Long Harbour

A Message from Lord Pickles and Lord Blunkett, followed by Long Harbour's best practice article

The ability to listen and learn from one another has always been vital in parliament, in business and in most aspects of daily life. But at this particular moment in time, as national and global events continue to reiterate, it is uncommonly crucial that we forge new channels of communication and reinforce existing ones. The following article from Long Harbour is an attempt to do just that. We would welcome your thoughts on this or any other Parliamentary Review article.

Blunkett signature Rt Hon The Lord David Blunkett, MP
Pickles signature Rt Hon The Lord Eric Pickles, MP

www.longharbour.co.uk

1LONG HARBOUR |
BEST PRACTICE REPRESENTATIVE
Executive Director Richard Silva
The Wullcomb,
Vaughan Way
Long Harbour is an FCA-regulated asset-backed investment
manager which focuses on ground rents, the UK private
rental sector and strategic land. It has a ground rent
portfolio comprised of over 160,000 leasehold properties, valued
in excess of £1.6 billion. This portfolio is managed by Long
Harbour’s associated company HomeGround Management Ltd, a
professional ground rent asset manager which provides services
to its leaseholder customers on behalf of the freeholder, including
estates management, arranging building insurance cover and
dealing with all landlord obligations within the lease, as well as
requests from leaseholders related to enfranchisement and lease
variations. Executive Director Richard Silva discusses the leasehold
sector and the potential reforms that have been laid out for it.
Our operation is indicative of the evolution of the leasehold sector. We have
introduced long-term institutional capital to the sector from the likes of pension
funds, with ground rents providing thousands of individual pensioners with a safe
long-term income. The alignment of interest between the preservation of this long-
term income and therefore the long-term stewardship of the buildings we manage
has brought great benefit to the residential leasehold market.
State of play
The residential leasehold sector has undergone major change in the past two
decades. With the introduction of regulated institutional investors as professional
FACTS ABOUT
LONG HARBOUR
»Executive Director:
RichardSilva
»Established in 2009
»Based in London
»Services: Investment
management
»No. of employees: 120
»Long Harbour sponsors Ace
of Clubs, a London-based
homelessness charity
Long Harbour
THE PARLIAMENTARY REVIEW
Highlighting best practice
2| LONG HARBOUR
freeholders, its evolution is bringing
new benefits to leaseholders and
residents alike, but it has also brought
greater complexity. We believe that
with a regulatory framework fit
for a modern housing market we
can address these complexities and
protectconsumers.
Regulation will drive up standards and
encourage a greater understanding
and responsible use of the leasehold
ownership model. Educating
consumers and creating a more
transparent market must be an
underlying objective. All stakeholders
– freeholders, developers, managing
agents, estate agents and legal
advisers, in particular conveyancers –
acknowledge that we have not done
enough to inform consumers, so
improving the home-buying process
from the first point of inquiry should
have a profound impact on the
entiremarket.
This is just one of many policies the
Ministry of Housing, Communities and
Local Government have consulted on
as part of their wholesale review of
leasehold ownership that began in the
summer of 2017. We have welcomed
this as an opportunity to address the
problems facing our industry, and we
hope that the government acts on this
in forthcoming parliament.
Understanding the challenges
The lack of regulation in the leasehold
sector has allowed less than desirable
practices to emerge, and as a
result the leasehold tenure is under
intensescrutiny.
The most prominent of these has
been onerous ground rents, such as
those that double more frequently
than every 20 years. While affecting
only a fraction of the UK’s 4.5 million
leaseholders, this has been a hugely
damaging issue and one that’s
been rightly exposed by the media.
Likewise, the practice of developers
selling new houses with long leases
without good reason highlights how
consumers are vulnerable in the home-
buying process.
We have engaged with and
submitted evidence to the various
consultations issued by MHCLG, the
Law Commission and the housing,
communities and local government
select committee. While we agree with
a number of the recommendations
provided for improving the current
system, we have serious concerns over
two potential reforms on the table
which we strongly believe could make
life worse forleaseholders.
The first of these is the call
for widespread adoption of a
commonhold structure where
residents take on the joint
ownership and management of their
owndevelopments.
Before considering such wholesale
change, we should identify the
problems that this structure is
believed to fix and acknowledge
the merits of the current leasehold
system. Some of the most common
complaints from leaseholders today
stem from poor management practices
or disputes among residents, the
latter of which can be triggered
by emerging subletting practices.
Underlying challenges like this will not
The Lansdowne,
Birmingham
As professional
freeholders, we
oversee the
management
of properties in
a responsible
and efficient
manner. By
enforcing
covenants
within leases,
we ensure
residents have
quiet
enjoyment of
their homes
3LONG HARBOUR |
BEST PRACTICE REPRESENTATIVE
be resolved through the introduction
of commonhold. In fact, the reality
is quite the opposite: a resident-
led management system will only
increaseconflict.
In deciding whether to abandon the
current leasehold system in favour
of commonhold, campaigners and
policymakers must also consider the
implications of forcing everyone,
whether they like it or not, into
communally managed developments.
Reinvigorating commonhold for
smaller, owner-occupied developments
is a good thing as it broadens
consumer choice. However, it will
expose leaseholders to increased risks
in larger, more complex developments.
As professional freeholders, we
oversee the management of properties
in a responsible and efficient manner.
By enforcing covenants within leases,
we ensure residents have quiet
enjoyment of their homes without
being burdened by difficult decision
making and project management.
In an announcement on June
27, the government reiterated its
commitment to eliminate ground
rents. As a direct by-product of this,
institutional investors – no long able
to collect ground rents – would
retreat from the market therefore
abandoning their role as a professional
steward. This would leave a vacuum
at a time when stewardship is of
paramountimportance.
Resolution on the way?
In March 2019, a group of
freeholders, managing agents and
developers signed a public pledge to
bring about positive change in the
residential leasehold sector. Backed
by the government and overseen
by the housing secretary, James
Brokenshire MP, this commitment
to raise industry standards felt like a
watershedmoment.
This an important first step, but more
must be done. The industry cannot
be complacent and feel that the
underlying issues have been resolved.
Voluntary efforts can bridge the gap
where support for existing leaseholders
is imperative. Within the pledge is a
commitment from the government
to develop a comprehensive code of
practice that forges a path to introduce
formal regulation.
Such a code can establish the
responsibilities of freeholders and
enshrine the highest standards for
the management and maintenance
of properties. This is our opportunity
to properly address the issues that
pervade the residential housing
market. A draft of the code has been
produced by industry specialists and a
formal working group is convening to
develop the draft in accordance with
existing regulations and consumer
protection.
Ultimately, effective regulation is a
better solution than throwing the
system out entirely. Regulation that
can empower and protect consumers
and that holds all parties to account at
the heart of a package of reforms for
the residential housing market is the
only way to drive real change.
Ultimately,
effective
regulation is a
better solution
than throwing
the system out
entirely
London-based
investment manager

www.longharbour.co.uk

The Parliamentary Review Publication, in which this article originally appeared, contained the following foreword from Rt Hon Michael Gove.

Rt Hon Michael Gove's Foreword For The Parliamentary Review

By Rt Hon Michael Gove

This year's Parliamentary Review comes at a momentous time for parliament, as we collectively determine the destiny of the United Kingdom. 

On October 31, the UK will leave the European Union. The successful implementation of this process is this government's number-one priority.

Three years after a historic referendum vote, we will deliver on the decisive mandate from the British people. Trust in our democracy depends on it. Until that final hour, we will work determinedly and diligently to negotiate a deal, one that abolishes the backstop and upholds the warm and close relationship we share with our friends, allies and neighbours in the EU. But in the event that the EU refuses to meet us at the table, we must be prepared to leave without a deal.

As the Chancellor of the Duchy of Lancaster, it is my job to lead on this government's approach, should that scenario happen. Preparing for Brexit is my department's driving mission. But while I am leading this turbocharged effort, the whole of government is committed to this endeavour.

Ministers across Whitehall are working together to ensure that every possibility is considered, every plan is scrutinised and every provision is made. A daily drumbeat of meetings means that we are holding departments accountable, so that preparations are completed on time.

The chancellor has confirmed that all necessary funding will be made available. And we have mobilised thecivil service, assigning 15,000 of our most talented civil servants to manage our exit from the EU.

We will make sure that on November 1, there is as little disruption to national life as possible. Our trade relationships will continue to thrive, thanks to agreements with countries around the world worth £70 billion. Our country will remain secure, thanks to nearly 1,000 new officers posted at our borders. And the 3.2 million EU nationals now living and working among us can remain confident, with absolute certainty, of their right to remain in the UK.

Above all, our goal is to be transparent. Soon, we will launch a public information campaign so that citizens, communities and businesses are ready and reassured about what will happen in the event of “no deal”.

In my first few weeks in this role, I have travelled to ports and tarmacs, borders and bridges, all across the UK –from the seaside of Dover to the rolling green hills of County Armagh. I have heard from business owners and border officials, farmers and hauliers. They are ready to put an end to uncertainty. And they are ready to embrace the opportunities ahead.

Our departure from the EU will be a once in a lifetime chance to chart a new course for the United Kingdom. Preparing for that new course will be a herculean effort. But this country has made astounding efforts before. We can do it again.
Rt Hon Michael Gove
Chancellor of the Duchy of Lancaster