass to their heirs. Whereas an estate for life would revert to the landowner after the tenant died.

Remarkably, the modern system of long leases with ground rents was only introduced in the 1920s.

Precipitated post-war construction in the 1950s witnessed a dramatic increase of flats and leasehold. However, by the 1960s many elderly leaseholders were being evicted from their dilapidated homes after their leases expired.

The press coverage resulted in the White Paper on Leasehold Reform. It described property reverting to a landlord at the end of the lease term without compensation as indefensible and Harold Wilson’s Labour government introduced the Leasehold Reform Act 1967 enabling leaseholders of houses to acquire their freehold.

Margaret Thatcher’s Conservative government introduced the Landlord and Tenant Act 1987 giving leaseholders a right of first refusal where landlords wished to sell their freeholds; and John Major’s Conservative government introduced the Leasehold Reform Housing and Urban Development Act 1993 enabling leaseholders to extend their leases or acquire their freehold.

The Great Estates (such as the Grosvenor Estate owned by the Duke of Westminster) feared the 1993 Act spelt their demise as they would be compelled to relinquish their freeholds. However, there were relatively few freehold claims as lease extensions were more popular and estates have used the income to regenerate.

In 1997, Tony Blair’s Labour government described leasehold as (surprise surprise) medieval feudalism and introduced commonhold (freehold ownership of flats with joint responsibility for the common parts) with the Commonhold and Leasehold Reform Act 2002. However, conflict with existing freehold law and poor promotion (not forgetting the distraction of the Iraq war) meant that it never gained traction (most importantly among mortgage lenders).

Leasehold is under scrutiny once more largely because of onerous ground rents and the Law Commission’s 13th Programme of Law Reform will herald the next chapter in the history of leasehold.

For expert advice on Leasehold law please contact Dominic Danvers on 020 3861 5154 or ddanvers@meaby.co.uk.

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