The British empire spread leasehold to every corner of the globe – but now England and Wales remain the last redoubt of a system regarded as a feudal relic everywhere else.

In Ireland, much-hated ground rents extracted by the Anglo-Irish aristocracy, and dating back to the Cromwellian era, were partly behind the rise of the Land League in the late 19th century, and the country’s fight for independence.

Quick Guide Leasehold houses and ground rent Show What are leasehold houses? Britain has had leasehold homes for hundreds of years, but only in the past few months has the ground rent scandal exploded. Now the government is proposing a complete ban on new houses sold as leasehold, and reducing ground rents to zero. Traditionally, houses have been sold as freehold, and the buyer has complete control over their property. When a house is sold as leasehold, the buyer is effectively only a tenant with a very long term rental, with the ground the home is built on remaining in the hands of the freeholder. The home buyer has to pay an annual “ground rent” to the freeholder, and has to ask the freeholder for consent if they want to make any changes to the property, such as building a conservatory or changing the windows. Why have they suddenly become such a problem? In the past, leasehold property owners were generally charged just a “peppercorn” ground rent, sometimes as little as £1 a year, and many freeholders did not bother to collect it. But the picture changed earlier this century, when developers started to insert clauses into leasehold contracts where the ground rent was set at £200-£400 a year, doubling every ten years. Direct Line estimates the typical ground rent to be currently £371. Although unsuspecting first-time buyers were frequently told that 999-year leases were “virtually freehold”, the clauses meant that the ground rent would soon spiral to absurd levels. The government quotes a family house where the ground rent is expected to hit £10,000 a year by 2060.

How many people are affected? The Leasehold Knowledge Partnership, which has vigorously campaigned on this issue, estimates that around 100,000 homebuyers are trapped in contracts with spiralling ground rents. There are many more people in leasehold flats, some of which also have doubling ground rents. Is it just the ground rent that is the issue? No. Freeholders are able to extract other sums out of their leaseholders in a variety of ways. Homebuyers report being charged £100 even to have a letter answered by the freeholder, and as much as £2,500 for permission to build a conservatory. These are charges that are on top of obtaining planning permission.

Once a republic, Ireland legislated to give leaseholders the right to demand the freeholder sell up, at a relatively low price using an agreed formula. Even today, leaseholders in Northern Ireland enjoy a much better deal than their counterparts in England, with the ability to buy their freehold for about 10 times the ground rent, compared with the 25-40 times multiples common in England.

Colonial territories including large parts of Australia were originally leased to farmers by the government, but the country rejected that form of tenure in the 1960s, as have other former parts of empire saddled with this legacy of British rule.

In New Zealand, approximately 15% of residential apartments are believed to remain as leasehold, mostly towards the bottom of the market, with what are called “Glasgow” leases, again dating to the colonial period.

In Auckland’s super-hot property market, issues similar to those in England about soaring ground rents have emerged. However, the sector is much smaller than in England because New Zealand banks are far less willing to lend against leasehold homes.

Although the Glasgow leases date back to Scottish settlement in the Otago region of New Zealand’s South Island, in Scotland they were abolished in 2004.

Legislation passed by the Scottish parliament, including the Abolition of Feudal Tenure (Scotland) Act 2000, and the Tenements (Scotland) Act 2004, effectively brought leasehold to an end in the country. More recently, the Long Leases (Scotland) Act 2012 automatically converted remaining long leases to outright ownership.

Houses in Auckland, New Zealand. Leaseholds do still exist in the country, but mostly at the bottom end of the market. Photograph: PatrikStedrak/Getty Images/iStockphoto

In England and Wales leasehold was a dying form of tenure, but in recent years has returned with a vengeance. In 1996, just 22% of new-builds in the UK were sold as leasehold, but this has doubled to 43% today. In London, nine out of 10 new-builds are now leasehold.

A report by the HomeOwners Alliance found that four out of 10 leaseholders do not know the length of time remaining on their lease, while of those that do, almost a quarter (equal to 370,000 homes) have less than 80 years to run. “The cost of extending these is likely to exceed £4bn,” it warned.



Supporters of the leasehold system in the UK claim it is the only solution for apartment blocks. But in Europe, cooperative flat ownership is standard, the US has condominium and cooperative apartment ownership, while Australia operates a strata-title system.

These “commonhold”-style systems provide flat dwellers with full ownership rights over their homes, with collective control over the management of their blocks.



What may come as a surprise to many English leasehold owners is that commonhold was introduced in England in 2002, supported by all the main political parties, and designed to end the problems many flat owners faced.

When the law was introduced, solicitors said “commonhold will quickly become adopted by new residential developments”. But it has almost completely failed to take off, with only 161 homes sold as commonhold in the first 13 years after the legislation was introduced.

Critics say the legislation was poorly drafted, but more importantly, developers could make no financial gain from selling properties as commonhold rather than leasehold.

Sebastian O’Kelly, whose Leasehold Knowledge Partnership group has been at the forefront of the battle against spiralling ground rents, says apartment buyers should gain the same protections now being given to house buyers. “New leases should be indefinite; ground rent should be abolished; all flats should be built with residents’ management companies, so the residents take control once a majority of the flats are sold.”