Leaseholders should not have to pay thousands for a building safety manager at every block

This is a system of legalised extortion that causes widespread misery and enriches property developers, speculative investors (sometimes anonymous and offshore), managing agents, lawyers and surveyors at the expense of normal families’ dignity and financial security.   

A system that other countries which based their legal system on the UK’s had the good sense to either scrap or never implement in the first place, including Australia, Singapore and Malaysia, which use commonhold equivalents to organise flat living that are much fairer to the ones actually paying the bills.   

“Leaseholders are tenants when it comes to rights, but owners when it comes to paying any bills”

England and Wales are the last major economies left which now have flats in the private sector sold as long-term tenancies with developers or third-party investors calling the shots in a block of flats, controlling its management as well as the chequebook of the homeowners.   

The cladding and building safety crisis has shown how iniquitous residential leasehold tenure really is. Leaseholders are tenants when it comes to rights, but owners when it comes to paying any bills.  

Yet they have no control over the contractor, costs or scope of any works. They must pay up pretty much whatever is demanded by the freeholder landlord and their agent.  

Up until this week, freeholders, or “building owners” as government likes to call them, were looking at a taxpayer bailout of circa £5.1bn because they couldn’t, or wouldn’t, pay to remediate their own blocks. If they cannot pay to make their own property safe, then what is the point of them? Why persist with leasehold? 

In November, housing secretary Michael Gove, a radical Conservative and Scotsman (Scotland abolished leasehold years ago), told MPs on the housing select committee that “before coming to the department, and putting the building safety issue and Grenfell to one side, I felt that the balance between freeholders and leaseholders was wrong and that leaseholders were often unfairly stung – not by every freeholder – through service charges and other charges”.  

He has put his name to a consultation on leasehold and commonhold reform, which closed on 22 February, which teases “more leaseholders to own their own buildings … under radical new proposals to create a fairer housing system”.

But if the government is not careful, the Building Safety Bill will do the exact opposite: prop up the feudal leasehold regime by giving ever greater powers to unregulated and often remote freeholders and their managing agents.  

Flats sales have plummeted 66% in three years, according to Land Registry data. No one will buy a leasehold flat again if they learn that each high-rise block in the land has to pay out an extra £60,000 a year in service charges to hire a so-called building safety manager.   

It is thanks to the work of campaigning organisations – including Leasehold Knowledge Partnership, End Our Cladding Scandal, UK Cladding Action Group, National Leasehold Campaign and, in my patch, Tower Hamlets Justice for Leaseholders and Friends in High Places – that the government is set to scrap the ‘building safety charge’ in its amendments to the Building Safety Bill. 

Had this gone through into law, freeholders and their agents would have been rubbing their hands with glee as they would able to demand extra cash outside of service charges under the guide of post-Grenfell safety.  

“Why should building safety managers be needed? The vast majority of leasehold developments have a managing agent in place and the leaseholders have to pay a management fee for their services”

But the fight to stop leasehold from becoming more draconian and costly to individual flatowners continues.  

In a meeting I organised with Baroness Pinnock the other week, local leaseholders urged the Liberal Democrats to do everything in our power to have building safety managers scrapped in the bill.  

Leasehold Knowledge Partnership has reported that building safety managers will, according to the government’s own assessment, cost leaseholders of each affected block £60,000 per annum and that the government’s fire safety tsars Sir Ken Knight and Dame Judith Hackitt do not believe the role should be regulated as the sector in their eyes can be trusted to get on with the job.  

So should we trust the same people who in one block in my borough helped raised a £2,790 cladding bill to government grant of £44,654, with a commission from taxpayers of £12,120, according to the Sunday Telegraph? In any case, why should building safety managers be needed? The vast majority of leasehold developments have a managing agent in place and the leaseholders have to pay a management fee for their services.  

At some of the bigger developments, leaseholders will also have to pay for a building or estate manager.  

Even in the best-case scenario, the cost of a building safety manager will mean leaseholders in a block of 30 flats will be paying an extra £2,000 each on top of their existing service charges. Capital values and rental yields will be decimated.  

If the government is concerned about the competence of property managers, then they must implement the recommendations of Lord Best’s regulation of property agents working group’s report which urge strict statutory regulation of managing agents to give leaseholders peace of mind and protection from rogue operators.  

This was handed over to ministers in July 2019, but gathers dust on the shelf as no response has been provided by the Department for Levelling Up, Housing and Communities. 

Safer homes are not going to come from employing someone to march around blocks of flats trying to find issues to justify their existence.   

As we have seen already, when someone else is picking up the tab, it pays to say there is remedial work that needs doing. 

Rabina Khan, author and Liberal Democrat councillor