Is it time for the Queen to bring an end to our feudal leasehold system?

The Crown was the very first freeholder in Britain. Over 950 years ago the current Queen’s 24th great grandfather William the Conqueror declared he owned all the land in the country, as you do, and the land still owned by the Crown today traces its roots right back to that time.

fullsizeoutput_658Included in this lucrative portfolio are thousands of leasehold properties where The Crown Estate is the freeholder. Over the last few hundred years this has brought in hundreds of millions of pounds’ worth of income to it. This money came from the leaseholders having to pay their ground to it but more significantly the huge costs of extending their leases.

In this time of overwhelming malcontent aimed at the injustice and unsuitability of the leasehold system is it not time for the Queen to lead the country into the 21st century and end the feudal system once and for all?

Why should the Queen end this feudal nightmare?

The Queen and the Crown Estate add a veneer of respectability to a clearly unjust feudal leasehold system and their refusal to let go of their leasehold portfolio validates the other freeholder’s fervent commitment to retain their ground rent portfolios too.

The majority of professional freeholders have an ingrained feeling of entitlement. They paid for the ground rents and they want to own these properties until the end of time, it is their right after all. They also feel ‘duty bound’ to wring as much money as they possibly can from these investments at the expense of leaseholders using the cover all moral ‘get out of jail card’ of caveat emptor.

If the legal head of our country and ‘uber’ freeholder displays this entitlement, then it validates the same feeling held by other commercial freeholders.

Even if significant changes are soon to be announced by the Government following the recent leasehold consultation there will always be included a legal caveat that omits any ground rents owned by the Crown Estate from being effected by any change to the legislation.

How can leasehold ever be really abolished by legislation changes or be significantly changed if the law itself panders to the aristocracy’s long-held belief in their entitlement to own other people’s homes perpetually and anyone ‘buying’ a Crown Estate leasehold property will only ever be tenants?

fullsizeoutput_aaaConversely, imagine if the Queen announced that from today she would longer own any urban leasehold properties in her portfolio and she initiates moves to alter the land tenure of these investments into one which is closer to commonhold and more fitting for the 21st century?

The effect this would have on leasehold as a viable land tenure, how the legislators approached the coming changes and how the public viewed this unjust feudal system would change overnight, it would sound the death knell for leasehold!

There is another valid reason for the Crown Estate to abolish leasehold and that can be found by examining who actually owns the land, property and assets of the Crown Estate.

Who really owns the Crown Estate?

The Crown estate is technically owned by our current monarch.

Historically the funds derived from the Crown Estate went directly to the Crown and were used to pay for the day-to-day expenses of the royal family and also fund the running of the country. By 1760 the population of the country had risen considerably and the governance of it became costlier. The income from the Estate no longer covered the outgoings of the monarch so George III decided to surrendered control of the Estate’s revenue to the Government in exchange for an annual grant known as the Civil list.

This is still the case today and this year the Chancellor of the Exchequer agreed to increase the Queen’s personal share of the income generated by the Crown Estate to 25% which should bring her around £76.1m in the next 12 months, not bad work if you can get it.

What that essentially means now is that the land and property of the Crown Estate are dually owned by the Crown and our Government (therefore us the tax payers) at arguably a 75% to 25% split.

fullsizeoutput_abbTherefore, if the Government is really serious about abolishing the leasehold system let them start with the ground rents owned by them and the Crown and the citizens of the country currently managed by the Crown Estate?

There could be no more powerful message if this were to happen, a message that proved beyond doubt the Governments intentions surrounding leasehold issues and produces concrete actions that are congruent with the statements currently being made by ministers about leasehold abuses.

Wouldn’t we lose a much needed tax income if this were to happen?

Not at all.

The Crown Estate is now very much run as a professional investment vehicle to match any in the City and on a breath taking scale too. There has been a gradual move away from urban ground rents as profitable investments into large scale commercial investments like high-end shops and offices.

It is difficult to know for certain from the Crown Estate’s financial reports but it seems urban ground rent investments account for around 3% of their total income.

If the Crown committed to ending residential leasehold as a tenure they invested in, then the income that came in from the change from leasehold to commonhold could be used to invest in more commercial leasehold opportunities just not costing the Crown or the tax payer any financial disadvantage.

Maybe we should wait until Prince Charles becomes the next monarch to change the leasehold system?

It is comforting to think that the next Monarch coming onto the throne in a new century would quickly act to end a 1000-year-old feudal system and bring his country into the 21st century but it seems unlikely.

Prince Charles is already a ground rent owning freeholder in his own right through his estate The Duchy of Cornwall and there have been fairly regular adverse headlines over the years caused by his refusal to allow any of his leaseholders the right to buy the freeholds of their own homes from him. Instead he allows them to merely extend their leases thus he ensures perpetual ownership of their homes and gets endless cash injections from them too.

The Crown is a super freeholder which means none of the existing legislation allowing leaseholders to exert their legal rights apply to them if they do not wish to comply. Instead they state that will act ‘by analogy to the relevant legislation’ which means we might choose to comply but we might not, depending where the property is situated.

Bonnie Prince Charlie also uses this legal anomaly fullsizeoutput_abdto refuse permission to his tenants to exert their legal right to acquire the freeholds of their own properties.

It seems unlikely therefore that when he comes to the throne one of his first acts will be to abolish leasehold as he clearly favours the system as a method of generating personal wealth, just like all the other freeholder operating today.

Now is the time for change

There are lots of encouraging statements currently coming from government about possible changes to leasehold but not a single one from the Queen. Included in last year’s Queen’s was a short sentence on the government’s commitment to change leasehold abuse but no personal mention of the freeholds she owns.

The history of leasehold reform over the last 150 years has been one that repeats itself like a feudal ‘ground hog day’. It starts with great public dissatisfaction and anger with the leasehold system which builds until the politicians are forced to take notice culminating in lots of noise from Government and sometimes flawed legislation changes being introduced which tinker around the edges of the real issue or make matters worse.

It is time to change this depressing pattern of events and abolish this deeply flawed system for good and the best place to start is at the very top. Let the Crown Estate and our Government show the way by changing the land tenure on property ultimately owned by the people.

The Crown Estate is currently working with Barratt Homes to build 1050 new homes on land they own in Bingham and we watch with great interest to see if they will be sold as leasehold or freehold.

2 Comments

  1. What do you get in return for payments to the Crown Estate? Protection from the army and police, recording of your private property rights in the Land Registry, and all of the public services that the government provides. If the freehold is sold to a private individual, they will not provide any of these services and the money will instead be paid to a bank or a landlord. Hong Kong and Singapore collect enormous amounts of revenue via leases, if anything the Crown Estate should be expanded. Rent and lease extensions paid to private freeloaders I mean freeholders should be abolished as soon as possible and with as little compensation as feasible.

  2. Very interesting thanks Louis, yes there seems to be a head of steam brewing up to right historic wrongs. I’d also ne uninterested to hear your insights into the ideas of Henry George and Land Value Tax.

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