All 20 contributions to the Leasehold and Freehold Reform Act 2024

Read Bill Ministerial Extracts

Tue 16th Jan 2024
Leasehold and Freehold Reform Bill (First sitting)
Public Bill Committees

Committee stage: 1st sitting & Committee stage
Tue 16th Jan 2024
Thu 18th Jan 2024
Thu 18th Jan 2024
Tue 23rd Jan 2024
Thu 25th Jan 2024
Tue 30th Jan 2024
Wed 28th Feb 2024
Wed 27th Mar 2024
Mon 22nd Apr 2024
Wed 24th Apr 2024
Wed 24th Apr 2024
Mon 29th Apr 2024
Wed 1st May 2024
Fri 24th May 2024
Leasehold and Freehold Reform Bill
Commons Chamber

Consideration of Lords amendments
Fri 24th May 2024
Fri 24th May 2024
Royal Assent
Lords Chamber

Royal Assent & Royal Assent & Royal Assent & Royal Assent & Royal Assent & Royal Assent & Royal Assent & Royal Assent & Royal Assent & Royal Assent & Royal Assent

Leasehold and Freehold Reform Bill

2nd reading
Monday 11th December 2023

(6 months ago)

Commons Chamber
Read Full debate Leasehold and Freehold Reform Act 2024 Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Second Reading
17:12
Michael Gove Portrait The Secretary of State for Levelling Up, Housing and Communities (Michael Gove)
- View Speech - Hansard - - - Excerpts

I beg to move, That the Bill be now read a Second time.

Before proceeding to the heart of the Bill, may I offer a few words of thanks to those who have laboured long in this field? We all know that leasehold and freehold legislation has preoccupied the House not just in this Parliament, but in many Parliaments in the past. Indeed, in the 1860s, 1870s and 1880s, much of the House’s time was taken up debating the finer points of such legislation. I was once described as a young man in a hurry. I am now an old man, but I am still in a hurry, in order to make sure that this legislation makes progress and that we liberate leaseholders from many of the unfair practices to which they are still subject.

I will say a bit more about that in a second, but I want first to say a special word of thanks to my predecessors as Secretary of State, who helped to issue the consultations and lay the groundwork for the measures that we are introducing today. I thank my right hon. Friends the Members for Newark (Robert Jenrick) and for Bromsgrove (Sajid Javid), but in particular I thank the late James Brokenshire, who did so much work to get us to this point. Having thanked them, I cannot but thank my hon. Friend the Member for Redditch (Rachel Maclean), who was a brilliant colleague in the Department and did so much of the heavy lifting to ensure that this legislation was ready to be introduced. She has been a brilliant colleague and a great Minister in so many ways. All the good things in the Bill are down to her; anything that is lacking is down to me.

I also thank members of the all-party parliamentary group on leasehold and commonhold reform, who have worked so hard for so long to ensure that the ground could be laid for today’s legislation. I thank the hon. Member for Ellesmere Port and Neston (Justin Madders) for his work and, in particular, his predecessor, the former MP for Poplar and Limehouse, Jim Fitzpatrick. I must thank the Father of the House, my hon. Friend the Member for Worthing West (Sir Peter Bottomley), who has been the single most consistent and bravest voice in standing up for leaseholders. I also thank—even though she is not in the Chamber—the hon. Member for St Albans (Daisy Cooper), who speaks on behalf of the Liberal Democrats and has contributed to the work of the APPG.

The APPG would not have been able to do its work without the Leasehold Knowledge Partnership. In particular, I thank Martin Boyd, who has been hired by the Government to head up our Leasehold Advisory Service, and Sebastian O’Kelly. Both have contributed to helping leaseholders and providing them with the advice and counsel they need to navigate this tangled landscape. I also thank the campaigners, some of whom I had a chance to talk to earlier, who have been indefatigable in making it clear that the law needs to change. I thank, in particular, Katie Kendrick, Cath Williams and Joanne Darbyshire, all of whom have made an impeccable case for change throughout.

What is the problem that we are trying to solve? Basically, it is this: leasehold as a form of tenure is essentially a deal where someone is invited to buy a home and then, instead of becoming a full homeowner, they are treated, or can be treated, as a tenant. It is a fundamentally unfair system and a fundamentally inequitable tenure, because those who buy flats and—increasingly, in recent years—houses, in good faith, paying market rates, assuming and hoping that they would be homeowners in the fullest sense of the word, have found that, rather than being homeowners, they are at the whim of the ultimate owner of the freehold, who is in effect their landlord.

In the past, there were justifications. There were cases and examples where those who held the freehold operated in an enlightened and paternalistic way. For example, the freehold of properties was sometimes held by trade unions or other enlightened organisations that would ensure that the common interests of all those within a particular building were looked after. It is still the case that some landowners and freeholders take their obligations towards leaseholders seriously, ensure that the service charges are levied in an appropriate way, keep the ground rent at an appropriately low level, and ensure that the building is maintained in a good state of repair. However, individual leaseholders should not simply have to rely on the good will and good character of whoever the freeholder is; they need better protection in law, which is what we seek to achieve with the Bill.

Alexander Stafford Portrait Alexander Stafford (Rother Valley) (Con)
- Hansard - - - Excerpts

Many of the leasehold homes in Rother Valley were built by the National Coal Board to provide homes for miners and their families, with the intention that the ground rent would be peppercorn, but since the closure of the pits many of those freeholds, especially in areas such as Thurcroft, Wales and North Anston, have been sold to private developers who are taking advantage of their leaseholders. For example, in Thurcroft, leaseholders were forced to represent themselves in court when the freeholder tried to raise the ground rent from £10 a year to £2,500 a year, which is absolutely shameful. How can we ensure that freeholders must act reasonably, and not stray too far from the spirit of the original legislation?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

My hon. Friend is absolutely right. The miners’ families and their descendants, whom he represents so well, were originally in homes that the NCB established to ensure that those in the pit villages he represents would have a proper landlord, providing stewardship, care and support, but as he rightly points out, the freehold ownership has subsequently been used not as an obligation towards the leaseholder but as a commodity to be traded. More and more freeholds are in the hands of entities, often based offshore, that regard them as a licence to extort from the leaseholder, rather than as an obligation to be discharged.

Stephen Doughty Portrait Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
- Hansard - - - Excerpts

I have raised concerns on behalf of leaseholders in my constituency on many occasions in this House—particularly on the issue of service charges, which the Secretary of State referred to a moment ago, and the lack of transparency around them. I have seen again and again cases where certain information is not provided to leaseholders, where they are not sure that the moneys are being spent on what they have provided funding for, or where it is not clear whether, for example, there has been an adequate tendering process for works, insurance and so on. Can he explain what will be done on that, and whether it will fully extend to England and Wales? What co-operation has he had with the Welsh Government about those provisions?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

It is the case that this Bill covers England and Wales. Obviously the hon. Gentleman is aware that there are slightly different tribunals that operate in each jurisdiction, but it will precisely address the situation he mentioned: it will ensure there is transparency over service charges and, through the appropriate tribunal in each jurisdiction it will become easier on the part of the leaseholder to contest any unfairness.

None Portrait Several hon. Members rose—
- Hansard -

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I just want to make one or two additional points and then I am happy to give way.

Personally, one of the moments where I realised that the system, which is hard to defend in any case, was fundamentally broken was in the aftermath of the Grenfell tragedy. We knew then that it was important that responsibility be taken for remediating buildings that were unsafe. We knew then that individuals and organisations had to take that responsibility on their own shoulders. We knew then that freeholders, if they were true to the spirit of the original legislation, would say, “Yes, we have a responsibility for this building and for all those within it. We have a responsibility to make sure this building is safe. Therefore, we should have a responsibility to pay for the remediation.”

But did we find freeholders queueing up to do that? Absolutely not. They were there ready to extract income at the highest possible rate whenever they could, through ground rents and service charges, but when they were called upon to discharge their responsibility to the leaseholders within those flats, they were absent. They ran away from their responsibilities. That is why I have limited to no patience now with the well-funded lobby groups that stand up for those freeholders and seek to ensure that they can continue to extract money from leaseholders. It seems to me that, at a critical point, the argument that is sometimes made on behalf of those people disappeared because of their negligence and their moral fault.

Kevan Jones Portrait Mr Kevan Jones (North Durham) (Lab)
- Hansard - - - Excerpts

The right hon. Gentleman says that traditionally it was flats that were leasehold, but increasingly it was houses, mainly fuelled by the Government’s Help to Buy scheme. In my constituency, Persimmon Homes’s business model was structured around not only selling on the leaseholds, but the tactic of including areas of the estate that traditionally would have been passed over to local authorities as the responsibility of the leaseholders. Would he agree that the Government need to take some responsibility for the tsunami of money they threw at some of those developers, and for turning a blind eye to what they were doing in their business models?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I take the right hon. Gentleman’s point, but he is conflating two things. Help to Buy can be criticised or defended on its own terms, and I believe it was the right intervention to ensure, in particular, that more first-time buyers could get on to the property market. However, he is also right that leasehold, which as he says was originally a tenure designed for flats, was then extended to houses, and in a way that is difficult to defend. It has expanded over recent years. That is why we are legislating now to ensure that we can stop it. There are two separate arguments that can be had there.

Julian Lewis Portrait Sir Julian Lewis (New Forest East) (Con)
- Hansard - - - Excerpts

I particularly look forward to that part of the Secretary of State’s speech when he will tell us whether this will apply to new leaseholds or will be retrospective on those suffering under existing leasehold arrangements. However, there is one step the Government took that has not been helpful to leaseholders, and of which I have personal experience: creating a presumption in favour of developments where the airspace above a block of flats is sold and the freeholder then insists on having one or two more floors built on top. That can cause immense damage to the building, not to mention disruption, and then who gets the bill for paying for the damage? It is transferred from the freeholder to the leaseholders. The Government should think again about that presumption in allowing that sort of ill-considered development.

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

My right hon. Friend makes an important point on permitted development rights. On the whole, I am in favour of the extension of permitted development rights, because I want to see an increase in housing supply overall, but it is incumbent on the Government to review how those rights have been operating. He raises one concern, but there are other legitimate concerns about the way permitted development rights, when commercial buildings have been turned into residential, have meant that the quality of those new residential flats has been insufficiently high. I also know that colleagues, not least in London, are concerned about potential future extensions of permitted development rights. There is a responsibility on me and others to review their impact, and that is what we are doing, separate from this particular legislation.

None Portrait Several hon. Members rose—
- Hansard -

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

An embarrassment of riches! I will give way to all colleagues currently standing, and then I will try to make progress.

Mark Tami Portrait Mark Tami (Alyn and Deeside) (Lab)
- Hansard - - - Excerpts

I represent an area with a lot of leasehold houses. It is just a cynical money-making scam. Some people own a house but are required to pay an admin charge to change the flooring or have a pet, so it does not feel as if they own it. I can understand the flooring thing if they are in flats, but not if they are in houses. It is just a con.

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I couldn’t agree more.

Stella Creasy Portrait Stella Creasy (Walthamstow) (Lab/Co-op)
- Hansard - - - Excerpts

One of the challenges here is the lack of voice for our constituents in trying to address the problems. The Secretary of State says that he cannot defend leasehold. None of us can. It is a feudal process that still denies our constituents a voice over the thing that is most precious to them: their home. If he agrees with that, why will he not agree with us that we should move forward to commonhold, whereby everybody has a voice and a say in their own building?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I actually agree that commonhold is the ideal form of tenure, but there are certain technical questions about when commonhold can apply, not least if a building also has commercial uses on the lower floors.

Rachael Maskell Portrait Rachael Maskell (York Central) (Lab/Co-op)
- Hansard - - - Excerpts

When we come to clause 27, will the Secretary of State clarify whether “best value” applies to leaseholders or to freeholders? It certainly seems that leaseholders do not get best value when testing what additionalities and enhancements are put into their schemes.

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

That is certainly true and I quite agree.

Munira Wilson Portrait Munira Wilson (Twickenham) (LD)
- Hansard - - - Excerpts

The Secretary of State was talking about leasehold houses. I was recently visited by a group of residents from Hampton Wick in my constituency who have been collectively trying to buy the freehold on their houses. They have a very obstructive freeholder and are now resorting to an enfranchisement notice under section 5 of the Leasehold Reform Act 1967, but that requires a valuation from 1965, for which there are no records available, so they are now being obstructed in buying the freehold by that legislative basis. When the Bill introduces a new methodology for calculating the value of enfranchisement, will that old provision be got rid of?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I believe that it should be, and I encourage the hon. Lady’s constituents—as I am sure she has done—to be in touch with Martin Boyd’s Leasehold Advisory Service to be absolutely clear that they are getting the support they need.

Clive Betts Portrait Mr Clive Betts (Sheffield South East) (Lab)
- Hansard - - - Excerpts

It is a little disappointing that the Secretary of State did not refer to the Levelling Up, Housing and Communities Committee’s report of 2019. The Government, working with the APPG, have followed many of the report’s recommendations, but some of those recommendations —we will come to them later, with your permission, Mr Deputy Speaker—have not been included, so I will make just a couple of points.

The real challenge is, first, that freeholders who will not comply with any legislation, or will try to avoid it, do not reply to letters. I have exchanged information with the Minister for Housing, Planning and Building Safety on how to deal with Coppen Estates and what the penalties will be for non-compliance. Secondly, there are freeholders who seek to move the ownership of a property around in order to avoid the legislation. Why not give existing leaseholders the right of first refusal before any freehold is sold?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I am very grateful to the hon. Gentleman and his Committee for all their work—it was discourteous of me, when running through the names of those to whom I am grateful, not to mention them. His broader point, about not just the operation of the freehold system but the way in which different aspects of the property market work, is a fair one. The use of opaque overseas entities and special purpose vehicles—the way in which ultimate beneficial ownership can be hidden—are all problems that require to be addressed. The Bill is pretty lengthy and substantial, and deals with many of the issues—I will go on to explain why we have taken the approach that we have—but there are other abuses within the property and land market system that require to be addressed, which we will address, and not just in this Parliament but after we are returned at the next general election.

Natalie Elphicke Portrait Mrs Natalie Elphicke (Dover) (Con)
- Hansard - - - Excerpts

I thank my right hon. Friend for giving way, and for the pragmatic approach that the Government have taken in this very complex area. In my constituency of Dover and Deal, we have a failed development—Sunningdale homes—and a long-standing problem with Persimmon Homes in relation to Sholden. Both situations relate to the lack of adoption by local authorities, and to service charges and other management arrangements. I would be grateful if my right hon. Friend could say more about the way in which those sorts of situations will be helped, and whether there will be any retrospective help for situations that have remained unresolved for many years.

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I am very grateful to my hon. Friend. She and my hon. Friend the Member for North East Bedfordshire (Richard Fuller) have been particularly energetic in pressing me to deal with this issue of leasehold homes—fleecehold estates, as they have become widely known—which is, I believe, precisely the phenomenon that the right hon. Member for North Durham (Mr Jones) was also referring to.

The Bill will ensure that there is a ban on new leasehold homes, but as well as averting that problem in the future, we are attempting to deal with the difficult situation we have all inherited. We will do so by making sure that we squeeze every possible income stream that freeholders currently use, so that in effect, their capacity to put the squeeze on leaseholders ends. That will mean the effective destruction of the leasehold system. Do not take my word for it: as Sebastian O’Kelly of the Leasehold Knowledge Partnership has made clear in his writing,

“The Bill is a full-on assault on leasehold’s income streams”.

First, we have a consultation on ground rents. I cannot pre-empt that consultation, but at its conclusion, we will legislate on the basis of that set of responses in order to ensure that ground rents are reduced, and can only be levied in a justifiable way. As I say, I cannot pre-empt the consultation, but in a way I already have, because I was asked by the Select Committee last week what my favoured approach would be, and I believe that it should be a peppercorn. Of course, if compelling evidence is produced, as a Secretary of State with great civil servants, I will look at it, but my preference is clear, and I suspect that it is the preference of the House as well.

Indeed, it is important to say that that particular squeezing of the freeholder’s income stream goes beyond what the Law Commission recommended. We are really grateful for all of the Law Commission’s work, but it was a little bit cautious in this area; we are deliberately saying no. I know that some people will say, “What about A1P1 rights under the European convention on human rights? You are taking property away from people.” I respect the ECHR, but if it stands in the way of me defending the interests of people in this country who have been exploited by ground-rent massaging, I am determined to legislate on behalf of those people, because their interests matter more than that particular piece of legislation.

Matt Rodda Portrait Matt Rodda (Reading East) (Lab)
- Hansard - - - Excerpts

I am grateful to the Secretary of State for the way he is addressing this issue. Can I draw his attention to a particular variant of this practice that exists in my constituency? Between a developer and a local authority, a scheme was allowed whereby residents were—and continue to be—charged for access to public open space on their estate and, indeed, to maintain a neighbouring park that residents across the district can enjoy. That is surely wrong, and I hope he will look into that matter.

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

The hon. Gentleman is absolutely right: a number of the people who have built, operated and retain the freehold on these estates levy service charges for all sorts of things that, in my view, are totally inappropriate. That is why the Bill makes clear that service charges have to be issued in a standardised format, so that they can be more easily scrutinised and challenged. It also makes clear that those charges can be challenged in such a way as to ensure that egregious examples, such as the one the hon. Gentleman has mentioned, will end.

Edward Leigh Portrait Sir Edward Leigh (Gainsborough) (Con)
- Hansard - - - Excerpts

I am not against what the Secretary of State is trying to do, but philosophically there is a reason why the Conservative party has been the defender of property rights. It is to do with freedom and established rights, so it is nothing to do with the ECHR or anything like that. Before this debate becomes just about bashing landlords, what about the Duchy of Cornwall? There are excellent freeholders that have traditionally maintained properties and done wonderful work in ensuring that properties are well maintained and in looking after their tenants.

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I quite agree with my right hon. Friend. There are good landlords, and the Duchy of Cornwall has been a stand-out example, as have been the Cadogan estate, the Howard de Walden estate and so on—they are responsible landlords, absolutely—but an individual leaseholder should not have to rely on the good will and the grace of His Grace, as it were, to get the protection they need.

There is no stauncher defender of capitalism and property rights than me, but what has happened is that freeholds have become utterly torn away from the warp and weft of the capitalist system as we understand it in this country, and have become tradeable commodities that foreign entities are using to exploit our people who have worked hard and saved to get their own home. So whose side am I on—homeowners who have worked hard and saved up to secure a mortgage, or shadowy foreign entities that are essentially attempting to rip off British citizens? I am on the side of homeowners.

Rachel Maclean Portrait Rachel Maclean (Redditch) (Con)
- Hansard - - - Excerpts

When the Secretary of State is considering the evidence from the consultation he mentioned, will he adhere to his own adage of “follow the money”, and remember that those people advocating for a higher ground rent probably have a motivation for doing so?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

My hon. Friend is completely right. I will be looking at the responses to the consultation, and I am sure that some of London’s finest legal firms and most eloquent solicitors will be putting in some very thoughtful contributions, but the question will be: who is paying for them and how much are they being paid? To my mind, people can buy silver-tongued eloquence, but what is far more important is actually being on the right side of justice.

Marsha De Cordova Portrait Marsha De Cordova (Battersea) (Lab)
- Hansard - - - Excerpts

Will the Secretary of State give way?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I believe that most of the people in the House are on the right side of justice, especially the hon. Lady.

Marsha De Cordova Portrait Marsha De Cordova
- Hansard - - - Excerpts

On ground rents, shared owners who have staircased their way up to 100% and become leaseholders obviously have a long lease of 999 years, but face the issue of having their ground rents doubled every, say, 20 years. Clearly, that is an unfairness in the system, so will the Secretary of State’s consultation address that point?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I believe it will. I must now make progress because I know a number of people want to contribute, so I will try to run through the other arguments about why we are taking the approach that we are.

I mentioned service charges, and one other example, to which the Father of the House has of course persistently drawn our attention, of where those who have been managing properties on behalf of the ultimate owners have abused their position is that of insurance commissions. We will be taking steps in the Bill to make sure that insurance charges are transparent and that fair handling fees are brought in. The fact that I can list all these examples just shows hon. Members the way in which freeholders have operated. Many who have got hold of such freeholds have been thinking, “Right, okay, we can jack up the ground rent, great! We can have service charges, keep them opaque and add something. Tell you what—insurance; let’s try to get more out of that.” It is a persistent pattern of behaviour that does require reform.

Another pattern of behaviour is the way that lease extensions and the whole question of enfranchisement have been going. If someone’s lease goes below 80 years and they want to enfranchise themselves, they have to pay what is called marriage value. That is the principle that, by bringing together the ownership of the freehold and the leasehold in one by enfranchising themselves—bringing those two together in a marriage—people are enriching themselves. Again, however, it has been used by freeholders to bilk leaseholders overall, which is why the approach we are taking will in effect eliminate marriage value. It is also why, when we talk about lease extension, instead of people having to extend and extend again generation after generation, we are saying that leases can be extended to 990 years. In effect, as I say, this will make sure that one of the approaches that freeholders have taken to extracting more cash from leaseholders will end.

Stephen Timms Portrait Sir Stephen Timms (East Ham) (Lab)
- Hansard - - - Excerpts

I agree with the Secretary of State about the seriousness of the problem of excessive insurance premiums being charged to leaseholders, and I will give an example if I am able to contribute later. Does the Secretary of State agree that the solution requires risk-pooling among insurers? The initiative on that seems to have stalled; can he hold out the prospect of the delay being resolved?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

Broadly on the whole question of insurance, I am due to meet the chair, Baroness Morgan of Cotes, and the chief executive of the Association of British Insurers later this week to address not just that question but some other related questions.

Rachael Maskell Portrait Rachael Maskell
- Hansard - - - Excerpts

Will the Secretary of State give way?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

I won’t at this stage.

I freely admit that this Bill does not go as far as some in the House and elsewhere would like. Strong arguments have been made about how property agents can be better regulated and Lord Best in another place has made arguments that I find incredibly persuasive—so why not legislate for them now? Well, as I mentioned earlier, this Bill has many clauses, deals with technical aspects of property law, requires close scrutiny and is likely to face a lobbying exercise from deep-pocketed interests outside attempting to derail it. Legislating to give effect to Lord Best’s proposals and to set up a new regulator—I am always a wee bit wary about setting up new quangos but on this occasion he makes a good case—would require significant additional legislative time of a kind we simply do not have in the lifetime of this Parliament. There are changes we are making overall in order to deal with some of the abuses for which managing agents are responsible, but there is still some unfinished business. I happily grant that, and there are organisations like FirstPort, which many of us will be familiar with from our work as constituency MPs, that require some gentle direction towards behaving in a better fashion.

Richard Fuller Portrait Richard Fuller (North East Bedfordshire) (Con)
- Hansard - - - Excerpts

I am grateful to my right hon. Friend, my hon. Friend the Member for Redditch (Rachel Maclean) and Ministers for bringing the Bill forward. The Secretary of State spoke about leasehold improvements and improving the rights of leaseholders, but he will be aware that part 4 of the Bill looks to protect and improve the rights of families who hold the freehold of their property against the estate management charges about which he is speaking; the Bill does a lot to meet some of the requests of many of my Conservative colleagues on this matter.

One issue that is not addressed in the Bill, however, is the right to manage. In the 2019 response to the 2017 consultation, the Government said they would look at that and introduce legislation. What is the current Government thinking on giving people the right to manage, and therefore to take back control from the estate management companies?

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

My hon. Friend makes a good point. I was going to say there are two other areas in particular that we should look at in Committee: the right to manage; and the abuse of forfeiture, which is sometimes used by freeholders to intimidate leaseholders. I am very open to improving the Bill in Committee; we will be improving it ourselves by bringing forward the legislation that will ban new leasehold homes in the future, so I hope we will have a chance to do that.

I mentioned earlier that we have been debating leasehold and freehold in this place for a long time. In the preparation of this Bill, one of the brilliant civil servants in the Department drew to my attention comments made by Harry Levy-Lawson, 1st Viscount Burnham and MP for St Pancras, as it happens, when the Leasehold Enfranchisement Bill 1889 was brought forward by another great reforming Conservative Government under the Marquess of Salisbury.

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

Exactly: the Minister is, like me, a great fan of the Marquess.

In that debate the opening remarks of the Minister were:

“We do not claim for this Bill any perfection of draftsmanship, but it is so far complete that if it pass through Parliament, we believe it would be smooth, just and reliable in its working. The principle, however, is now exactly what it has always been, viz., the grant to urban leaseholders, with a substantial interest in their holdings, of the power to purchase the fee simple”—

the ownership—

“on fair and equitable terms.”—[Official Report, 1 May 1889; Vol. 335, c. 889.]

This Bill does so much more. Is it perfect? No, I would not claim for this Bill any perfection of draftsmanship. Is it substantive—does it move the dial, does it change the business model, will it effectively mean that leasehold will become a thing of the past? I believe absolutely it will, and I am fortified in that belief by the strong support for this legislation shown by leasehold campaigners. I commend the Bill to the House.

17:44
Angela Rayner Portrait Angela Rayner (Ashton-under-Lyne) (Lab)
- View Speech - Hansard - - - Excerpts

It is a pleasure to open this debate on behalf of the Opposition. Let me say at the outset that we do not intend to oppose the Bill today. Simply, it is better late than never. May I associate myself with the Secretary of State’s comments at the start of the debate, because many people have contributed and campaigned on this issue over the years that it has been spoken about? Many have long needed this overdue Bill, and they need it to be improved. Leaseholders across the country have been waiting for years—six years, to be exact—to see the Government’s flagship Bill to end leasehold and to break free the millions of people trapped in what the Secretary of State himself describes as a feudal and absurd system of home ownership.

If this is the Secretary of State going in a hurry, I would hate to see his normal pace. It was back in 2017 that his fifth predecessor as Housing Secretary pledged action. He talked a good talk today, and he is theatrical. I love the passion—it is really there—and I love the “squeeze”. We want to see the squeeze, but frankly I have lost count of the number of times Ministers have promised to finally put Britain in line with other developed countries across the world that have all ended this medieval system. To be fair to the Secretary of State, none of them has said it is an assault on leasehold and a squeeze on income, so he is going a little bit further, but after all that time and all those promises and after that theatrical squeeze, we still have a Bill that does not actually abolish leasehold. I suppose that that is no surprise, as it comes alongside a Bill that pledges to ban section 21 no-fault evictions that does not ban no-fault evictions and a Bill to stop the small boats that does not stop the small boats.

It is all well and good for the Secretary of State to say that the Government plan to amend the Bill in the usual way, but is it too much to ask for the Government to include a clause that bans leasehold in a Bill whose stated purpose was to ban leasehold? Why make those promises, only to produce a Bill that does no such thing? In a word, it sounds like chaos. Even the day before it was published, the Department’s press release said that the Bill would ban developers from selling new houses under leasehold. Given the tiny proportion of leaseholds that are houses, rather than flats, it is hardly an ambitious pledge, but the Bill does not even introduce that ban.

Kevan Jones Portrait Mr Kevan Jones
- Hansard - - - Excerpts

Does my right hon. Friend agree with what I said to the Secretary of State? The Government could have stopped this, if they had not done the Help to Buy scheme, which fuelled this practice among large developers. They could have stopped it in its tracks, if they had stopped the finance to those companies. Does she also agree that expectations have been raised among a lot of the leaseholders who were put into the trap of their houses being leasehold? They thought they were going to get out of that trap, when actually they are not.

Angela Rayner Portrait Angela Rayner
- Hansard - - - Excerpts

I absolutely agree with my right hon. Friend. The Government have been in government for 13 years. We have had six years of these promises, and he is absolutely right that there is more than one way that the Government could have ensured that leaseholders were not treated in this way. The botched drafting of the Bill means we are still waiting to see a single clause that prohibits a single new leasehold property, whether it is a flat or a house.

It was on 30 January this year that the Secretary of State promised my predecessor, my hon. Friend the Member for Wigan (Lisa Nandy),

“we will maintain our commitment to abolish the feudal system of leasehold. We absolutely will. We will bring forward legislation shortly.”—[Official Report, 30 January 2023; Vol. 727, c. 49.]

In February, he said he aimed in the forthcoming King’s Speech

“to introduce legislation to fundamentally reform the system…to end this feudal form of tenure”.—[Official Report, 20 February 2023; Vol. 728, c. 3.]

In May, the then Housing Minister told this House that

“my Department are working flat out”—[Official Report, 23 May 2023; Vol. 733, c. 214.]

on the legislation. If it has taken them this long with not a word to show for it, can they guarantee that they will put their amendments to the House by 30 January next year—a full 12 months after the Secretary of State’s promise at the Dispatch Box?

We have heard the Secretary of State say that it is perfectly normal to bring forward vast swathes of amendments in Committee—believe me, the Committee will be doing some considerable heavy lifting. Having shadowed him through the final stages of the Levelling-up and Regeneration Bill, I would say that perhaps he does think that making endless last-minute amendments to his own Bills is a normal way of legislating, but the anonymous sources close to the Secretary of State may have let the cat out of the bag about the real reason the Bill is so empty when they briefed the press last month. We know from them what he cannot admit today: the Prime Minister was blocking this Bill from the King’s Speech in the face of lobbying from vested interests opposing the reform. In the chaos of this Government, it was added only at the very last minute. We may have heard many warm words, and the Secretary of State was very theatrical about his ambition for reform, but he is stuck in the daily Tory doom loop in which vested interests always come before the national interest.

The truth is that the time wasting and backtracking all go back to the Prime Minister’s desperate attempt to extend the lease on No. 10 Downing Street. The fact is that even if the Government belatedly fix their leasehold house loophole, flat owners will be left out of the picture, yet 70% of all leasehold properties are flats and there are over 600,000 more owner-occupied leasehold flats than houses in England. Having listened to the Secretary of State, those owners will still be wondering just when the Government will fulfil their pledge to them. As I am sure everyone in the House will agree, property law is, by nature, extremely complex, but we cannot and must not lose sight of the daily impact that these laws have on the lives of millions across our country, including over 5 million owners of leasehold properties in England and Wales. I am sure that most of us in the House know what that means in human terms for our constituents.

For most freehold homeowners, ownership means security and control, yet for far too many leaseholders, the reality of home ownership falls woefully short of the dream they were promised. Too many leaseholders face constant struggles with punitive and ever rising ground rents—rent for a home that they actually own, in exchange for which the freeholder needs to do nothing at all. Leaseholders are locked into expensive agreements and face unjustified administration fees and extortionate charges. Conditions are imposed with little or no consultation. For leaseholders also affected by the building safety crisis, the situation is even worse.

Michael Gove Portrait Michael Gove
- Hansard - - - Excerpts

The right hon. Lady has made it clear from the Dispatch Box that she opposes excessive ground rents. Can she explain why the Labour leader made it clear at the Labour party conference that he would get new houses built by creating “attractive investment products” that had residential ground rents at their heart? How can it possibly be the case that she intends to deal with excessive ground rents, when the leader of the Labour party wanted to fund new development by pursuing precisely that policy? Which is it: against them or for them?

Angela Rayner Portrait Angela Rayner
- Hansard - - - Excerpts

I thank the Secretary of State, but he has just used the word “excessive”. If he wants to let me deal with this problem, I am happy to take over and show that I am not just about theatrical performances at the Dispatch Box; I will actually deal with it. He has been given 13 years on the Government Benches and has failed to do that. This Bill still fails to do that, so I would like to see where he will deal with this issue.

Regulation of freeholders has fallen behind that of landlords, leaving leaseholders stripped of the rights enjoyed even by tenants in the private rented sector. Perhaps the Secretary of State can tell us what measures exist that prevent the worst actors in the market from repeatedly ripping off leaseholders in one place after another.

Stephen Doughty Portrait Stephen Doughty
- Hansard - - - Excerpts

My right hon. Friend is making a strong speech, and she accurately describes the mental and financial anguish that has been felt by many leaseholders in my constituency. She is absolutely right. In my constituency, this issue predominantly affects those in flats, not in leasehold houses, and what they have gone through with service charges and fire and building safety remediation has taken a toll on many of them. They have found themselves in despair. Does she agree that much more needs to be done to deal with managing agents on the transparency of service fees? It was good to hear the Secretary of State mention FirstPort, and I hope to meet it soon, but does she agree that this is a much wider problem that needs to be addressed?

Angela Rayner Portrait Angela Rayner
- Hansard - - - Excerpts

I absolutely agree. As I said before, and as I think the Secretary of State acknowledged, there is a lot of work to be done in Committee on these issues. Hopefully, we will be able to help the Secretary of State improve his own Bill, which needs significant improvements.

Alistair Strathern Portrait Alistair Strathern (Mid Bedfordshire) (Lab)
- Hansard - - - Excerpts

I suspect that my right hon. Friend will welcome the strengthening of the regulation of management companies in the Bill, but we need to go further. Just last Friday, I had some heartbreaking conversations with residents on the Froghall Fields estate in Flitwick—a lovely part of the world with which I am sure many Members will be familiar from the by-election—who have been left brutally exposed to successive failed management companies by ongoing adoption conversations with the council that are dragging on and on. Does my right hon. Friend agree that there is more we can do to strengthen the proposed regulations in this area, to ensure that my long-suffering residents finally get the redress and resolution they deserve?

Angela Rayner Portrait Angela Rayner
- Hansard - - - Excerpts

I absolutely agree with my hon. Friend. I am so pleased about the work he has been doing since he was elected to this place and the way in which he has been a real champion of his constituents, which they did not feel they had previously. He makes a really important point, and he is right to point out the huge problem of estate agent charges and fees. The steps the Government are taking to address the issue are welcome, of course, but we absolutely believe there is room to improve the measures in the Bill. The shadow Housing Minister, my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook), will look to do so in Committee.

Clive Betts Portrait Mr Betts
- Hansard - - - Excerpts

Following on from that point, when the Select Committee looked at this issue—it is a real problem—we said that whenever a property is sold, the purchaser or leaseholder, and in some cases the freeholder, should have a right at the beginning to see precisely what the agreement was between the local authority and the developer about where responsibility for ongoing maintenance of the estate and so forth rests. Many purchasers simply do not know who to go to and who is responsible. It would be helpful if that was set out very clearly at the beginning of the purchase.

Angela Rayner Portrait Angela Rayner
- Hansard - - - Excerpts

I absolutely agree, and I congratulate my hon. Friend on his fabulous work in this area. Transparency is incredibly important because it is the first step towards getting accountability.

We spoke before about pets—we all love our pets—and the Secretary of State has rightly protected the reasonable right of tenants to keep pets, yet it is not clear whether he intends to extend that right to leaseholders. I have seen leases that contain an outright ban, so I hope he ensures that the Bill reflects that. It is just one example of the restrictions that terms in leases increasingly impose, but I could cite many more—for example, basic modifications or decorations to flats, or the right to conduct business from home. I know that some Government Members may not be keen on working from home, but it is quite another thing to say that someone could lose their home over it. They might be more sympathetic if I point out the impact on the self-employed, who are often banned from running their own business from their own home.

There are basic principles at stake for the Opposition, and I hope the whole House can agree that people’s rights to bring up a family, to care for a loved family pet, to own and run their own business, and to pay a fair price and receive what they have paid for are basic British rights and values. The incredible thing is that they are being denied to people in their very own homes—homes that they own. That is surely at the heart of today’s debate, because for leaseholders, their flat or house is not an investment; it is their home—a place to live, to grow up, to grow old, to raise a family, to get on in life and to be part of a community. A home is more than bricks and mortar; it is about security and having power over your own life.

As a leaseholder, someone may have ownership but not control. The dream of home ownership has already slipped away from far too many, but it is less of a dream and more of a nightmare for too many who now achieve it. From what the Secretary of State has said, there is some agreement between us on the problems those people face, but the contents of the Bill do not quite match up to his sentiments or the energy that he brings to the Dispatch Box. So I hope that in winding up, the Minister will not just tell us exactly how far the Bill addresses the problems raised today but accept that we can work together in later stages to go further.

Rachael Maskell Portrait Rachael Maskell
- Hansard - - - Excerpts

This is a point that I wanted to make to the Secretary of State as well. There is a long-standing injustice for leaseholders who experience flooding as they currently do not have access to the Flood Re scheme. Will my right hon. Friend seek—I hope she will—to ensure a level playing field for leaseholders and freeholders in accessing the Flood Re scheme?

Angela Rayner Portrait Angela Rayner
- Hansard - - - Excerpts

I thank my hon. Friend for that. Just as the Secretary of State earlier brought enthusiasm to the Dispatch Box on cladding and some issues we faced there, I hope that, in Committee, we can explore that and the effect on people who have been affected more and more by flooding.

The Secretary of State may not have the support of his Prime Minister, or his Back Benchers—[Interruption.] Many of them are not here at the moment—watch this space!

On the Labour Benches, we are united behind the decisive action that leaseholders need. If the Government cannot deliver it, we are ready to do so. A Labour Government will make commonhold the default tenure for all new properties as part of our commitment to fundamentally and comprehensively reform the leasehold system. We will also enact the Law Commission’s recommendations on enfranchisement, commonhold and the right to manage in full.

The fact is, unless and until leaseholders of houses and flats get a renewed commitment from Ministers on all the Law Commission’s recommendations, leaseholders will reasonably conclude that the Government have scaled down their ambition with the scaled-back Bill before us. Leaseholders deserve to know the real reason why they are being fobbed off with such limited steps. Unfortunately, the answer, as ever, lies in the chaos of this Government. The Secretary of State has talked a good game, but he might be the only functional cog in a dysfunctional Government—there is a compliment in there; I am trying. [Laughter.] I hope that he will face down his Prime Minister and his own Back Benchers and accept Labour’s proposals to make the Bill meet the challenges of the moment. But if he does not, a Labour Government will.

Rosie Winterton Portrait Madam Deputy Speaker (Dame Rosie Winterton)
- Hansard - - - Excerpts

I call the Father of the House.

18:02
Peter Bottomley Portrait Sir Peter Bottomley (Worthing West) (Con)
- View Speech - Hansard - - - Excerpts

The House will be grateful to know that the official Opposition support what the Government are trying to do. I pay tribute, as the right hon. Member for Ashton-under-Lyne (Angela Rayner) and my right hon. Friend the Secretary of State did, to the people in the all-party parliamentary group on leasehold and commonhold reform—Liberals, Labour, Conservatives and others—who, over the last 11 years, have worked together to try to get to a situation where it is not possible for freeholders, on purpose or by mistake, to exploit residential leaseholders.

When I first spoke on this issue about 11 years ago, I declared my interest as a leaseholder in my constituency with no problems whatsoever. Six of us bought the freehold willingly from a willing seller—the person who developed the block of flats—when he retired. I have since acquired an interest in another leasehold property. I do not take part in these debates to try to feather my own nest; I am trying to ensure that the 5 million people who are in a worse position have as good an experience as I have had.

It is 10 years since I first started quoting Leasehold Knowledge Partnership. In addition to Sebastian O’Kelly and Martin Boyd, whom the Secretary of State referred to as well as the campaigners in the National Leasehold Campaign, I would like to name one or two journalists who have helped—in particular, the people at “Newsnight”—and the people who have batted away at the issue. Major media organisations ought to have a housing correspondent or editor rather than putting it with home affairs. We cannot expect Mark Easton at the BBC, when he covers the Home Office, to be able to become expert in residential leasehold in the way that is needed.

I hope that in Committee, and especially in the House of Lords, the parts of the Law Commission’s recommendations that have not been incorporated in the Bill will be put forward for decision by the House and the other place. The three reports that it produced in 2020 should be implemented in full, or else, when those reports came out the Government should have said what was wrong with the proposals.

May I emphasise what the Secretary of State said about the ongoing consultation and continuing conversation on modern leasehold—the ground rent issue—where the period of consultation has been extended from, I think, late-December to the middle of January? People will be grateful for that. There are five options. As Dean Buckner, a trustee of LKP, the campaigning charity, has said, those who own freehold interests have known since Scotland abolished leasehold that the gravy train was going to end. When the Government came forward with the proposal that ground rent should not be more than 0.1% of the capital value, they knew that their value was not as high as some were estimating, and when people start looking at the discount rate—I think in the impact assessment it is about 3.5%; in fact, long-term debt for the Government is now at 4.5%—they see that that again will reduce it. I make the suggestion, which is also on the LKP website, that the Government can deal with any possible compensation by saying that they will tax it at 45% or higher, which will make attempts by people to take it to judicial review or challenges to the Government on human rights terms null and void, or at least not worth trying.

May I say to the Government that after the Grenfell fire tragedy, while it became clear that up to £15 billion of remediation was needed not just for cladding but for other fire defects and that the only people who could eventually pay those costs by law would be the leaseholders who own not a brick in the building, the people who ought to be paying are the insurers for those who were responsible—the designers, the architects, the builders, the developers, the subcontractors, the component manufacturers and the like; they were all insured? I commend to the House that, in Committee, it should somehow be written into the Bill that potential claims by leaseholders be gathered together in an agency, which could sue the insurance companies and those they insured to get a contribution from them. That would reduce the costs both to leaseholders and to the Government, who have been providing a lot of money to try to ensure that remediation has happened.

I pay tribute to successive Secretaries of State, who have had to give written instructions to their permanent secretaries for some of the compensation for fire defect costs, and I say to the Government that the artificial distinction of 11 metres is unjustified. Actually, fire death certificates show that more people die in fires in lower buildings, and higher buildings are not riskier. We ought to try to recognise the realities. It is also worth saying in passing that when Dame Judith Hackitt produced her report and recommendations, I do not think she was well briefed on the law on leasehold, which is why some of her recommendations were not properly appropriate. I am glad that since Gavin Barwell we have had a succession of Ministers who have put the Government on the side of leaseholders; we now know that there are 5 million to 6 million of them.

Bob Blackman Portrait Bob Blackman (Harrow East) (Con)
- Hansard - - - Excerpts

I thank my hon. Friend for what he is saying. Does he agree that, at some stage or other, these unsafe buildings were signed off as fit and proper buildings under building regulations and that leaseholders also have a valid claim against the individuals who signed them off, who are also insured?

Peter Bottomley Portrait Sir Peter Bottomley
- Hansard - - - Excerpts

I agree with my hon. Friend and pay tribute to him for his work in this field. It is worth noting that building standards were set not by those who sign buildings off—the building control people—but by the Government or quasi-Government agencies, so the Government bear some responsibility as well, as I think they recognise.

In my thanks. I want to include Katherine O’Riordan, who has helped the secretariat of the all-party group and worked remarkably well. Given that my involvement as an active campaigner on this matter came through a constituency case, I pay tribute to my senior caseworker, Colette Hanson, who for many years—over a decade—has helped to support constituents facing awful problems, whether on this matter or others.

The Secretary of State referred to James Brokenshire, who carried forward many leasehold reforms. I also thank Sir Nigel Shadbolt and Sir Tim Berners-Lee and their Open Data Institute for providing help to LKP, the campaigning charity, in getting information that is publicly available and putting it together so that we could know the scale of the problem that we are facing. I pay tribute to the law commissioner Professor Nick Hopkins and his team for their 13th programme of law reform. I also pay tribute to Wendy Wilson at the House of Commons Library, who has since left, and Hannah Cromarty, who have produced briefings for Members of Parliament, which I commend to those outside this building. If they look at the House of Commons research and the LKP site, they will be as knowledgeable as me and will put across these points as effectively or more so.

Over and again I want to emphasise that people must respond to the Government’s very good consultation on ground rent. It is well-written and brings out the issues properly. I would be surprised if the dominant view were anything other than that ground rents should be reduced to peppercorns. At one stage, the Government suggested bringing it down to £10, but that still leaves most of the superstructure and the problems with leaseholders. It should be brought down to a peppercorn to eliminate those. When the consultation is analysed, I ask the Secretary of State to look with favour on reducing ground rents to zero. If I get any benefit, I will give it to a good cause, but I am not saying this for me.

I could go on at length, and at some stage I probably will. Having made my preliminary remarks, I want to say to the House that this is the opportunity, before a general election—whoever wins—to get legislation through that may be complicated in law but not in politics. Are we on the side of the people who have been at risk or exploited by interests who have owned freeholds? I have given my list of past shame, and I will not trouble the House with it now. If people have problems with their landlords or freeholders, they should tell their Member of Parliament so that they can bring it up in Committee or on Report.

I suggest that those who have used expensive lawyers to screw residential leaseholders use their money on something else. When a notable charity uses expensive lawyers to raise the cost of enfranchisement or lease extension by a third—an issue that should have come to Parliament rather than be done in the privacy of an upper property tribunal—we know that those running charities can get it wrong, too. We have left this too long. Let us now get on with it.

Rosie Winterton Portrait Madam Deputy Speaker
- Hansard - - - Excerpts

I call the Chair of the Levelling Up, Housing and Communities Committee.

18:12
Clive Betts Portrait Mr Clive Betts (Sheffield South East) (Lab)
- View Speech - Hansard - - - Excerpts

Generally, I welcome what is in the Bill, as does the Select Committee, based on our 2019 inquiry. It is what is not in the Bill that is disappointing—that is the difference. Let me go back to our report, which built on the work of the APPG—I congratulate the Father of the House, the hon. Member for Worthing West (Sir Peter Bottomley), and my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders), who is now a shadow Minister, on their work. That report led to the work of the Competition and Markets Authority on mis-selling and the Law Commission report.

I want to go through some of the Select Committee’s recommendations and what the Government have followed through on, which we welcome. I also want to look at the matters omitted from the legislation, which could easily be added in Committee if the Government want to. Leasehold flats are more complicated, and they will probably not be added to the Bill in Committee. The Select Committee accepts the complications, particularly where properties are part commercial, part residential. However, our report was four years ago, which is a long time for the Secretary of State to work up a scheme to deal with leasehold flats, but we are not there. In the meantime, I hope that he will commit to the Committee’s recommendation for a programme of education and information for leaseholders, to ensure a better understanding of what commonhold is all about. There is a lack of understanding and information, and if we are to move to commonhold for new properties and encourage leaseholders in existing properties to convert, that programme is needed.

The legislation deals primarily with leasehold houses. We welcome the commitment to no new leasehold houses—or we will when the clauses are added to the Bill. We understand that that is for Committee. We welcome the commitment to removing onerous ground rents. The Select Committee looked in detail at the argument about the European convention on human rights.

Kevan Jones Portrait Mr Kevan Jones
- Hansard - - - Excerpts

Does my hon. Friend agree that the Bill does not address issues associated with the growth in leasehold houses over the last few years? Earlier, I mentioned Persimmon, which has left a lot of residents with leases that include not only their own properties but common areas. Traditionally, when my hon. Friend and I were in local government, those would have been taken over by a local authority.

Clive Betts Portrait Mr Betts
- Hansard - - - Excerpts

There are real issues with that, which I was going to address later, but I will do so now. It is important to strengthen the right to manage, both for leaseholders and for freeholders in these estates who own the freehold of their house but not of the communal areas. I said earlier that in all property purchases where common areas remain in private ownership, there should be, at the point of purchase, a clear understanding of the agreement between the local authority and the developer about who is responsible for those common areas. In many circumstances it is simply opaque. Often, purchasers do not know who is responsible and are sent on a wild goose chase to find out once they have bought their property.

Returning to onerous ground rents, the Select Committee took counsel’s opinion, which was quite interesting, and made recommendations in paragraphs 114 to 116 of our report. There were two clear arguments why removing onerous ground rents from leases retrospectively was completely compatible with the European convention on human rights. The first, which most of us may not have thought about, is that controlling or changing rent is not confiscation of property but control of its use, so it does not conflict with the article on removing people’s property rights. Secondly, the convention includes a justification where the proposal has a wider beneficial impact on society, which can be offset against any impact on the property owner. Counsel’s opinion was that it was therefore perfectly justifiable under the European convention to remove onerous ground rents on existing properties.

Barry Gardiner Portrait Barry Gardiner (Brent North) (Lab)
- Hansard - - - Excerpts

My hon. Friend will remember that when the Labour Government overturned the case of Custins v. Hearts of Oak in 1967, they used exactly those grounds to justify doing so.

Clive Betts Portrait Mr Betts
- Hansard - - - Excerpts

I do remember that far back. Many will not remember the Labour Government’s ’67 reforms, but they were quite important on those grounds—absolutely.

Other good aspects of the Bill include its reducing the price of enfranchisement and trying to make it simpler. Now, I am not sure that it makes it simpler; it is still a bit complicated. In the end, it partly depends on the capitalisation rates that the Government introduce, which will determine the price. But a lot of my constituents who are leaseholders live in houses, and they often face enormous barriers to carry through the enfranchisement process. I have referred to Coppen Estates in my constituency, which is notorious for simply not replying to letters. I once got it to reply to a recorded letter at the third time of asking. Normally, it ignores everything. That is just its way of trying to hang on to its ground rents and its income from leases. How will we deal with those sorts of individuals and companies, and the fact that they transfer ownership around from one company to another?

Why is there no right of first refusal for leaseholders in the Bill? I was pleased that, some years ago, Sheffield Council agreed that when it sold freeholds, the right of first refusal would go to the leaseholder. That would be a simple reform, and I hope the Secretary of State will consider it. The improvement of the enfranchisement process to make it simpler and reduce the cost is right, but I would like further improvements to ensure that it will work.

I welcome the standardisation of service charges. One big complaint to the Committee was that leaseholders often simply do not know what they are paying and why. They cannot work out which services are supposed to be provided and which are not. That is an important step forward.

On commission fees, we heard about the £150 to change a doorbell and the £3,000 to put up a conservatory—complete rip-offs. There is no justification for them in houses in particular, and very little justification in flats. I am pleased that freeholders will now have to provide a schedule of rates that will be charged. We called for a cap on rates, which might have taken reform a little further, but at least there now has to be clarity and transparency. I also welcome the clause that means leaseholders will not end up paying for the legal and other costs of freeholders where there is any conflict or dispute.

A number of other measures have been omitted from the Bill, but they could be included very easily. The Secretary of State mentioned forfeiture. If leasehold is a feudal tenure, then forfeiture is prehistoric—it really is. If a leaseholder in a very small way fails to comply with an element of their lease, they could have the property taken off them. That is just unacceptable and unjustifiable. The Secretary of State was right in what he said. Forfeiture is not necessarily something that gets used, but the threat of its being used puts the onus on leaseholders to “behave” or do what the freeholder wants them to do. The removal of that with a simple clause would be really welcome.

Peter Bottomley Portrait Sir Peter Bottomley
- Hansard - - - Excerpts

I should have included the hon. Gentleman and the Select Committee in my thanks, and I do so belatedly. On forfeiture, we could ban it completely, although there may be times when it is necessary to have an order to sell a property to pay debts. The limit should be raised from £350 to a significant figure such as £5,000, and any remaining equity should go back to the person who owned the lease and not be pocketed by the freeholder.

Clive Betts Portrait Mr Betts
- Hansard - - - Excerpts

The Father of the House makes a very reasonable point. My point is simply that forfeiture is currently a blanket possibility that can apply to any breach of a lease, however minor, and non-payment of a very small amount could cost the leaseholder the total of the value of their property. That is what we have to stop.

Why do freeholders not have to join a redress scheme? The Committee called for them to be included in the redress schemes. The Secretary of State is bringing in a number of redress schemes and ombudsmen extensions, so why can freeholders not be included?

One of the big issues raised with us, where again there is a lack of transparency, is that many leaseholders have to pay into a reserve fund—a sinking fund—for their property. Can we not have some protection for those funds formally written into law? Currently, many leaseholders have no idea what the money is being spent on. There is no obligation on the freeholder to explain it and certainly no protection that funds have to be used for the purpose for which they are paid.

On mis-selling, one of the big complaints we heard when we met leaseholders—this related to houses in particular; Persimmon Homes has been mentioned, but there were other developers too—was the fact that they were being sold a leasehold as though it was the same as a freehold. The solicitors were compliant in that, because they had been recommended by the developer. Often, a bonus was thrown in: “We’ll give you new carpets in the living room if you use that solicitor.” The Competition and Markets Authority investigated at our request and said there was mis-selling, but so far nothing has been done about it. The Government have done absolutely nothing to rectify that injustice. Can we not see something on that again? I do not think that there is any great conflict across the House, or between anyone who has been involved in this matter. It is wrong—absolutely wrong. Solicitors should not be induced in this way to provide conveyancing to a purchaser, when the developer is recommending that solicitor. It simply is not right and it needs addressing.

My final point is one that we raised on the private rented reforms that the Government will hopefully pursue —and hopefully this year coming, rather than waiting any longer with regard to section 21. We have called repeatedly for a housing court. I know the Secretary of State will explain again why he does not want to do that, but I think we ought to keep asking. There are so many issues in the housing field that need a specialism, and need quick decisions and quick resolution. A housing court would be one way of doing that and of trying to improve the process.

Stella Creasy Portrait Stella Creasy
- Hansard - - - Excerpts

One thing I think so many leaseholders find frustrating with our current court system and the first-tier tribunals is that they do not set a precedent, so even if we identify something with a freeholder who may have multiple thousands of properties, every single individual has to go through the process if they were not a party to the original case. Does my hon. Friend agree that a specialist housing court could at least have precedent built in?

Clive Betts Portrait Mr Betts
- Hansard - - - Excerpts

That is an extremely good point. I do not think the Select Committee actually made that point, but it adds to its recommendations in a very thoughtful and helpful way.

There are a lot of issues, and I am sure we will not resolve all of them in today’s debate, but they need to be addressed in Committee. There are reforms to the proposed legislation that could be made, most of them quite easily. The bigger issue of leasehold flats is for another day, but it ought to be kept on the agenda. I welcome what is in the Bill, which could be the basis for a much-improved piece of legislation. Perhaps we will see an improved Bill come back to us on report.

18:25
Rachel Maclean Portrait Rachel Maclean (Redditch) (Con)
- View Speech - Hansard - - - Excerpts

I am delighted to speak on this flagship piece of legislation, which will restore true home ownership to millions, end rip-off charges and introduce fairness to the leasehold market. I am confident that it is a good piece of legislation not because I did all the preparatory work on it, but because I worked with brilliant officials, whom I thank.

We heard the testimony of so many thousands of leaseholders who struggled with blighted properties that led to blighted lives. There are too many of them to mention individually, but the strength and tenacity of the campaigners—and the organisations, such as the Leasehold Knowledge Partnership and the Leasehold Advisory Service, under the leadership of the superb Martin Boyd, which helped them—is enormously impressive. Take, for example, Liam Spender, who was able to show that leaseholders in his block had paid £1.6 million in excess service charges to their freeholder, FirstPort. Incidentally, FirstPort is one of the worst offenders I heard about in my time as Minister. Yet freeholders still had the audacity to sit in front of me while I was a Minister and claim that

“some people like the security of paying service charges”

and that there is no evidence that they oppose ground rents. Yes, truly, that is what they said. Shockingly, I understand that Mr Spender and his tenants have received nothing yet, and now the freeholders are appealing the decision with the leaseholders’ own money. I would like the Minister to set out clearly how the Bill will tackle their situation and end that scandal once and for all.

We got here because of the greed and unethical behaviour of predatory freeholders who have treated leasehold properties as a cash cow and the leaseholders as a milking machine to produce an endless stream of income for no work at all. It is the ultimate definition of rent-seeking behaviour. In its worst excesses, it is frankly disgusting. I and many others find it appalling.

Peter Bottomley Portrait Sir Peter Bottomley
- Hansard - - - Excerpts

On the case that Liam Spender has so rightly been pursuing for his fellow leaseholders, does my hon. Friend think it would be a good idea if the Select Committee considered inviting in the people he has been engaging with to ask why they did not put their hands up straightaway, settle and give back all the money they wrongly took from leaseholders, without having to have extended legal proceedings?

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

That is an excellent suggestion from my hon. Friend the Father of the House, with which I strongly agree—as I do with everything he says about this issue.

Despite the theatrics we heard from the right hon. Member for Ashton-under-Lyne (Angela Rayner), who spoke for the Opposition, it is the Conservatives who are finally bringing in sweeping reforms. It is right that we note that Labour ducked the issue while they were in office. They could have fixed it then. They could have saved millions from misery—nearly 5 million homes, accounting for 20% of the entire housing market, are owned on a leasehold basis across the UK—but it appears they bowed to pressure from freeholders. We will never know why, but thankfully things will now change.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

The hon. Lady may not remember—but I do—that before the Commonhold and Leasehold Reform Act 2002 was passed, a great deal of pressure had been applied since 1999. At that stage, however, their lordships down at the other end of the building threatened to block all of Labour’s legislation if we insisted on putting through some of the measures that were ultimately taken out of that Bill. The hon. Lady is right; those measures should have been included. I lobbied and campaigned for them to be included, and made my speech in the House accordingly, but their lordships were in the majority—and, at the time, 66% of their lordships had declared in the Register of Interests that they derived most of their income from the management of land.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

I thank the hon. Member for the history lesson but, regardless, we are determined to fix this now.

Kevan Jones Portrait Mr Kevan Jones
- Hansard - - - Excerpts

Will the hon. Lady give way?

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

No, because I need to make progress. Perhaps I will allow the right hon. Gentleman to intervene a little later.

The key factor here is choice. At present, leaseholders do not have a choice, or they have a fake choice. The Bill will give them a genuine choice when it comes to how they manage and own their homes. However, while I warmly welcome these measures, we can and must go further. May I draw the attention of the Secretary of State and the Minister to a few of my suggestions?

The measures in the Bill will clearly be of enormous benefit to individual leaseholders, making it easier and cheaper for them to buy freeholds or extend leases, but of course this is a very complicated area, and I know it will be difficult for many leaseholders to understand exactly how much they will benefit financially. My first suggestion, therefore, is the provision of an easy-to-use digital calculator enabling people to see what the Bill means for them.

Then there is the issue of commonhold fixes. I know that the focus here is on ensuring that leaseholders cannot be exploited and can take control of their homes, but there is a clear Conservative and free-market rationale for accepting the Law Commission’s recommendations on reforming commonhold so that more developers choose it, rather than leasehold, for new blocks of flats—not because they are forced to do so, but because it is the best option for their business model. Can the Government look at that again? All the work has already been done.

I strongly welcome the Government’s consultation on capping ground rents. As I said in an intervention earlier, the Secretary of State must look at who is making the representations, and bear in mind the old adage, “They would say that, wouldn’t they?” when people oppose such caps. We know that ground rents are sheer exploitation. Let us call a spade a spade: this is money for nothing. Can the Minister assure me that there will be time to get a cap into the Bill once the consultation has closed?

We have all heard of too many sad cases involving a hard core of truly exploitative and dodgy freeholders—the bad apples—ripping off and exploiting leaseholders. We know that there are some freeholders who treat people properly, but the others know that going to court will be too much hassle for most people, and indeed that the odd tribunal defeat is just part of the cost of doing business. We must do something to ensure that there is a real cost to those unscrupulous companies and their directors.

Ruth Cadbury Portrait Ruth Cadbury (Brentford and Isleworth) (Lab)
- Hansard - - - Excerpts

I thank the hon. Member for the work that she has been doing on this issue. However, she implies that the rip-off merchants constitute only a certain proportion of freeholders. Is she not aware that these people have been working in cahoots over the past 10 years, attending conferences, identifying the weaknesses in the law, sharing information and forming links with professionals such as agents and solicitors in order to rip off innocent leaseholders? This is a consistent, organised scam that has been growing over 10 years, which is why there are so many more problems now than there were, say, 15 or 20 years ago.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

Of course I am aware of that. When I was privileged to hold the position of Housing Minister, I strongly supported the relevant legislation, because those people sat in front of me and cried crocodile tears, telling me that if we went ahead with it we would destabilise the pensions industry and leave lots of little old ladies with no pensions—which is obviously complete and utter nonsense, as I am sure the Secretary of State and the current Housing Minister, my hon. Friend the Member for North East Derbyshire (Lee Rowley), will be able to tell me on the basis of the analysis that they have conducted.

We also need assurances about section 24 managers. I note that, in recent weeks, at least one freeholder has tried to wrest control of a building back from a court-appointed manager—a so-called section 24 manager—claiming that it is incompatible with the Building Safety Act 2022. That is obviously nonsense. If a freeholder has been found not to be managing his building properly, it shows some cheek to try to ditch a court appointee on such spurious grounds. I hope that the Minister will take the opportunity later to give us the Government’s view.

I welcome the Government’s intention of introducing building safety measures to ensure that remediation continues to accelerate, and to make it easier to ensure that the right people pay, but may I press the Minister for a little more detail? I know that, even as we speak, people are making serious decisions about their own finances.

My constituents in Brockhill, especially those in the Persimmon Homes development, have faced innumerable issues relating to freehold estates, and I must press the Minister on what measures he will introduce to help them and, most importantly, when he will do so. I know that the Government intend to introduce a right to manage for freeholders, and to challenge arrangements and charges through the first-tier property tribunal. However, I urge him to read again the Hansard report of the Westminster Hall debate in which I responded, on behalf of the Government, to my hon. Friend the Member for North East Bedfordshire (Richard Fuller), who had told a story about one of his constituents who had had to pay thousands of pounds for one lamp post. This is an outrageous state of affairs, and I want the Government to introduce measures that will tackle it and many others. Currently, throughout the country, people’s new dream homes are turning out to be a nightmare. They are being ripped off by small-print clauses that turn into big bills, and they have no redress. That must be fixed.

Finally, there is a need for regulation of the property management sector more broadly. I recognise that the Bill was not the right vehicle for it, but I urge the Minister to continue to push ahead with a reform that must happen, if not on this side of a general election, then on the other side.

We Conservatives believe that the opportunity to own one’s home is sacrosanct, and the Bill takes another important stride towards the creation of a true property-owning democracy. While, as we have made clear, we stand firmly on the side of fairness and those who want to own a home, we are still none the wiser when it comes to where Labour Members stand. One week they are on the side of the builders, not the blockers—or so they say. The next week, they are blocking our proposals to build 100,000 new homes that first-time buyers and young families would desperately want to possess. While they decide whose side they are on, we are taking important steps to improve the lives of millions up and down the country. I look forward to working with Ministers on the Bill as it goes through the House to strengthen some of its measures, particularly those on commonhold and freehold estates, and to ensure that we deliver on the promise that it holds.

Let me end by wishing my hon. Friend the Minister better luck than I had in his tenure of this important role. I especially hope that he can remain to finish the vital job of leasehold and freehold reform and restore true property ownership to millions. He will have my full support in the Lobbies.

18:38
Stephen Timms Portrait Sir Stephen Timms (East Ham) (Lab)
- View Speech - Hansard - - - Excerpts

I am pleased to follow the hon. Member for Redditch (Rachel Maclean), the former Housing Minister, and I congratulate her on her work in this regard. I was disappointed that she chose to adopt a rather partisan tone in some of her remarks—unnecessarily, I thought—but I was grateful for the more generous tone taken by the Secretary of State. I especially welcomed his generous and appropriate tribute to our former colleague, Jim Fitzpatrick, for his work in the all-party parliamentary group—I am glad that he was mentioned.

Let me begin by identifying a specific concern that the Bill has raised. I am aware of it because of the work that the Work and Pensions Committee has done on asbestos. Under the Control of Asbestos Regulations 2012, premises can be sold while containing asbestos; ownership can be transferred. Asbestos management is regulated in relation to workplaces, where it is the responsibility of the Health and Safety Executive, but not in domestic properties. In a lot of shared dwellings, such as flats and conversions, the landlord or freeholder has regulated duties under the existing regulations to manage asbestos in the shared areas in those developments. This legislation, as I understand it, may well give rise to the transfer of those obligations to domestic owners.

The existence and extent of asbestos in a building might not be known, leaving homeowners taking on these responsibilities with a hidden liability and, potentially, a life-threatening risk to handle as well. Homeowners are unlikely to have the wherewithal to manage asbestos in situ effectively, and this could leave a complex set of responsibilities and liabilities between owners in shared properties or where the nominal landlord no longer exists. At the moment, there is tax relief for businesses removing asbestos from a workplace—they can offset it against corporation tax—but there is no support for homeowners to remove or manage asbestos.

It has been suggested to me—this is something I am looking at—that there should be an amendment proposing that change in ownership of a property in the circumstances envisaged in the Bill, or a change in the extent of landlord control, should be a trigger for removing asbestos. Otherwise, more asbestos will move outside effective control under this legislation, meaning that nobody will be responsible for managing it and potentially creating a significant public health risk.

I will focus the rest of my remarks on part 3 of the Bill and draw attention to some particular instances that have arisen in my constituency. My right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), in opening the debate, rightly expressed the disappointment of many that the more radical ambitions for the Bill have been dropped, at least for the time being, but there are lots of practical problems for our constituents that need addressing and that the Bill can potentially help with.

The Minister for Housing, Planning and Building Safety, who is in his place, is aware of Barrier Point in my constituency, which comprises eight towers and 257 apartments. Tower 8, the largest of the towers, has 50 apartments and a flammable cladding problem. In 2017, buildings insurance for the whole of Barrier Point cost £104,000. Last year, Aviva, which insured the block previously, refused to quote, so this year residents have ended up paying £443,547 for insurance, and Tower 8 residents have shouldered that huge increase at a cost of between £6,000 and £12,000 each. I am grateful both to Aviva and to Barratt, which built the development, for meeting residents to try to find a way forward. I am also grateful to the Minister for the interest he has shown in this and for his agreeing to visit—I hope we will have a date for that soon.

I can see that the Bill could go some way towards tackling those problems. I particularly welcome clauses 27, 28 and 29, which increase transparency around service charges and give occupants the right to obtain information about service charges and costs on request. Clauses 30, 34 and 35 will help tenants to enforce those rights and rebalance the costs of litigation in their favour. The Financial Conduct Authority’s 2020 report on insurance for multi-occupancy buildings found that commission was often at least 30% on a transaction, and it found one case where it was over 60%. The FCA was worried that insurance commissions lacked transparency and it feared the conflict of interest that stemmed from brokers regularly sharing half their commission with the freeholder or managing agent. Replacing commission with transparent handling fees, as clauses 31 and 32 envisage, should certainly help.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

I appreciate everything that my right hon. Friend is saying. He will be aware, though, that many companies holding freeholds will also set up an arm’s-length company that is the broker, thus taking a double take in terms of the commission. It is not just that they get cut from the broker; they are the broker.

Stephen Timms Portrait Sir Stephen Timms
- Hansard - - - Excerpts

My hon. Friend makes an important point and I welcome his work in this area over a long period.

The changes in the Bill are not likely to do much to help the residents of Barrier Point who have exercised their right to manage. The FCA has argued that

“the intervention most likely to reduce prices for the minority of multi-occupancy buildings with the most substantial price increases would be cross-industry risk pooling”.

I was pleased to hear from the Secretary of State, in answer to my intervention, that he will be meeting representatives of the Association of British Insurers this week. The ABI initiative on this issue appears, up to now, to have stalled. The FCA recommended that the ABI should work with it and with the Government to introduce a risk pooling scheme in 2022. The scheme was expected to come forward last summer, but we are still waiting. I am hoping that, as a result of the meeting this week that the Secretary of State has told us about, things will get moving.

I checked with the FCA last week about this. It said that the ABI plan is

“credible and capable of delivering savings to those worst affected buildings”,

but it went on to add that the plan is delayed with “no firm launch date” because the ABI is struggling to secure “the reinsurance capacity required”. That seems to be the obstacle. I very much hope that the Secretary of State can find a way to push this forward at his meeting. The ABI urged the Government to increase capacity by backing catastrophic losses in the scheme. It did that most recently in June. Can the Minister tell us whether that appeal has been considered by the Department and whether that might be taken forward at the meeting with the Secretary of State later this week? When does he think risk pooling will commence?

On remediation, there is a power imbalance between leaseholders and freeholders. That has been highlighted to me by Barrier Point residents. The Bill does not really address that. Section 72 of the Building Safety Act 2022 makes a right-to-manage company the “accountable person” for a high-risk multi-occupancy building, making the directors criminally liable if negligence can be proved. The same Act, however, requires only that freeholders “co-operate” with accountable persons, without any enforcement mechanism in place at all. The freeholder at Barrier Point has held up remediation works for several months and is refusing to sign off on them. The directors of the right-to-manage company desperately want to fulfil their legal obligations but they are left liable because of the refusal of the freeholder to say okay, and there is no comparable liability on the freeholder. That seems wrong, and I wonder whether that imbalance can be addressed in the course of the Bill’s passage through the House.

The Minister said in oral questions just last week that the Government plan to make changes to the Bill as it goes through Parliament, and I hope he will consider how that imbalance can be addressed to ensure that remediation work can go ahead in a case such as that, which I suspect is by no means unique. The residents of Barrier Point want to purchase their freehold. To do so, they need to get at least 50% of all the leaseholders to agree to, and be able to afford, a freehold purchase. That is very difficult in a building with 257 households. I do not think the Bill does anything to make that process easier, so I very much hope that Ministers will be open to further improvements as it progresses through the House.

18:49
Gareth Johnson Portrait Gareth Johnson (Dartford) (Con)
- View Speech - Hansard - - - Excerpts

My speech will be brief, as I want to concentrate on one aspect of the Bill. Estate management companies are a massive and growing issue in my Dartford constituency. Some 7,000 new homes have been built in my constituency over the last 10 years, and they are predominantly “looked after” by management companies.

I welcome the measures in the Bill that will rightly allow residents to challenge the invoices and bills they are sent by management companies. This will help to transfer some of the power back to residents, by giving them a tool to say, “This invoice is unfair,” “This bill is not right,” or, “These accounts are not right.”

It is absolutely right that power is transferred away from management companies and into the hands of local residents, because at the moment management companies seem to do pretty much whatever they like. They can put up the charges they levy on residents way above inflation while providing a very poor service, and local residents can do very little about it. Local residents find themselves completely restricted in challenging what is, on occasion, a hideously poor service with extortionate fees. They are trodden on by the management companies.

Of course, residents question why they have to pay council tax at the same time as paying management fees, as they often find that their management fees are used to pay for, say, play parks that the whole community can use for free. They have to pay for it, they have to pay for the maintenance and they have to pay council tax, too, which seems very unfair.

In my experience, local residents want to be able to change their management company. They want to be able to switch over and to say to their management company, “No, you have not provided a good enough service. You are charging us too much money, and therefore we are going to use a different management company.” If that happens, it will help to tackle most of the problems we are experiencing with management companies. It will end the monopoly by returning competition to the system, enabling the good management companies to prevail and the poor ones to fall by the wayside.

Peter Bottomley Portrait Sir Peter Bottomley
- Hansard - - - Excerpts

The whole House will accept that my hon. Friend is rightly arguing for total transparency. There ought to be open-book accounting by these managing agents, so that those who are paying can see what is happening.

Does my hon. Friend agree that the amalgamation of managing agents is a dangerous trend? It means that the choice is reducing, not increasing. Given that some managing agents are very large and people’s experience of them is not very good, we ought to try to make sure that there is not this continual amalgamation and that there is a good choice of good managing agents that want to earn a better reputation.

Gareth Johnson Portrait Gareth Johnson
- Hansard - - - Excerpts

The Father of the House makes a very good point. I would like to see co-operation between companies, rather than amalgamation. In my constituency, we often see two management companies sending two people to mow the grass on the same estate. Residents look out of their window and see the grass on one side of the estate being mowed by one company and the grass on the other side of the estate being mowed by a different company. Of course, they have to pay twice for that pleasure. If the companies co-operated, that situation would not arise.

Some 20% of the people attending my surgeries are there to complain about management companies. Even a constituent of the hon. Member for Greenwich and Woolwich (Matthew Pennycook) came to my surgery—with two of my constituents, I hasten to add—to raise issues about management companies. She was very complimentary of the hon. Gentleman, by the way, but I put her straight. However, she was not very complimentary about the management company that she was suffering from. This problem happens in Greenwich, in Dartford and across the country, and we need this Bill to get to grips with it.

Kevan Jones Portrait Mr Kevan Jones
- Hansard - - - Excerpts

Is the hon. Gentleman aware that management fees slowly go up in some retirement villages and retirement complexes? Older people do not challenge them, and it ends up making their flats either unsellable or worth less than they paid.

Gareth Johnson Portrait Gareth Johnson
- Hansard - - - Excerpts

The right hon. Gentleman makes an excellent point, and it highlights how management fees undermine the whole housing sector. We will end up in a situation where people do not want to buy nice homes because of the management companies that operate on these estates.

It undermines freehold, because people living on these estates have to go to the management company to get an information pack in order to sell their home. Of course, the information pack does not come free. On most estates in my constituency, people have to pay the management company £350 effectively to ask for permission to sell their house.

A lady contacted me and, apart from the cost, some of the information in her information pack was wrong. When she contacted the management company to ask some questions about the information it had provided, she was told that each question would be charged at £60 plus VAT, but this was the management company’s fault, not hers. That is just one example—I could give thousands—of just how horrifically some management companies behave. The Bill needs to deal with these organisations.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

The hon. Gentleman is making some excellent points. Is he aware that some companies managing residential properties for the elderly charge 10% of the property’s sale price, which they take to themselves for the privilege of allowing it to be sold?

Gareth Johnson Portrait Gareth Johnson
- Hansard - - - Excerpts

I have heard of those kinds of things. The same happens with park homes, and we are also trying to tackle that. It is only right that we tackle this issue with management companies, because it totally undermines the concept of freehold. The Secretary of State rightly says that he supports home ownership, yet we have a system that undermines the principle of home ownership.

People bought these houses in my constituency because they are nice homes in a nice area, and they often bought them in a seller’s market. They were literally standing in a queue, with other people waiting behind them to buy the same property. If they had not signed on the dotted line there and then, there were plenty of people behind them who would have. They signed without a full appreciation of the terms of the contract, which effectively said that the management company can put up its management fees way beyond inflation, and there is nothing that can be done about it.

I echo the Father of the House. As we consider the Bill throughout its passage, Members have to decide which side we are on. Are we on the side of the management companies, or are we on the side of local residents? It should be a no-brainer for every Member of the House, and I hope we will come together. After the Bill gets its Second Reading, I am sure we would all like to see some amendments in Committee.

18:58
Marsha De Cordova Portrait Marsha De Cordova (Battersea) (Lab)
- View Speech - Hansard - - - Excerpts

It is a pleasure to follow the hon. Member for Dartford (Gareth Johnson). He is absolutely right about management companies needing more transparency and more accountability.

Today’s Second Reading of the Leasehold and Freehold Reform Bill is long overdue for my Battersea constituents. Many are trapped in the exploitative leasehold system, which denies them control, safety, security and a future in their home. Unfortunately, the Bill falls short of what the Secretary of State committed to when he said that the Government

“will maintain our commitment to abolish the…system of leasehold. We absolutely will.”—[Official Report, 30 January 2023; Vol. 727, c. 49.]

This is yet another broken promise by the Tories.

We all know that everyone deserves to live in a safe, decent and affordable home, and that means abolishing the unfair and outdated leasehold system. In London alone, leasehold accounts for more than 30% of homes. Some 74% of homes sold in Battersea in 2022 were leasehold transactions, making Battersea the 18th highest constituency in the country for leasehold. So this Bill really matters to the people of my constituency.

I have been in this House for only six and a half years, and we have debated leasehold reform continuously. Indeed, we have passed legislation, by way of the Fire Safety Act 2021 and the Building Safety Act 2022, which followed the awful, awful tragedy at Grenfell Tower. However, we know that even with all that legislation and despite all these debates, the system is still flawed and not all leaseholders are protected. In England and Wales, our approach has not been in keeping with that of the rest of the world, because many countries have chosen to do away with this feudal system or have reformed it; we are still in this state of stalemate. The Law Commission’s proposals back in 2020 had cross-party support. Everybody was in favour of them all, so it is disappointing that the Bill does not include all of its proposals and recommendations. That is sad because the Government have missed an opportunity to make some positive change that would protect our leaseholders. The Government’s inaction and delay in tackling the extortionate costs associated with being a leaseholder have had an impact, not least on people’s finances, as well as on their mental health and wellbeing. Many of my constituents regularly tell me about the range of problems they face: surging ground rents; high service charges; a lack of transparency over charges; poor customer service; excessive administration charges; charges for applications to extend lease agreements or enfranchise; and a lack of knowledge and information about their rights and obligations. The leaseholders in Battersea do not receive value for money on service charges, which can be increased at the last minute; they can go up drastically, with little warning. In one case, someone had their service charge increased by 30%, without any breakdown of costs or transparency as to why that had happened. At that time, the management company was—I am not sure of the best way to describe this—not forthcoming. In addition, it was abrasive, belittling and rude in its responses to us. So it is important that the role of these management companies and the way they are handled is addressed.

I am pleased that the Government are introducing long overdue measures to improve home ownership for many leaseholders. The Bill will make it cheaper and easier to extend a lease or buy the freehold; and it will increase the standard lease extension term from 90 years to 990 years, with the ground rent reduced to a peppercorn—obviously, upon payment of a premium. That is good and I welcome the fact that the Secretary of State said today that the Government will be consulting on grounds rents. Sadly, he did not address my point about shared ownership and those who staircase to 100% and then become leaseholders, so I hope the Minister will clarify whether the consultation will seek to address that issue as well. We need more transparency on things such as service charges, and it is right that the Bill will provide that. It will also provide for a right to request information about those charges.

However, as was mentioned by my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) and many others, despite multiple assurances from Ministers, the Government have U-turned on their commitment to end the leasehold system. After all that they had been promised, my constituents would have expected the Government to go further and end this outdated system. The Bill does not even contain provisions to ban the creation of new leasehold houses, as was promised in the King’s Speech. I understand that that will be brought forward in Committee, but why on earth was it not in the Bill today? There is never going to be enough time to really go into detail about the challenges with the Bill, but it is important to note that housing is a human right. Everybody should be able to live in a safe, decent, warm and affordable home. Homeowners should be able to have security and have the power of their own home, regardless of the type of tenure. If you buy your home, you expect it to be yours; you do not expect there to be a freeholder who owns this aspect of it. The Government could take some lessons from Labour, as we will protect leaseholders through making commonhold the default tenure for all new properties and by overhauling the system so that existing leaseholders can collectively purchase more easily and move to commonhold if that is their wish. We are also committed to supporting house building, in order to deal with the housing crisis that the Tories have created and not addressed. That is why we need this leadership on housing; we do not need any more broken promises and failed policies from this Government, which have really left this country in a mess.

19:05
Bob Blackman Portrait Bob Blackman (Harrow East) (Con)
- View Speech - Hansard - - - Excerpts

It is a pleasure to follow the hon. Member for Battersea (Marsha De Cordova). Let me start by paying tribute to the Father of the House, my hon. Friend the Member for Worthing West (Sir Peter Bottomley), who has been campaigning on this issue for many years, to great success, eventually. I also pay tribute to my hon. Friend the Member for Redditch (Rachel Maclean), who is no longer in her place, for all the work she has done in the preparation of this Bill. I welcome the principle of the Bill. Some Opposition Members may say it is too timid, but with 58 pages of detailed legislation and equations, which remind me of my time studying physics and maths at university, it can hardly be said to be less than complex. The key issue is: have the Government gone far enough in what they intended to do?

Our manifesto commitment was clear: to promote fairness and transparency for leaseholders, and ensure that consumers are protected from abuse and poor service. Clearly, that is a fundamental requirement. The Law Commission’s 2017 review of leasehold law represented it, and it is has taken us six years to get to this point in dealing with some of the abuses. We have to remember that 94% of people who have bought leasehold properties regret buying them and 70% of leaseholders are worried that they will not be able to sell their homes because they are leasehold. That is one fundamental thing we need to answer. We also need this leasehold reform to reform and support the housing market, because almost half of leaseholders are first-time buyers and 28% are under 35. At a time when fewer and fewer people are buying their first home at such an age, it is vital that we not only encourage people to buy their first home, but simplify the system.

So I welcome the overarching aims of the Bill to modernise this complex system, but clearly there is still a lot of work to do. Obviously, making it cheaper and easier for existing leaseholders in houses and flats to extend their lease and buy their freehold is a key point. The so-called “marriage rates” make it almost impossible for leaseholders to buy properties with fewer than 80 years left on the lease and to extend that lease to 990 years, which is what we are now going to be looking at. Having that as the standard position for houses and flats has to be the right thing to do. We should remember that the original position on extensions was 90 years for flats and 50 years for houses, so we are introducing a massive change and it is extremely welcome.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

I thank my constituency neighbour for giving way; if he is fortunate at the next election, he may inherit some more leasehold flats. As he will know, in this country a freeholder holds their freehold for a period of 999 years from the Crown and that may run out before any new leasehold is able to conclude its 999 years. Does he understand what the Government propose to do in that situation?

Bob Blackman Portrait Bob Blackman
- Hansard - - - Excerpts

Longevity may run in my family, but not to the extent of 1,000 years. The hon. Gentleman makes a good point and I am sure the Minister will seek to answer it in his summing up.

Introducing new rights for long leaseholders to buy out the ground rent without needing to extend the term of the lease is another extremely welcome move, as is removing the requirement for a new leaseholder to have owned their house for two years before they can benefit from the changes. The new right to require the freeholder to take a leaseback of non-participating units when a collective enfranchisement claim is made is also vital. We do not want to get to a position where people are deterred from enfranchisement because they cannot take on those who do not take on enfranchisement.

A new costs regime for enfranchisement and right-to-manage claims so that each party bears their own costs is vital. Far too often, the freeholder has sought to obtain their costs from the purchaser, which is clearly unfair and unjust. Moving jurisdiction for enfranchisement and right-to-manage disputes to the first tier tribunal and the leasehold valuation tribunal in Wales makes it much easier for parties to identify how they can bring about a dispute. I note the point the Chair of the Levelling Up, Housing and Communities Committee, the hon. Member for Sheffield South East (Mr Betts), raised when he said that freeholders often make it as difficult as possible for enfranchisement to take place.

The issue of transparency of service charges is vital. One of the benefits of serving on a Select Committee for a long time is being able to remember the reports the Committee was involved in, and I well remember an inquiry into this issue. We wanted all service charges to be transparent and fixed to the cost of providing that service, as opposed to a figure plucked out of the air and then passed on to the person supposedly receiving the service. It is welcome to see that the Bill contains measures for minimum key financial and non-financial information to be supplied to those receiving the service on a regular basis, including through a standardised service charge and an annual report. That means leaseholders can scrutinise and better challenge costs if they are unreasonable.

Equally, replacing buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees stops leaseholders from being charged exorbitant, opaque commissions on top of their premiums, an issue that has already been raised in the debate. I welcome scrapping the presumption for leaseholders to pay their freeholders’ legal costs, which in my opinion is outrageous, as well as granting freehold owners on private and mixed-tenure estates the same rights of redress as leaseholders, by extending their equivalent rights to transparency over their estate charges and to challenge the charges they pay by taking a case to a tribunal.

All these measures are welcome, but there are many other areas where we need to go further. The promise to do away with leasehold—or fleecehold—completely was clear in the manifesto; in my view, that promise should be honoured, particularly on the sale of new-build flats. In London, they are now the most common property type; almost all flats are sold on leasehold basis, compared to just 6% of houses.

On the individual building firms, we have heard about Persimmon, but we should also remember Bellway, whose chief executive came in front of our Select Committee and told us—I repeat what they said almost word for word—that it was the company’s policy not to offer the freehold to leaseholders at the first opportunity. Instead, six months after building the properties and selling the leaseholds, it would transfer them to a finance company, which would go through the detail of all the charges it could make and then really leverage up those charges, and the finance company would refuse to allow the leaseholder to even consider buying the freehold. That was the policy of that company. I think Permission admitted that that was its policy too, and other building companies do exactly the same. That is a scandal and it should be stopped, and we should legislate for that.

Clearly, we all want to see the promotion of commonhold. However, as the Chairman of the Committee said, we need more education for individuals, so they understand not only their rights but the responsibilities they would take on with commonhold.

One concern that has been raised with me on several occasions is about what will happen, once this welcome Bill is on the statute book—we look forward to the amendments that are made—to existing leaseholders who bought their leaseholds in good faith but are not being dealt with properly or effectively. We need to ensure that squeezing out the bad practices of freeholders and managing agents, which are unfair to individuals, is part and parcel of the legislation.

There is also the issue of conveyancing. Most people who buy their first property pay the minimum legal costs they can get away with. As a result, they often are not given proper advice about the consequences of their decisions. We need to ensure that individuals are given the opportunity to understand the responsibilities they are taking on and, more importantly, what will happen to them in the future if there are service charges involved.

Local authorities hold a huge number of properties under lease conditions and, if they want to sell the freehold to leaseholders, they are often among the worst sets of people to deal with across the country. I agree that a leaseholder should have the right of first refusal if a freehold is being offered. Will my hon. Friend the Minister give a commitment that, after we have engaged in consultations on service charges, the results of those consultations will be reflected in Committee so that we can strengthen the Bill?

Finally, I want to refer to a particular building in a constituency that neighbours mine. It has 13 floors and still has the old, Grenfell-style cladding. We all know the tragedy of Grenfell, but the owners of the building are refusing point blank to remove the cladding unless and until they are given planning permission to build on top of the building, so that they can sell more property to pay for the cost of remediating the cladding. The self-same company, Ballymore, although it has yet to submit a planning application, wants to build 29 blocks of flats, the tallest of which will be 29 storeys and the majority of which will be more than 20 storeys, at a density greater than Manhattan, Singapore or any other place in the world. That is a scandal. When the Secretary of State named certain building companies, he promised that if they refused to carry out the work that they should do, they would not be given planning permission to enable the development of more leasehold flats. I call on him to ensure that they are not given planning permission until such time as they are putting right what they have put wrong.

I pay tribute to all those who have fought for so long and so hard to achieve this limited reform. I will support the Bill, and I look forward to us taking forward further measures so that we can end the feudal system of leasehold once and for all.

19:20
Helen Morgan Portrait Helen Morgan (North Shropshire) (LD)
- View Speech - Hansard - - - Excerpts

I have mentioned before that Liberals have been campaigning to end leasehold since the days of Lloyd George, so I am pleased to see this piece of legislation finally being debated in the dying days of this Parliament. I hope that there is the time left to pass it and see meaningful change for the many leaseholders—leaseholds comprise 20% of the housing stock in England—who are boxed in by exorbitant management charges and uncapped ground rents.

The content of the Bill is welcome, and the Liberal Democrats will not oppose it on Second Reading, but, like other Members, we have significant concerns about the omissions from it. First, the Bill does not actually ban leasehold. Perhaps more importantly, it does not ban the creation of new leasehold flats. I do not grasp the logic of arguing that leasehold is outdated and unsuitable for the modern housing market, while allowing 70%—the vast majority—of leasehold arrangements to go ahead.

The Liberal Democrats support the comments made recently in The Guardian by the shadow Minister, the hon. Member for Greenwich and Woolwich (Matthew Pennycook), that

“commonhold should be the new default tenure”

for all flats, and that it should be easier for leaseholders to collectively purchase their freehold should they wish. I also agree with several other Members that giving leaseholders first refusal when the freehold is sold is a good idea. It seems to me that without those more radical measures, the Bill is less leasehold reform and more leasehold tinkering.

I think that we all agree with the Secretary of State that this is a feudal system that needs radical overhaul, and I am not sure why the Bill does not go further to achieve that. I have been lobbied, and I have some sympathy for the argument that there is a need to ensure that there is a clear line of responsibility, and indeed liability, for building maintenance and safety in large blocks of flats, but most other countries—in fact, all countries other than Australia—have managed to achieve that without reliance on the leasehold model. Indeed, our recent experience regarding the safety of large blocks of flats, with the cladding scandal, suggests that in many instances the leasehold model has demonstrably failed to provide it. We probably all agree on that point.

I am also confused about why the Bill omits to introduce professionalisation in the management of leasehold buildings. The British Property Federation has said that

“the lack of any provision to introduce competency standards or regulation to our sector is a missed opportunity.”

Given the experience of many leaseholders over the cladding scandal, and the welcome professionalisation of the social housing sector, I hope that the Government recognise the importance of ensuring that management is professionalised and will seek to introduce such measures in Committee. I wonder whether the Minister would commit to that in his closing remarks.

In my North Shropshire constituency we do not have a large number of flats, but we have been plagued to some extent by new housing developments in which the housing is freehold but shared areas, services and essential infrastructure are managed by the original developer. As we all know, those are referred to as fleeceholds, and since being elected I have told a number of horror stories regarding such arrangements, both in this Chamber and in Westminster Hall. The provisions in the Bill that allow the right to challenge charges, provide for greater transparency of information, and relate to the quality of work and an associated system of civil penalties, are a welcome step in the right direction, but I wonder whether I could push the Government to go further in that area.

The tenants of such developments pay both their council tax and an estate management charge, yet they often receive a far worse service than those who live in adopted developments and are subject only to council tax. The hon. Member for Dartford (Gareth Johnson) laid out some of the issues in his excellent speech, so I will not go into too much detail, but I urge the Minister to consider ending the practice of shared ownership of public spaces for the vast majority of new developments. They have the commercial substance of a leasehold, and I would like to see a presumption that the shared areas around new developments are almost always adopted by the local authority where the development is standard in nature. Where there is no good reason for that not to happen, homeowners on those developments should have their rights clearly set out so that the matter can be settled quickly in court.

I ask the Minister to consider further the specific circumstances where assets such as sewage pumping equipment or a ground source heat pump are shared by everyone on the estate. I am grateful to him for listening to my concerns prior to the debate. Freeholders using such equipment are dependent on its being installed and maintained to a high standard, but the experience of my constituents is that conveyancing solicitors do not alert buyers to the risks involved in this type of structure, and that the ownership structure can be opaque and almost impossible to challenge. I have one development in which the developer retained the ground source heat pump to be used by the rest of the houses in a separate company. He charges the full cost of running that pump to the residents but keeps the renewable heat incentive payments to himself, making a huge profit in the process. The freeholders’ only route of redress is through the courts. Because of the opaque management structure, it is not clear that they will win, and they do not really have the resources to commit to those legal proceedings.

It is not uncommon in rural places such as North Shropshire for a new development to use a shared septic tank rather than be connected to the mains sewer. If the tank has been installed to a poor standard, the costs of rectification are charged to the freeholders once they move in. Those are costs that they would not have anticipated when they bought the property. I would welcome greater clarity over who is responsible for ensuring that such shared assets are fit for purpose before the freehold houses are sold for habitation. Currently, such assets and services are outside the building control regime. That means that if someone gets a completion certificate on their house, which might have been properly constructed, but their sewage system is not fit for purpose, they will still have a valid building control certificate, and will be none the wiser when they buy the property.

I ask the Minister to consider whether further protections can be put in place, such as ensuring that inspections of those assets are included as part of the building control sign-off, ensuring that reserve funds are being collected and appropriately ringfenced through reasonable service charges throughout the life of such assets, and allowing freeholders to take joint ownership of the assets for a nominal fee if they wish to do so. A right to manage would be so welcome for residents trapped in such situations.

Will the Minister also expand on the issue of enforcement? The additional rights afforded to leaseholders and those paying estate management charges will be effective only if there is an affordable way for leaseholders and fleeceholders to ensure that they can be enforced. We all have experience of freeholders simply failing to respond to correspondence, or requiring their tenants to take them to court in a highly unaffordable process, often charging the costs of that court process to leaseholders. Enforcement is therefore not really achievable at the moment, but it is so important to ensure that those revenue streams are effectively squeezed for freeholders.

The Bill is a small step in the right direction, but so much more could be done to end this outdated form of tenure. It was 1909 when Lloyd George described leasehold as “not business, but blackmail”. It is high time that we grasped the nettle and ended it.

19:28
Wendy Morton Portrait Wendy Morton (Aldridge-Brownhills) (Con)
- View Speech - Hansard - - - Excerpts

There is much to welcome in the Bill. It is all too easy to believe that leasehold affects only London and the larger cities across the country, but that is not so. In the past 30 to 40 years in particular, many more properties have been built on a leasehold basis. Many leaseholders are now facing the dilemma of whether to extend. It is estimated that there are 4.98 million leasehold properties, equating to 20% of the housing stock. That includes properties in my constituency, and I have raised the matter in the House previously. I also have a personal interest as a leaseholder. Many years before coming to this place, I had the unpleasant experience of extending our own lease. The Government made good progress with the Leasehold Reform (Ground Rent) Act 2022, which limited ground rents to a peppercorn on all new leases. The Bill that we are considering today does not include the same limitation to protect existing leaseholders from onerous and potentially very expensive ground rents. Without that, up to 4.98 million homeowners will be left saddled with unfair ground rents.

My right hon. Friend the Secretary of State, who is no longer in his place, said that

“liberating leaseholders forms a vital part of the government’s long-term plan for housing.”

We cannot have a situation in which we are liberating future leaseholders while leaving existing homeowners trapped. This is an urgent problem. The Government’s own consultation in 2017 identified it as a trend leaving leaseholders facing significant and unsustainable increases in ground rents, which often affects the saleability of their homes, so I hope it will be addressed.

On new leasehold houses, I welcome the Government’s commitment to ending the creation of new leasehold houses. It is time we moved on from what other hon. Members have also described as an archaic system that holds homeowners back. However, I was concerned that measures to do that have not appeared in the Bill as drafted. My understanding is that the Government intend to bring forward amendments for that purpose, but I would also like an assurance from my hon. Friend the Minister at the Dispatch Box that that will be the case.

I am also concerned that new leasehold houses may still be permitted under exceptional circumstances. I ask my hon. Friend the Minister to tell me exactly what those circumstances cover, and to assure me that safeguards will also be put in place. We need to ensure that that exception is used sparingly, if at all, and does not become a loophole for developers who simply wish to push more leaseholds in through the back door.

Turning to the extension of existing leases or the acquisition of freeholds, an important and necessary part of the proposed changes will be the extension of the lease, with a new standard 990-year lease with zero ground rent. The removal of the marriage value from the premium calculation is also welcome and much needed, and potentially represents a fair and equitable change for leaseholders. As you may recall, Mr. Deputy Speaker, I raised my concerns in the debate on the King’s Speech that those reforms are long overdue. I am disappointed that they have come forward so late in this Parliament, especially when we promised reform as far back as February 2017.

I for one would not want to see current leaseholders, who have no choice but to renegotiate their current leases now, unfairly left out in the cold by our legislating so late in this Parliament. I therefore ask the Minister to consider a sunset clause in the Bill, to allow anyone who has had to negotiate since the start of the current Parliament to be afforded a right of passage under the reforms to extend their lease to the new standard.

Like my hon. Friend the Member for Redditch (Rachel Maclean), who is no longer in her place, I would welcome the introduction of an online calculator for calculating the cost of an extension. I believe that would make the process simpler and more streamlined for those who are seeking to extend their lease or acquire the freehold. However, it must also be quick and inexpensive for leaseholders to calculate and find out the cost of an extension, because currently that is not the case. Put simply, the current system of using archaic graphs is another way to set the system against the leaseholder—and, sadly, too much of the current system is weighted in favour of the freeholder. That is why this legislation is so badly needed.

The change to ensure that legal costs be shared, as opposed to the current system whereby the leaseholder bears all the costs, is also welcome. We also need to end the weighting of independent arbitration through the Tribunals Service in favour of the freeholder. In considering this Bill, we have the opportunity to shape legislation and create a level playing field for both parties.

On commonhold we also need to do more. Reform would give the leaseholders of flats the right to acquire and manage the common parts of the building. That is potentially a welcome change, provided that protections against the abuse of service charges are in place. However, when it comes to disputes, there is a clear need to revamp the tribunal system. It does not fulfil what it was set out to achieve. The tribunal system was created to strengthen the rights of long leaseholders, and to provide a cheaper and quicker way to resolve disputes, yet in reality it is the antithesis of that.

Leaseholders often avoid the tribunal system altogether, due to fear of becoming liable for the freeholder’s tribunal costs, and regrettably there are many cases where freeholder landlords recruit high-powered barristers and simply pass their fees on to the leaseholders, regardless of whether they win or lose. It is also fair to say that that leads to leaseholders worrying that they will be unable adequately to defend their position on, for example, raising a dispute over unreasonable administration charges. That needs to change. We need a renewed and refreshed tribunal system that empowers and protects leaseholders.

There are additional things that we can also do to see improvements now for those with leaseholds. The right to manage is an important part of our toolkit, and I welcome measures in the Bill to improve that process. The current claims process is complex, and leaseholders can find their attempts frustrated by rogue freeholders who block them from exercising their rights. I would like to see more of the Law Commission’s recommendations implemented, particularly where we can make the process cheaper and less complicated to implement. Let us be bold and include more measures to help our homeowners to take back control.

There is also a strong need for a new regulatory model for managing agents. Under the current system, anyone can become a managing agent, regardless of experience. Unfortunately, many leaseholders report countless problems with their agent, from high service charges to lack of transparency or exclusion from decision making. Of course, there are some managing agents who perform well and choose to sign up to standards of practice, but there are many who do not. This, for me, is a clear case of a moral hazard. It must be addressed, and we have the opportunity to do so through this Bill.

I am pleased that the Government have committed to regulating managing agents through a single, mandatory and legally enforceable code of practice. Managing agents will be required to have a nationally recognised qualification to practice, which will be overseen by an independent regulator. By requiring them to adhere to minimum standards through a professional body, we can expect to see higher levels of professional conduct among all managing agents.

Finally, I want to mention housing associations. I would hope to see under this new legislation a requirement for greater transparency on service charges and the replacement of building insurance commissions for managing agents or landlords, with transparent administration fees, to benefit leaseholders who have exercised their right to buy within the social housing sector and those within the leasehold retirement bracket. Recently, I have come across numerous examples in my own constituency where leaseholders in those sectors have been left with unexplainable and unjustifiable bills—something that this legislation must stamp out.

To conclude, we have an opportunity with this Bill to get rid of archaic processes and systems, to renew and refresh the legislation on leasehold and to create a level playing field. There is much to welcome, but I still believe there is more that we can do through this legislation.

19:38
Ruth Cadbury Portrait Ruth Cadbury (Brentford and Isleworth) (Lab)
- View Speech - Hansard - - - Excerpts

It is a pleasure to speak on the Second Reading of the Leasehold and Freehold Reform Bill and to follow so many excellent contributions from Members across the House. They have all provided examples, most of which I have experienced in my eight and a half years in this place.

For years and years, leaseholders, campaigners and groups such as the Leasehold Knowledge Partnership have been warning the Government about the huge harm being done by our outdated, feudal and antique leasehold system. Many of us have raised it in this House. Problems with leaseholds is one of the biggest issues brought to me by constituents, and I am sure if the Minister joined me in meeting residents of just one or two blocks in my constituency, whether it was Great West Quarter in Brentford, Grove House in Isleworth or Wheatstone House in Chiswick, he would see the wide array of problems caused by the leasehold system.

We have had nearly four years of promises from successive Conservative Housing Ministers and Secretaries of State to commit definitely to leasehold reform. The Government have talked a good game but failed to deliver the big comprehensive package of reforms needed. This piece of legislation is yet another example of that failure.

This was supposed to be the grand reforming Bill from the grand reforming Secretary of State, who is not currently in his place. He has become the Conservatives’ Mr Fix-It. He was sent in to fix the justice system and then the Cabinet Office, and even to deliver the parting blow to the former Prime Minister. When he was presented with the leasehold system, there was a glimmer of hope that the Government would slay the vested interests and finally fix this antique system—but no, the right hon. Member has flinched. He has failed, because before us today we see a timid and narrow Bill that does not go anywhere near far enough to fix the problems faced by leaseholders.

Most new homes in my constituency are flats, not houses, so although ending the sale of leasehold houses is welcome overall, it will not help my constituents and the millions across the country who are still living in, or face the prospect of living in, leasehold flats. If the House will indulge me, I will give a typical example of why the leasehold system is outdated and just what the legislation should be addressing.

Imagine someone in their early 30s on the career ladder in a reasonably well-paid job. They have saved up for years, often while stuck in private rentals. They finally have enough for a mortgage, and they can just about afford the monthly repayment rates. They look across west London and cannot afford to buy a house, but they then see a glossy advert for a flat. At first glance, it looks perfect. They have worked out that they can get a mortgage and use their deposit to get a foot on the ladder. It looks as if their salary can pay the mortgage and the service charge, so they buy and assume that they have a stake in the home that they now own.

Too often, they are kept in the dark by solicitors who are often recommended by developers. They move in and the problems start. They notice a few problems: the promised concierge might not be there; the gym on the brochure never opens; rubbish is left in the hallways; the car park barrier and the door from the car park into the flats are often broken, creating a security hazard; and heating and hot water stop working for weeks on end. They report those issues, but nothing happens. Then, they get their service charge bill in the post: it has increased to more than £7,000 a year, over 50% more than what they were told they would be spending.

One constituent has seen a trebling of their service charge since they bought their flat in 2017, but while the service charge goes up, the services get worse. Leaseholders feel that they are treated like cash cows. Then they are hit with an increase in their building insurance: what was £200 a year is now £400, £500 or more. They ask why those costs have gone up, but they do not receive a specific or clear answer. Many are faced with having to sell, sometimes at a loss.

If they were lured into shared ownership, managed by housing associations, they face additional problems. The part-buy/part-rent set-up is supposed to be targeted at keyworkers in the public sector, many of whom are on fixed pay. On top of the mortgage and service charges, those so-called owners—they are not really owners, are they?—find out that their rent is going up. In many cases, my constituents in shared ownership have seen rent increases of 6%, 7% or 8%. They only own 20% or 25%, and if they need to sell, they have to sell through their housing association, unless they are in the fortunate position of being able to step up and own the lease outright. A report that I read said that many housing associations drag their feet on resales as there is not much money to make from them. They focus their energy on getting the new blocks sold.

I have heard from many constituents who are shared owners. They wait months and months to sell, and have to pay for costly valuations, while they are trapped in limbo trying to get on with their lives. Many of my constituents who are leaseholders are also unable to sell because they are waiting for remediation work to begin on blocks deemed to be unsafe. Much of that emerged following the tragedy at Grenfell. Banks will still not approve mortgages for those blocks until the work is carried out, which means that, again, those leaseholders are trapped in limbo.

In one case in my constituency, Galliard Homes has delayed and delayed taking any action, despite promises that it would start months ago. Leaseholders in blocks below 12 metres are still responsible for funding building safety fixes. They were carved out and left to deal with the crisis themselves. For one of my constituents, that means a £20,000 bill hanging over their head. The building safety crisis is a wider symptom of the building culture that the leasehold system encouraged; a system in which a small number of people and companies are able to make huge profits, with absolutely zero oversight of the build quality.

Let me move on to repairs. The residents of Wheatstone House in Chiswick, which is managed by L&Q, face an example of poor repairs services. Leaseholders and tenants in that block have known their hot water and heating not to work for days on end. That started last winter and is back again this winter. Each time, residents get a lacklustre and slow response from L&Q. We saw a repeat of such poor service when Peabody-Catalyst dragged its feet for months in fixing the lift at Aplin Way in Isleworth, trapping some residents upstairs. The developer then tried to leave leaseholders with a huge bill. Others have district heating systems that run at 35% efficiency but cost a lot of money. What does the legislation do to address those issues?

On service charges, management companies have their cake and eat it. The hon. Member for Dartford (Gareth Johnson), who is no longer in his place, mentioned the excess charges, increases well above inflation, deteriorating service and opaque bills. Management companies are often too closely aligned by ownership with the freeholders. The same names keep coming up: Rendall & Rittner and FirstPort appear to be hoovering up the management contracts for a range of blocks, including housing association, shared ownership and resident management companies, all the while providing an appalling service to the leaseholders.

On declining value and the need to extend leases, constituents have told me about how they worry about their future if they have less than 80 years left on their lease. I do not think that the Bill does enough to address that challenge.

I am pleased that my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook) has said that a Labour Government would go further and ensure that everyone who wanted to move from leasehold to commonhold would be able to do so. A Labour Government will make commonhold the default tenure for all new properties, and will carry out the Law Commission’s recommendations—I welcome that. Labour will also address the omission on deferment rates. We will do what the Conservatives have failed to do.

I have touched on only some of the many and varied issues that my leaseholder constituents have faced. The legislation does not go far enough for them and will not fix the problems that they face. It will not help those who are stuck in limbo and unable to sell, it will not help those who were tricked into shared ownership with false promises, and it will not prevent yet more leaseholders from having their lives turned upside down. When someone is handed their first set of keys, it should be a day of dreams, but for so many of my constituents and millions of people across the country, that dream has turned into a nightmare. The Government had a chance to end that nightmare through this piece of legislation, but they have failed to do so.

19:47
Nickie Aiken Portrait Nickie Aiken (Cities of London and Westminster) (Con)
- View Speech - Hansard - - - Excerpts

Leaseholders at 8 Artillery Row pay on average £2,000 in service charges each month. The managing agent, Avon Ground Rents Ltd, refuses to disclose what is included in those charges and to provide invoices. One of the charges was £30,000 for legal and professional fees, requested without explanation or detail, even though leaseholders asked—reasonably—for information for over two years.

Leaseholders in Neville House in Westminster are living in a cladding nightmare. Although Westminster City Council issued a hazard awareness notice on the building, no remedial works have been undertaken because the managing agent, Estates & Management Ltd, has failed to agree with the developers, Berkeley Homes, on the terms of a survey licence. As a result, the homes are unsellable.

The leaseholders of Blake Tower on the Barbican estate are living in a building with ongoing fire safety issues. The developer, Redrow, committed to dealing with those issues but has yet to undertake the necessary inspections. The tower also has building defects so serious that they have resulted in several flats being unliveable. The local authority, the City of London Corporation, shares my concerns and those of my constituents, and I understand that it is about to take action.

Those are just a few examples of the appalling behaviour of freeholders in my constituency. I have been contacted by countless leaseholders who routinely report appalling practices related to service charges, the cost of major works and the extortionate charges they face when renewing their leases. When they request information or explanation, they often face a wall of silence from freeholders and their agents. “Extortionate” is probably the correct word, as what some freeholders and their accomplices—including managing agents, lawyers and accountants—are involved in is often little better than extortion. Those freeholders should instead be described as freeloaders.

The Bill responds to the concerns raised by so many of my constituents. For example, clause 27 aims to make service charges more transparent, ending the practice of demanding unexplained service charges that too many freeholders engage in, often just to profit off leaseholders. The introduction of a standardised form for freeholders requesting service charges from their leaseholders is certainly welcome, but I would like more detail about what information will need to be disclosed and how much warning freeholders will have to give leaseholders regarding costs.

Too many of my leaseholder constituents have told me that they choose not to take their landlords to tribunal, as they could be liable for their huge legal fees even if they win. I therefore welcome clause 34, which responds to that concern by ensuring that leaseholders will no longer be liable for those costs. I also welcome the fact that the Bill overhauls previous legislation by increasing the standard lease extension term for houses and flats to 990 years, as well as reducing ground rent to a peppercorn upon payment of a premium. That will ensure that leaseholders can enjoy secure, ground-rent-free ownership of their own property without the hassle and expense of repeated lease extensions.

Another game changer in the Bill is the commitment to removing marriage value. For far too long, when leaseholders want to extend their leases, they have been at the mercy of their freeholder and that freeholder’s agents, and have faced some questionable practices. The Bill makes it cheaper and easier for leaseholders to extend their lease or buy their freehold. It removes the requirement to pay marriage value, capping the treatment of ground rents at 0.1% of the freehold value in the calculation and prescribing rates for that calculation.

Clause 22 will increase the non-residential limit of a block from 25% to 50% when it comes to securing the right to manage and enfranchisement, meaning that more blocks that are a mix of residential and commercial property will have the right to manage and buy their freehold. However, that still requires 50% of the leaseholders in a block to agree to go ahead with the right to manage, which could prove near impossible for many of my constituents, due to the unique nature of the Cities of London and Westminster. Over 1,300 properties in the City of London, and a staggering 12,100 in Westminster, have owners who live abroad or are owned by companies using central London’s golden postcodes as a place to park their cash. As such, while my constituents and I warmly welcome the Government’s intention to support leaseholders who want to manage their blocks, it will prove difficult in my constituency to achieve the 50% of signatories required.

If the proposed legislation is to achieve what the Government hope for constituencies such as mine, I ask them to consider making the thresholds more flexible—perhaps by stating that 50% of signatories should be leaseholders of apartments that are their main home, rather than an investment, or reducing the threshold for the right to manage to 35% of leaseholders. I would welcome further discussions with the Minister, my hon. Friend the Member for North East Derbyshire (Lee Rowley), on that point. I thank him for meeting me and my leasehold reform working group, made up of constituents who are dealing with some of the most egregious freeholders in my constituency. The 50% threshold was discussed in some detail with the Minister at that meeting.

Another area of huge concern for leaseholders is the cost of major works and estate management charges. I have lost count of the number of constituents who have contacted me for help regarding those issues: for example, leaseholders living on the Golden Lane estate in the City are being asked to pay tens of thousands of pounds extra because the freeholder, the City of London Corporation, is 20 years behind schedule. In Russell House and Churchill Gardens, which are both in Pimlico, residents are failing to secure details on timings and costs from Westminster City Council.

Time and again, I receive complaints from constituents living in private and social blocks that, while they appreciate that they have to pay for major works and repairs, they want the freeholder—whether it is a private company or a local authority—to be open and transparent about costs. I therefore welcome clause 40 of the Bill, which will provide more transparency about major work costs. Similar to service charge expenses, landlords will have to fill out a standardised form to demonstrate exactly how the leaseholders’ money will be spent and ensure that the works are carried out to a certain standard.

I take this opportunity to thank Harry Scoffin, the founder of Free Leaseholders, for his incredible work. His support and technical knowledge has been invaluable to me and my constituents when considering the Bill. I welcome the Bill, and look forward to working with the Minister and my constituents to ensure that we end the many questionable practices of some freeholders and ensure that the leasehold and freehold system in this country is open, transparent and fair.

19:56
Samantha Dixon Portrait Samantha Dixon (City of Chester) (Lab)
- View Speech - Hansard - - - Excerpts

It is a pleasure to take part in this debate—it has been fascinating to hear from Members from around the Chamber. I pay tribute to the dedicated campaigners, including the Leasehold Knowledge Partnership and the National Leasehold Campaign, for their hard work up to this point. They have campaigned tirelessly for justice in the broken leasehold system, and for the Government to live up to their own manifesto promise and bring this Bill before the House. I am sure they will continue to campaign.

It is estimated that there are 4.86 million leasehold homes in England. That is 4.86 million households stuck in a system that denies people power, control or even a say over the security, safety and future of their own home. As we have seen, this is a cross-party issue: Members from across the House have been expressing the concerns of their constituents for many years, long before I arrived in this place a year ago. This Bill is an opportunity to rebalance the scales in favour of leaseholders, but the question remains: will it actually do so? Unfortunately, I and many others feel disappointed by the limited state of the Bill before us.

It is often said that an empty vessel makes the loudest noise. We have heard a lot of noise, which may reveal the reality that this Bill is somewhat hollow. Not only does it not ensure that new flats will be sold as freehold, contrary to what Ministers have claimed; it does not even do what it says on the tin and ban the sale of new leasehold houses, as the Government originally promised, because it contains no provisions to end leaseholds on newly built houses in England and Wales. I understand that that ban is going to be brought in in Committee, but it was first promised in December 2017 by the right hon. Member for Bromsgrove (Sajid Javid). Originally, the Government claimed to have run out of time to put it into the Bill, but they have been planning it for six years. They repeatedly comment on how complicated leasehold law is, yet they cannot include that one simple provision in the Bill. In reality, it is leaseholders who are exasperated.

Indeed, it appears that the Government have dropped quite a lot of the Law Commission’s recommendations. They claim that the Bill will make it easier, cheaper and quicker to buy the freehold or extend the lease on a property, but how do we know that without knowing what the prescribed rates will be? Thousands of leaseholders have been waiting for this Bill to arrive, and in the meantime they remain in a state of leasehold limbo, trapped by this iniquitous system. Many are unable to sell and move on with their lives. They are being forced into a game of poker in which the stakes could not be higher. Do leaseholders stick, and wait to buy their freehold or extend their lease—in itself, an appreciating asset—in the hope that Government promises to make it cheaper actually materialise, or do they twist, and pay these faceless offshore investment companies thousands of pounds? I do not know the answer, and I am not too sure the Government do either. Professional valuers and leasehold solicitors are struggling to advise their clients, too. Without knowing what the prescribed rates are going to be when calculating these figures, the claim that this legislation will make it cheaper to buy is unsubstantiated.

Also missing from the Bill is the regulation of property agents. The single biggest rip-off in the leasehold system is service charges, and without robust regulation of this, it will continue and leaseholders will remain at the mercy of bad managing agents. On the Opposition Benches, we are committed to implementing the recommendations of Lord Best’s working group, which were published by the Government four long years ago and on which they have sat. The Government have yet another consultation, which leaseholders are busy completing as we speak, on reducing current ground rents for existing leaseholders. As the hon. Member for Harrow East (Bob Blackman) has pointed out, it is not quite clear what the relationship is between this Bill and that consultation, but perhaps the Minister will expand on that.

After so many years of unfulfilled promises, the Government appear to have yet again failed to deliver for our constituents. As my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) has said, a Labour Government will make commonhold the default tenure for all new properties, as part of our commitment to reform the leasehold system fundamentally and comprehensively, by enacting in full the Law Commission’s recommendations on enfranchisement, commonhold and the right to manage. I am glad to see this Bill in front of us, but from listening to this debate, it is still clear that there remains a great deal of work ahead before these fine ambitions become a reality. In fact, it is becoming increasingly clear that we need a Labour Government to truly deliver for the so many people stuck in this feudal system.

20:02
Duncan Baker Portrait Duncan Baker (North Norfolk) (Con)
- View Speech - Hansard - - - Excerpts

It is a pleasure to be speaking on the Second Reading of this Bill, which sees long-term changes to improve home ownership for leaseholders and freeholders alike. As many people have said, the Bill is much needed, and I am glad it is finally here. It is also a pleasure to be speaking on behalf of a constituent of mine, who does not wish to be named, but who, through the numerous conversations I have had with her over the years, has enlightened me about the significant difficulties and obstacles that many leaseholders face.

These difficulties include, but are not limited to, high service and administration fees, disproportionate costs when wanting to extend leases, managing agents displaying poor practice and, in particular, imbalances in the dispute mechanism. Most of these my constituent has had to deal with personally, and they have impacted on her in numerous ways and led to a long, hard battle that she is still fighting. I can only imagine the stress and concerns that this brings to many families, and many of these points have been raised already this evening. It is through these conversations that I know how many leaseholders feel insecure and uneasy about owning a home with the sector as it currently stands. Leaseholders are a residential sector that makes up 20%—almost 5 million properties—of the housing stock in England. As such, it is important that we strike a balance between the rights of the tenants and those of the landlords, while ensuring that there are more powers and protections for those owning a home.

The Government have committed to not only increasing housing supply, but ensuring that more people feel protected and secure when looking to rent or own their own home. That is a problem I do not need to mention in this House yet again, given the pressures of living in an idyllic coastal area such as North Norfolk, which has some of the highest numbers of second homes and holiday accommodation in the UK. I similarly welcomed the Renters (Reform) Bill for tenants and landlords, and it is encouraging to see that extended to leasehold and freehold as well.

However, as others in the Chamber have said, the Bill does not go far enough in the eyes of many. It can be incredibly tiring, financially taxing and stressful for leaseholders, especially when trying to extend their lease or challenge poor practice. The Bill is trying to make it cheaper and easier for leaseholders in houses and flats to extend their lease and buy the freehold, improve transparency and rebalance the legal costs regime, as well as removing barriers for leaseholders to challenge their landlords’ unreasonable charges at a tribunal.

Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
- Hansard - - - Excerpts

I commend the hon. Gentleman for what he is saying. I know the Leasehold and Freehold Reform Bill is for England and Wales, but it seems that there are many good things in it that, even if the Bill does not go far enough, are to be welcomed. May I, through the hon. Gentleman, ask the Minister, on the finalisation of the Bill, to share information about it with the Northern Ireland Assembly, and the Northern Ireland Department for Communities in particular, to ensure that we can take advantage of the good things in the Bill back home?

Duncan Baker Portrait Duncan Baker
- Hansard - - - Excerpts

I thank the hon. Gentleman for that intervention, and I think he is right. There are many good things in the Bill, but it does need to go further. I will come on to some of the issues in a moment, but the particular items on which we need to go further are those raised directly by my constituent, who has written to me about this for the last couple of years. It is welcome that the Bill is here, but I already understand that it will be amended, which will be important as it goes forward.

As I have said, I am aware that the Government are planning amendments to take the Bill further. I say to my hon. Friend the Minister that we should give ample time to consult on those amendments, particularly—for me and my constituent—those in respect of the first-tier tribunal system to ensure that all barriers are removed for leaseholders challenging their landlords. We also need to take time to discuss the benefits of bolstering commonholds to ensure that leaseholders who own flats have the same protections and freedoms as those who live in houses. There needs to be better regulation of managing agents—that has been mentioned already—and, as a basic requirement, the first-tier tribunal system needs the jurisdiction to enforce its own orders. Without strengthening the Bill on that in particular, there will not be a significant impact on my constituent.

We have said all along that the Bill has cross-party support, which is really positive in this place. As I have said before, it is positive to see the Government are taking a leading step to help ensure that leaseholders are better protected. It is opening up further opportunities for people to own their own homes, but I hope it does go further so that I can support my constituent and we can really deliver the radical changes we need.

20:07
Stella Creasy Portrait Stella Creasy (Walthamstow) (Lab/Co-op)
- View Speech - Hansard - - - Excerpts

May I begin by echoing the comments of those on both Front Benches in supporting all those who, for many years, have been working on leasehold reform? As we have seen from this debate, this cuts across the Benches, because it is a classic example of the reality that we see in our constituency surgeries day in and day out. I also pay tribute to the all-party parliamentary group on leasehold and commonhold reform for all the work it has done. I know that I have benefited from reading much of its material while trying—often in vain, frankly—to help constituents with freehold manager companies.

As we head into the festive period, I know that this would be the best possible Christmas present we could give to so many people who are struggling with the impact of what I call “leasemin”—the day-to-day admin or work they have to do to manage the fact that they have a leasehold property. In my constituency, like that of so many other hon. Members, thousands of people are in that position. It is not just about the costs of renewing a lease; it is the day-to-day problems that come from being in a leasehold block.

Given that it is the festive period and we all want to give people good news at this time of the year, I have to tell the Minister that it does feel a bit as though my constituents have seen Santa’s sleigh flying past with all the lovely presents, but all they are getting is a lump of coal because so many of them are in flats that will not be affected by this legislation. May I urge him to think about what more we could do to protect those people in flats, because there has been an explosion of this, particularly in cities and in areas such as mine?

Sadly, I am told this evening that Condé Nast has described part of my constituency as one of the new hot places. I always dread it when I see that because it means a lot more building, a lot more pressure on house prices and very little support for my local residents. So many of the people who move into those properties will be moving into leasehold properties and face these problems; they will face that basic nightmare of thinking they own their home when they really do not. It is theirs but only under certain conditions; it is not their castle to do what they want with. Those conditions can be about whether they can have pets or a loft extension. During the pandemic, many residents could not access the energy-saving proposals because that had to be done at leaseholder level and their leasehold managers were not doing anything about it.

There have been good freehold companies as well as bad ones; there is variation. But the fundamental challenge at the heart of this legislation, and why I asked the Secretary of State about it earlier, is that commonhold is the only way we can genuinely give voice to people. It is a voice that deals with the “leasemin” problem—much more so than having the most efficient freehold management companies possible. So I want to stress to the Minister that there is still time to put commonhold as the default tenure into this legislation, and give people the Christmas present they really deserve—the most proper protection against being exploited that we could offer.

Let me give the Minister some context for why I feel so strongly about this. The number of flats in my community has risen 13% in the last eight years while the numbers of other types of properties have remained broadly static. Frankly, every time Kirstie and Phil turn up in Walthamstow, we see another tower block go up, and those tower blocks are leasehold; more than half the property transactions last year were for leasehold properties.

This is a massive issue now for most local residents, fundamentally changing the nature of my community both in terms of the people who can afford to live in those properties and the impact this is having on the cost of living. It is no surprise to me that I have the ninth highest level of child poverty when I look at people who have bought what they think are great starter homes but then find themselves saddled with charges and costs that they cannot afford in order to try to stay in the area. The question for me is whether this legislation will address the challenges that they are facing, and I do not see that happening, However, I do want to acknowledge there are many things in the legislation that we all welcome, such as the shift to peppercorn rents and ending escalating ground rents, which for some of my constituents has been a massive challenge, and the idea of longer default leases.

Many people in my constituency are part of a group of leaseholders because they live in properties that were built en masse. That is not a recent phenomenon. Indeed, I want to talk about the Warner estate in Walthamstow. They are beautiful properties, and I declare that I used to live in one myself. They were built from the 1930s to house the workers for our local industrial estates in the Lea valley. They were purpose-built flats built in two-storey terraced rows with a double front door and a split back garden. On a practical basis, that means that both residents in the properties have to want to buy the freehold, which creates a barrier for people and a challenge for so many of my constituents.

More fundamentally, the frustration I see is that, although thousands of residents live in these properties, every single one of them has a different interaction with the freehold manager. That is partly because in 2002 a situation happened which this legislation would not deal with. The Warner estate was sold and split up between Circle 33, Final Brief and various other commercial freeholders. The Minister might say that the residents would have had the right of first refusal, but because the leasehold companies were sold within parent companies and child companies of each other, residents did not get a look in. Therefore, local residents who organised themselves into Warner estate residents groups have had to deal with different companies even though they live side-by-side, complicating their ability to exercise what few rights they have under existing legislation. That means that there are different prices for renewal of the same length of leases, and different prices for quotes for having an extension and the paperwork needed for that. The most egregious difference is in the insurance they were all charged. In fact, many years ago they were asked to take on terrorism insurance for living in these properties. When I queried that with the freehold company, I was sent back the details of somebody who had been accused of terrorism and lived in Walthamstow; therefore, those who wanted to continue to live in the Warner properties as leaseholders needed to pay that additional premium. That is all perfectly legal and at the moment in this legislation there is no way to challenge that when a freeholder “takes the mickey”—I was trying to find a polite parliamentary term.

I guess my leaseholders on the Warner estate are at least grateful that they do not have a lease for Bridge Court, which is under—I am sure the Minister will know the name of this management company— Y&Y Management.

Stella Creasy Portrait Stella Creasy
- Hansard - - - Excerpts

As the Minister is nodding, he will know the amount of casework that small set of properties, only 24 flats, has generated for me over the years. To give some examples of the charges residents have faced, one was given an extra £1,500 bill and another was due to be evicted for being spuriously charged £5,000 by that company. It is not legally possible for those residents to withhold those payments and not lose their properties, so they had to try to find the money to pay, even though it was patently obvious that that egregious company was levying the charges as punishment for their having dared to exercise their rights. The only option open to them was to go to court.

Again, this legislation offers nothing to help support people in such a situation. It offers nothing to help support people when their freehold manager shifts the leasehold around to avoid them having the right to manage or even the right to buy their own freehold out. This company decided the private communal gardens could be turned into a public car park, opening up the entire estate and letting in huge problems with antisocial behaviour, all because it thought it could make a fast buck in the London area with a car park.

Y&Y then transferred the ownership of the building to Triplerose, a management company owned by Israel Moskovitz, who is part of Y&Y Management. Just the other week a resident came to me to point out that they had an onerous ground rent clause, which means that their ground rent has to be reviewed every five years against the retail price rate. That was not in the original lease but was added in. The owners of that property tried to sell the flat, and they asked whether they could vary that condition, because it was stopping them being able to sell it. Triplerose responded, demanding an immediate non-refundable payment to provide a quote—just a quote—for what it would cost to vary that condition. It then came back with a quote of £700 for an admin fee, £1,400 for legal fees and £8,000 for the premium.

Richard Foord Portrait Richard Foord (Tiverton and Honiton) (LD)
- Hansard - - - Excerpts

I have some casework that sounds similar to that which the hon. Lady is describing. It is at Pebble Beach in Seaton. A constituent wrote to say that she wanted to change the name on the deeds and introduce her partner’s name, and FirstPort wanted to charge her £540 just to get its approval. Does the hon. Lady agree that some of the leasehold companies we are talking about are charging Fortnum & Mason prices for services we might associate with Trotters Independent Traders?

Stella Creasy Portrait Stella Creasy
- Hansard - - - Excerpts

I think even Del Boy had limits compared with some of the people we are talking about.

The Minister would probably say that in those circumstances the changes being made to ground rent should resolve the situation, and he would be right, but my broader point is that those residents have no redress. At the moment, the Bill does not come with forms of redress, and without redress it does not matter what rights people have because they cannot action them.

Those residents actually did go to a first-tier tribunal. They clubbed together, took on the risk and won—and understandably so, because if someone turns the private gardens into a car park, allowing people into the block, that does rather undermine the concept of service charges. They have been waiting three years for the compensation they are entitled to as a result of that ruling. Again, nothing in the Bill would change that. But that they went to a tribunal with a company with such a track record for doing these things over and over again, and that it meant nothing for future legislation and had no preventive effect, is perhaps the biggest and most important message Ministers should take from this debate. The fact that people cannot set precedent by winning a leasehold tribunal means that residents who live in blocks that are very similar go through the same fights again and again, and the same companies know they can get away with it again and again.

In any other legal situation there would be court precedent and opportunities for redress for our constituents. Surely, one of the things that we can do through the Bill is to change that and learn from other courts, because that “leasemin” is so time-consuming and stressful to so many of these people, and that is why they end up at our doorstep. Nobody wants to take on the risk of legal action if they can avoid it, especially if they have no guarantee that, even though the situation is patently unfair and somebody else has won a very similar case, that will make a difference.

We see it every single day. We see the people with repairs. I think of Hainault Court in my constituency, which has a freeholder of various names, including Freshwater, Highdorn and Daejan—it uses different ones all the time—where residents have spent hours of their lives trying to get the basic repairs that they pay their service charge for. They were charged £10,000 to replace a collapsed boundary wall. They got their own estimates, and it should have cost only £2,000 or £3,000. In a community where everybody is short of cash at the end of the month and every single penny counts, knowing that they have no alternative is a very poor place to be.

I wish I could say that situation is just in the private sector, but my own council was taken to court successfully by leaseholders over the charges being proposed for repairs and renovations in some of our local estates. Again, I hope that the Minister thinks about the right to manage, which is difficult to do in a block with a mix of social housing and leasehold property. In London, there are an awful lot of those properties, thanks to right to buy.

I also think of those people stuck with nothing to put any impetus on their property managers to do the right thing, even though they recognise that they need to do the right thing. I think of Hoffmans Road in my constituency, which is in that patch that Condé Nast is telling everybody to visit right now. The residents have no security on their building, because the doors do not work. The property company, Fexco, tells me that it is a problem for the developer, Taylor Wimpey. Taylor Wimpey, however, thinks it is for the property manager to use the money from the service charge to fix it. Nothing in this legislation will give those residents—my constituents—the ability to just get it sorted in the way that commonhold would.

We all have hundreds of examples. One thing that I have learned in this place over 13 years is that when we get these precious opportunities—when there is cross-party agreement that reform needs to happen—we should aim for the big reform, because we might not get the opportunity ever again. Nobody in this Chamber can defend freehold. Nobody can defend leasehold. We can all see the value in having a system that allows our constituents to have a direct voice. Goodness knows, I am sure for many of us it would cut the amount of casework we have, if nothing else. It would be a lot clearer what redress our residents have, before they have to go to court in the first place.

If we cannot have courts making precedent-setting rulings, can we at least look at how we can give our residents a stronger voice? For so many of them, it is the difference between a life well lived and a life lived in stress, wishing that they had never even bought the thing that they dreamed of, fought for and saved for longest of all. I had a cladding developer that said that it had put itself out of business so that it did not have to do the cladding; it was too small to be liable for it. Those residents are still waiting for redress.

All those issues tell us that this is not about a big-P political issue; it is about the day-to-day practical implementation. If we get this legislation right, we can solve so many headaches for so many people. I hope the Minister will not be Scrooge. I hope he will not be the Grinch. I hope he will think about what he can do for all those people sitting in those flats tonight, looking at the lump of coal that this legislation represents for them. Will he extend the Christmas cheer not just to those who might have been threatened by leasehold for houses, but to all those in leasehold flats right now? I know it would give everybody a very good 2024 if he did.

20:23
Ian Byrne Portrait Ian Byrne (Liverpool, West Derby) (Lab)
- View Speech - Hansard - - - Excerpts

It has been a privilege to sit here for five hours and listen to all the passionate contributions from all parts of the House, with a pretty unanimous view. First, I thank Cath Williams, Katie Kendrick and Barry Kushner for their help in my constituency with the many leaseholder issues that I have had. For millions of people, the housing sector is broken. Everywhere within it we see a huge imbalance of power, and that has had a devastating impact on the health and wellbeing of thousands of my constituents in Liverpool, West Derby, and so many people across the country, as we have heard today. That injustice is encapsulated by the frankly medieval ownership framework, which creates a clear imbalance of power between leaseholder and freeholder. The scandal of leasehold must be brought to an end for the millions who have bought their home but do not feel like they own it.

While I welcome the promise of some of the reforms in this long-overdue Bill, many of which came from the Select Committee on which I serve, I am extremely disappointed that it does not directly tackle ground rents. I suspect that the Government know exactly what existing leaseholders urgently require from them on ground rents, so I am dismayed that rather than addressing that matter directly, they have decided to consult on it. The vested interests have definitely won again.

Practically every constituent I have heard from on this matter—and there have been many—tells me that they want ground rents abolished so that they can be guaranteed secure, ground rent-free ownership of their property for years to come, without the stress and expense of repeated lease extensions. I note that the hon. Member for Harrow East (Bob Blackman) agrees. He spoke eloquently about it today, and he said last week that ground rents on leasehold properties needed to be

“peppercorn or zero, it’s as simple as that.”

My constituents also want to see a Bill that contains all the Law Commission’s proposals, rather than the watered-down version before us today. I am glad that our Front Bench team confirmed that that is what we will do if we get into government.

I am also dismayed that the Government have not gone so far as to abolish new leaseholds on flats. That is a huge mistake. Can the Minister give a reason why flats, which make up 70% of leasehold properties, will continue to be sold as leasehold, when he was elected on a specific manifesto promise to end that practice? The Government had the opportunity in this Bill to put a stop to what the Secretary of State himself recently called the outdated “feudal system” of leasehold. Instead, they appear content for new flats to continue to be bought and sold as leasehold. That is incredibly disappointing for so many people across the country.

If Ministers are serious about doing away with leasehold, they need to ban leasehold on all new flats, as well as new houses. Let us be clear: the only argument for retaining leasehold on flats is to allow management agencies and freeholders to continue to exploit leaseholders for the purpose of profit over principle, with the status quo prevailing. That has not been the mood music from those on the Government Front Bench, but talk is cheap in this place, as I have found out.

Until leasehold is banned, homeowners will continue to be held hostage in their own homes. Given the current economic situation, the delays and lack of clarity on a timetable for overdue reform are increasingly frustrating for my constituents. It is unacceptable that they continue to be subjected to extortionate, unjustified charges and escalating ground rents. What is more, I am convinced that the leasehold system is not only unfair, but a genuine health and safety risk, as has been outlined today, when we consider the continued delays to the vital fire safety recommendations made by the inquiry into the Grenfell Tower fire.

The National Leasehold Campaign has welcomed this long-overdue legislation, but considers several key items to be missing from the Bill, and I completely agree. Those measures include, but are not limited to: prescribed capitalisation and deferment rates for valuers to value lease extensions or freehold purchases; abolishing forfeiture, which is used against leaseholders and serves as a massive windfall for freeholders; an online calculator for lease extension and freehold purchase; steps to progress the adoption of commonhold; the regulation of managing agents, as we have heard about today; and making it easier for leaseholders to have the right to manage.

If the Government are truly serious about ending the nightmare for leaseholders, they need to urgently revisit this legislation. I suggest that they meet the National Leasehold Campaign and the Law Commission to ensure that the key recommendations by both bodies are included in the Bill as it moves forward.

20:27
Matthew Pennycook Portrait Matthew Pennycook (Greenwich and Woolwich) (Lab)
- View Speech - Hansard - - - Excerpts

I start by declaring an interest: my wife is the joint chief executive of the Law Commission, whose work I intend to cite in my remarks.

It is a pleasure to close this Second Reading debate for the Opposition, and I thank all right hon. and hon. Members who have participated in it. I echo what so many others have said and add my own tribute to all the individuals and organisations who have campaigned for so long for reform in this area.

As a number of contributors to the debate have pointed out, we have waited a long time for this Bill. It was just under six years ago that the then Secretary of State, the right hon. Member for Bromsgrove (Sajid Javid), announced that the Government intended to introduce a series of measures to end unfair and abusive practices within the leasehold system, including—I quote here from a Government press release in December 2017—

“legislating to prevent the sale of new build leasehold houses”.

That 2017 announcement was developed three years later, during the tenure of the right hon. Member for Newark (Robert Jenrick) as Secretary of State. In a written ministerial statement dated 11 January 2021, he announced

“seminal two-part legislation to implement leasehold and commonhold reforms in this Parliament”.

The first part of that two-part legislative agenda duly followed, in the form of the Leasehold Reform (Ground Rent) Act 2022. Although we—and in particular the shadow Minister for homelessness and building safety, my hon. Friend the Member for Weaver Vale (Mike Amesbury)—pressed Ministers to use that Act to implement further reform, we nonetheless supported the Government in passing it. In the 17 months since the Act came into force, successive Ministers have made all manner of extravagant promises about what the second part of the “seminal two-part legislation” would entail. Indeed, the current Secretary of State, in an interview with The Sunday Times in January this year, even went so far as to declare, without qualification, that he intended to abolish the leasehold system in its entirety.

Leaseholders across the country, whose daily lives are often made miserable by the unjust and discriminatory practices that our archaic leasehold system facilitates, took Tory Ministers at their word. They expected the second part of the promised two-part legislative agenda to live up to the weighty promises made by the Government. They have been badly let down. Having waited so long and had their expectations raised so high, they are understandably disappointed at the limited Bill that we are considering today. And it is a limited Bill, and no amount of bravado from the Secretary of State can alter that fact. They are also perplexed, as we are, that legislation that the Government claimed would end leaseholds on newly built houses in England and Wales does not actually contain any provision to end such leaseholds.

When the Minister responds to the debate, he will no doubt attempt to brush that criticism aside, as he did in oral questions last week, on the grounds that it is entirely normal for key provisions of a Bill to be added in Committee. Sadly, as my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) mentioned in opening the debate, it is common practice for this Government, and this Secretary of State in particular, to significantly expand the size and scope of Bills by incorporating swathes of Government amendments in Committee and on Report in a way that limits the ability of hon. Members to ensure that full scrutiny takes place. However, the Minister is fooling no one in attempting to suggest that the omission from the legislation of key provisions was always the Government’s intent.

I remind the House, as my hon. Friend the Member for City of Chester (Samantha Dixon) did, that the right hon. Member for Bromsgrove committed the Government to legislating to prevent the sale of new build leasehold houses nearly six years ago. The Government have no excuse whatsoever for failing to include in the Bill the provisions necessary to enact that commitment in order for the House to consider them properly today. That they failed to do so no doubt owes more to hurried drafting, and to the wrangling between the Department and No. 10 that has taken place over recent months in respect of this Bill, than to any considered design. However, for all the confusion that surrounded it, the legislation before us has answered one important question: how ambitious do the Government wish to be when it comes to leasehold reform? Because this unambitious piece of legislation makes it clear that proponents of caution and restraint have won out over those who want to lay claim to a legacy of bold reform in this area.

That criticism cannot simply be brushed aside as carping on the part of the Opposition. The Government’s poverty of ambition has real implications for leaseholders being routinely gouged by freeholders under the present system. Take flats, which are the overwhelming majority of new leasehold properties being created and the source of most of the leasehold-related complaints that I receive from constituents. The Government’s stated solution for them, as made clear by Baroness Penn in the other place just last week, is reinvigorating commonhold, yet the Minister of State made it clear on Monday that the Government do not intend to incorporate into this Bill any provisions whatsoever relating to commonhold, despite the clear commitment they made in 2021. Instead, it remains part of their “long-term approach”. In other words, the Government’s offer to swathes of leaseholders across the country is jam tomorrow.

The hon. Member for Redditch (Rachel Maclean), known affectionately as No. 15 on these Benches, gave the game away. She said that all the work has already been done on commonhold, so it is not a matter of complexity; it is a political choice on the Government’s part not to introduce commonhold provisions in this legislation. What is so galling about the position that Ministers have adopted is that there is clearly widespread support across the House for the more ambitious leasehold reform that could have been incorporated into the Bill, and this debate has demonstrated it. However, in the dying days of this Government, we are where we are.

While we deeply regret the Bill’s lack of ambition, we have no intention of voting against Second Reading this evening. We support the intent of the provisions in the legislation before us and the principle of the Bill as a whole. The measures it contains will give homeowners in England and Wales some greater rights, powers and protections over their homes. That is not to say that we do not have concerns about the efficacy of some of them; we do, and we will seek to strengthen the Bill in a number of ways in Committee. For example, we believe that clauses 12 and 13, which are intended to protect leaseholders from covering the legal and valuation costs associated with lease extensions, require tightening if we are to prevent, in practice, freeholders recovering litigation and non-litigation costs. To take another example, we believe that clause 23, which seeks to replace the existing costs regime for right to manage claims, is flawed and needs overhauling if it is to protect, in practice, RTM companies from cost claims by landlords.

We also believe that this limited Bill can be improved in ways that will give future leaseholders more control over their future. For example, we think there is an iron-strong case for adding to the Bill provisions that would abolish forfeiture for leases entirely and replace it with a more equitable means for freeholders to recover costs in a dispute that does not involve a windfall. I was pleased by the signal that the Secretary of State gave on that front in opening the debate. To take another example, we think there is merit in adding to the Bill provisions that would ensure that leases on new flats include a requirement to establish and operate a residents’ management company responsible for all service charge matters and associated works, with each leaseholder given a share.

We will seek to convince the Government of the merits of those and other measures when we go into Committee in the new year, and we will engage constructively with the Government if they decide to introduce other bold measures into the Bill at that stage—for example, if Ministers are minded to implement the Law Commission’s proposals on the right to manage, covering both flats and houses.

However, we recognise that there is only so much that we can do with the legislation before us. Given the paucity of the Bill’s ambition and the fact that it does not contain so many of the commitments that successive Secretaries of State have made, not least in relation to the promised widespread introduction of the commonhold tenure, it is clear that it will now fall to a Labour Government to fundamentally and comprehensively reform the leasehold system, including the reinvigoration of commonhold to such an extent that it will become the default and ultimately render leasehold obsolete.

We are pleased that the Bill will progress today. It will provide some limited relief to leaseholders. We will seek to improve it with a view to extracting from the Government any extra measures that further empower leaseholders and disturb the historical iniquity on which the present system rests. Leaseholders across the country who remain at the mercy of arcane and discriminatory practices, to their detriment and to the benefit of freeholders, rightly expect nothing less. But leaseholders across the country expected so much more from the Government. We are clear that, in due course, Labour will have to finish the job and enact all the Law Commission’s recommendations on enfranchisement, right to manage and commonhold in full. We are determined to do so.

20:37
Lee Rowley Portrait The Minister for Housing, Planning and Building Safety (Lee Rowley)
- View Speech - Hansard - - - Excerpts

It is a pleasure to wind up the debate after so many useful, thoughtful and detailed contributions. In that spirit, I want to spend a little time going through some of those details. Before doing so, I wish to thank, as so many others have, all the campaigners and all those who have spent so much time working in this area for so many years.

I thank my hon. Friend the Member for Worthing West (Sir Peter Bottomley), the hon. Member for Sheffield South East (Mr Betts), my hon. Friend the Member for Redditch (Rachel Maclean), the right hon. Member for East Ham (Sir Stephen Timms), my hon. Friend the Member for Dartford (Gareth Johnson), the hon. Member for Battersea (Marsha De Cordova), my hon. Friend the Member for Harrow East (Bob Blackman), the hon. Member for North Shropshire (Helen Morgan), my right hon. Friend the Member for Aldridge-Brownhills (Wendy Morton), the hon. Member for Brentford and Isleworth (Ruth Cadbury), my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken), the hon. Member for City of Chester (Samantha Dixon), my hon. Friend the Member for North Norfolk (Duncan Baker), the hon. Member for Walthamstow (Stella Creasy), the hon. Member for Liverpool, West Derby (Ian Byrne), and all those who intervened for the helpful comments they provided.

I welcome the general and broad support for the actions that are being taken in the Bill. I also welcome the consensus in the House on the need for reform, which I know, as was highlighted several times, has been some time coming. I hope right hon. and hon. Members will recognise that this is a complicated and intricate area, which is observable not least from the many examples given in the debate. We now have in front of us a good proposition for making progress.

Our focus in the Bill is on being able to make practical progress—to make the Bill as practically useful as it can be—and then to have the greatest impact that it can have. Some, including hon. Members tonight, have said that it does not go far enough; others have said that we should return to first principles and seek to build the whole system again. I am sure that those hon. Members will make their case in Committee if they are part of it, and on Report and in subsequent stages. The Government seek to have a proposition on which can be built; one that is practical, achievable and makes a difference. The art of politics is about being able to make progress, and we think that the Bill will make a significant difference to people’s lives.

Let me turn to some comments made in the debate. I pay tribute to the long-standing work of the Father of the House, my hon. Friend the Member for Worthing West. He raised a number of points, which we will go through in more detail in Committee, but I want to highlight his point on building safety with regard to sub-11 metre properties. A number of Members made similar comments. We have a process in place, so if colleagues have concerns about fire remediation issues in sub-11 metre properties, they should ensure that they get the appropriate fire assessments needed in all buildings. If substantial works are needed to those properties, they can be raised with the Department, which has committed at this Dispatch Box and has executed commitments to look into those issues in more detail.

I pay tribute to the work of the Select Committee, chaired by my constituency neighbour, the hon. Member for Sheffield South East. I particularly enjoy our interactions on this issue because it gives me, like him, the opportunity repeatedly to say as a constituency MP how outraged I am about Coppen Estates’s consistent failure to respond. That is a hallmark of a small cohort of actors in this area, which consistently and flagrantly ignore reality and their ability to make a difference to our residents’ lives. Coppen Estates is a good example of such actors, but there are many others.

Clive Betts Portrait Mr Betts
- Hansard - - - Excerpts

I thank the Minister for responding to that point. Will he look at strengthening the Bill to stop companies like Coppen Estates avoiding the legislation? Strengthening the legislation is fine, and so is changing the way that enfranchisement fees are calculated so that people get a better deal, but in the end, the freeholder has to respond, which Coppen Estates refuses to do. My constituents in the Flockton estate in Sheffield have tried and failed for years to get a response. How will the legislation be strengthened to ensure that such companies respond?

Lee Rowley Portrait Lee Rowley
- View Speech - Hansard - - - Excerpts

I am very happy to look at specific issues in Committee. As the Secretary of State highlighted in his opening speech, if there are areas where we can improve the Bill, we will be happy to do so. I cannot make promises, but we are happy to look at them. The hon. Gentleman’s constituents in Sheffield, my constituents in Dronfield and constituents all across the country have similar issues to those with Coppen Estates, so I hope we will be able to make progress.

The hon. Gentleman, the hon. Member for Battersea and others rightly talked about leaseholders not knowing what they are paying for. A few weeks ago, I had the privilege of taking part in a two-hour discussion with one of the better estate managers about an issue in my constituency in Hunloke Grove. They were willing to go into detail, talk about the issues, work through and be transparent on their fees in a way that so many other managing agents are not. The importance of that came home to me in that discussion.

My hon. Friend the Member for Redditch should rightly take all the credit for where we are today. I am surfing on all her work over many months to get the Bill ready. She deserves a huge amount of credit for that. She was an exceptional Housing Minister and has made some extremely constructive comments today, which we will look at along with the similar comments from my hon. Friend the Member for North Norfolk. I can confirm that our intention is that there will be sufficient time to be clear on ground rents. As my hon. Friend the Member for Redditch rightly said, it is so important that we secure a property-owning democracy for the next generation.

I thank the right hon. Member for East Ham for making a series of important points, which I am happy to look at. The Government are happy to see whether they are possible. He made a specific point about asbestos, which we will take away and review with the detail it deserves. I look forward to the visit to Barrier Point, which I wanted to make following his correspondence. It is important that, on building safety, we look at not just the overall macro picture but individual circumstances, to see whether we can learn anything.

I am also grateful to the right hon. Member for giving me this opportunity to make the point about insurance from the Dispatch Box. I am as keen as him to see progress on insurance. I have met representatives of the insurance sector on a very regular basis in the year that I have been in post. I hope that they will hold to their intentions. They have told us that they will launch the scheme, and we are keen to see it. The Secretary of State’s further meeting this week will, I hope, enable progress.

My hon. Friend the Member for Dartford made extremely important points on estate management. He has continually articulated the challenges on a regular basis, and has been a champion on this matter. He rightly speaks of the outrages he has seen in his constituency. It is important that we respond to that as best we can.

I am grateful to my hon. Friend the Member for Harrow East for highlighting a number of the important changes that are coming. He is right that our objective is to squeeze out the bad practice in the sector. There are honourable people out there and there are honourable ways in which it is done, but where bad practice occurs it gives the entire sector a bad name. We will legislate and regulate to remove it in a proportionate way.

My hon. Friend also highlighted an example of a property that has not yet made progress on remediation, and similar examples were given by the hon. Members for Brentford and Isleworth and for Walthamstow and my hon. Friend the Member for Cities of London and Westminster. We can see significant progress. We have only recently produced a new detailed set of data covering all the funds that are open on building safety. I hope hon. Members will see the progress that has been made, but we recognise that there is more to do. The hon. Member for Walthamstow is absolutely right that there are a number of names that pop up repeatedly—for example Y&Y Management and E&M. There are many others and they should be on notice that they need to change their practices, because they are not acceptable.

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

The Minister touched on building safety. In the briefing notes on the Bill that accompanied the King’s Speech, under the heading “Improving leaseholders’ consumer rights”, reference was made to:

“Building on the legislation brought forward by the Building Safety Act 2022”.

Is it the Government’s intention to incorporate building safety measures in the Bill?

Lee Rowley Portrait Lee Rowley
- Hansard - - - Excerpts

We are looking at what may be possible. We recognise that, while the Secretary of State for Levelling Up, Housing and Communities has brought forward a very solid prospectus, tweaks can always be made. We see real momentum in this area. I know that that is not good enough for buildings that have not yet had their remediation or for leaseholders who are hugely frustrated by the inability or unwillingness of freeholders to make progress, but we have made significant changes and steps forward in the last year or so, and we are committed to doing more in the coming months.

I am grateful to the hon. Member for North Shropshire for meeting me earlier to talk about specific points about assets. We will look at those points and come back to her.

I can confirm to my right hon. Friend the Member for Aldridge-Brownhills that we intend to tackle ground rents. I am grateful to her for highlighting exceptions in leasehold houses. We intend that to be a very narrow element. She sought an example. One example I can give is that of National Trust land where freeholds cannot be sold and a small number of leasehold homes may therefore be required.

The hon. Member for Liverpool, West Derby talked about his disappointment with, I believe, the consultation on ground rents. We must consult on that because we must ensure that we are listening and that we take a decision based on the broad range of evidence in front of us, to ensure that it is legally sound when the decision is made. He encourages me to speak to the Law Commission. I can tell him that I have spoken to the Law Commission probably more regularly than any other external organisation outside the Department in the past three or four weeks.

The hon. Members for Walthamstow, for Battersea and for Brentford and Isleworth are seeking to push a narrative—if I may say that very gently to them, with the best of intentions—that this is not a significant intervention with regard to flats. I gently encourage them to continue to engage with the Bill. They will see long and cheap extensions, easier enfranchisement, service charge transparency, easier redress, lease extensions, standard forms, annual reports and many, many other significant measures that will have salience for those living in flats.

Before I conclude, I would like to thank the hon. Member for Greenwich and Woolwich (Matthew Pennycook) for his constructive comments. I look forward to meeting him in Committee to talk about them more. While I may disappoint the right hon. Member for East Ham, I would like to turn to some of the comments made from the Opposition Front Bench.

The right hon. Member for Ashton-under-Lyne (Angela Rayner), despite acknowledging that the Government have brought forward important legislation, despite confirming that Labour would not be opposing it and despite advancing the most enthusiastic compliment I have ever heard her give a Conservative—that the Secretary of State has reached the lofty heights of being a “functional cog”; heavy praise indeed!—showed that, as ever, she deals in rhetoric rather than reality, and in politics rather than policy. She called the Bill “empty”. This is a Bill with 65 clauses, eight schedules and 133 pages, and there are 67 pages of explanatory notes. Given its comprehensive reform of enfranchisement and extensions, its comprehensive reform of redress, and its comprehensive reform of service charges, estate management and valuation, that is a funny definition of “empty”.

Bob Blackman Portrait Bob Blackman
- Hansard - - - Excerpts

I asked the Minister to answer this question in summing up the debate. Will he undertake to include the outcome of the consultations that are currently taking place, particularly that on ground rents, in the amendments that the Government table in Committee?

Lee Rowley Portrait Lee Rowley
- Hansard - - - Excerpts

That is our intention, yes.

We have had a good debate today, which I hope—indeed, I know—will start the passage of this important Bill into law and lead to a better system for everyone in the long term. This is an outcome that is fundamentally Conservative because, fundamentally, the Bill is about empowering people, about levelling the playing field where it has been distorted, about reining in those who are trying to rent-seek for no purpose at the expense of those who just want to get on with living their lives, and about giving people the security of home ownership—proper home ownership, for the long term—so that they can build their lives and build their futures. I hope that all Members will join the Government in supporting the Bill tonight, and I look forward to further constructive conversations during its future stages.

Question put and agreed to.

Bill accordingly read a Second time.

Leasehold and Freehold Reform Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Leasehold and Freehold Reform Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 1 February 2024.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Scott Mann.)

Question agreed to.

Leasehold and Freehold Reform Bill (Money)

King’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Leasehold and Freehold Reform Bill, it is expedient to authorise the payment out of money provided by Parliament of:

(1) any expenditure incurred under or by virtue of the Act by the Secretary of State, and

(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Scott Mann.)

Question agreed to.

Leasehold and Freehold Reform Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Leasehold and Freehold Reform Bill, it is expedient to authorise the charging of fees under or by virtue of the Act.—(Scott Mann.)

Question agreed to.

Leasehold and Freehold Reform Bill (First sitting)

The Committee consisted of the following Members:
Chairs: Dame Caroline Dinenage, Clive Efford, Sir Mark Hendrick, † Sir Edward Leigh
† Amesbury, Mike (Weaver Vale) (Lab)
† Carter, Andy (Warrington South) (Con)
† Davison, Dehenna (Bishop Auckland) (Con)
Edwards, Sarah (Tamworth) (Lab)
† Everitt, Ben (Milton Keynes North) (Con)
† Fuller, Richard (North East Bedfordshire) (Con)
† Gardiner, Barry (Brent North) (Lab)
† Glindon, Mary (North Tyneside) (Lab)
† Hughes, Eddie (Walsall North) (Con)
† Levy, Ian (Blyth Valley) (Con)
† Maclean, Rachel (Redditch) (Con)
† Mohindra, Mr Gagan (South West Hertfordshire) (Con)
† Pennycook, Matthew (Greenwich and Woolwich) (Lab)
† Rimmer, Ms Marie (St Helens South and Whiston) (Lab)
† Rowley, Lee (Minister for Housing, Planning and Building Safety)
Smith, Chloe (Norwich North) (Con)
† Strathern, Alistair (Mid Bedfordshire) (Lab)
Huw Yardley, Katya Cassidy, Committee Clerks
† attended the Committee
Witnesses
Mr Martin Boyd, Chair, Leasehold Advisory Service
Sebastian O’Kelly, CEO, Leasehold Knowledge Partnership
Liam Spender, Senior Associate, Velitor Law
Katie Kendrick, Co-founder, National Leasehold Campaign
Jo Derbyshire, Co-founder, National Leasehold Campaign
Cath Williams, Co-founder, National Leasehold Campaign
Amanda Gourlay, Barrister, Lazarev Cleaver LLP and Associate, Tanfield Chambers
Public Bill Committee
Tuesday 16 January 2024
(Morning)
[Sir Edward Leigh in the Chair]
Leasehold and Freehold Reform Bill
09:26
None Portrait The Chair
- Hansard -

Before I begin, I have a couple of announcements. Hansard colleagues would be grateful if Members emailed their speaking notes to hansardnotes@parliament.uk. Obviously, electronic devices should be switched off.

Ordered,

That—

(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 16 January) meet—

(a) at 2.00 pm on Tuesday 16 January;

(b) at 11.30 am and 2.00 pm on Thursday 18 January;

(c) at 9.25 am and 2.00 pm on Tuesday 23 January;

(d) at 11.30 am and 2.00 pm on Thursday 25 January;

(e) at 9.25 am and 2.00 pm on Tuesday 30 January;

(f) at 11.30 am and 2.00 pm on Thursday 1 February;

(2) the Committee shall hear oral evidence in accordance with the following Table:

Date

Time

Witness

Tuesday 16 January

Until no later than 9.50 am

The Leasehold Advisory Service (LEASE)

Tuesday 16 January

Until no later than 10.25 am

Leasehold Knowledge Partnership; Velitor Law

Tuesday 16 January

Until no later than 11.00 am

The National Leasehold Campaign

Tuesday 16 January

Until no later than 11.25 am

Law & Lease

Tuesday 16 January

Until no later than 2.30 pm

The Law Commission

Tuesday 16 January

Until no later than 3.00 pm

The Financial Conduct Authority

Tuesday 16 January

Until no later than 3.40 pm

Free Leaseholders; Commonhold Now; HoRnet (the Home Owners Rights Network)

Tuesday 16 January

Until no later than 4.15 pm

The Property Institute; Fanshawe White

Tuesday 16 January

Until no later than 4.50 pm

The Home Buying and Selling Group; The Conveyancing Association

Tuesday 16 January

Until no later than 5.15 pm

Public First

Tuesday 16 January

Until no later than 5.40 pm

Dr Douglas Maxwell

Thursday 18 January

Until no later than 12.10 pm

HomeOwners Alliance; The Federation of Private Residents’ Associations; Shared Ownership Resources

Thursday 18 January

Until no later than 12.40 pm

Professor Andrew J. M. Steven (Professor of Property Law, University of Edinburgh); Professor Christopher Hodges OBE (Emeritus Professor of Justice Systems, University of Oxford)

Thursday 18 January

Until no later than 1.00 pm

The Building Societies Association

Thursday 18 January

Until no later than 2.20 pm

Competition and Markets Authority

Thursday 18 January

Until no later than 2.40 pm

Policy Exchange

Thursday 18 January

Until no later than 3.10 pm

The Law Society; Philip Rainey KC

Thursday 18 January

Until no later than 3.30 pm

The Residential Freehold Association

Thursday 18 January

Until no later than 3.50 pm

End Our Cladding Scandal



(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 4; Schedule 1; Clauses 5 to 11; Schedules 2 to 5; Clauses 12 to 19; Schedule 6; Clauses 20 and 21; Schedule 7; Clauses 22 to 37; Schedule 8; Clauses 38 to 65; new Clauses; new Schedules; remaining proceedings on the Bill. (4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 1 February.—(Lee Rowley.)

Resolved,

That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Lee Rowley.)

None Portrait The Chair
- Hansard -

I take it that we do not need to move the motion about deliberating in private; just intimate to the Clerk or me that you want to speak, and we will proceed informally. We are sitting in public, and the proceedings are being broadcast. Do any Members want to make a declaration of interest?

Matthew Pennycook Portrait Matthew Pennycook (Greenwich and Woolwich) (Lab)
- Hansard - - - Excerpts

My wife is the joint chief executive of the Law Commission, and we are hearing evidence from it.

Examination of Witness

Mr Martin Boyd gave evidence.

09:27
None Portrait The Chair
- Hansard -

We will now hear oral evidence from Martin Boyd, chair of the Leasehold Advisory Service. Before I call the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill. We must stick to the timings in the programme order that the Committee has agreed. For this panel, we have until 9.50 am. Perhaps the witness could introduce himself briefly.

Mr Martin Boyd: Good morning, everyone. My name is Martin Boyd. I am the newly appointed chair of the Government’s Leasehold Advisory Service. I am also chair of the charity the Leasehold Knowledge Partnership, and I am chair of the resident management company in the place where I have a flat.

None Portrait The Chair
- Hansard -

I think perhaps the Opposition spokesperson wants to start off with the questions.

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

Q Martin, thank you for coming to give evidence to the Committee. I have two questions to start off with.

Marie Rimmer Portrait Ms Marie Rimmer (St Helens South and Whiston) (Lab)
- Hansard - - - Excerpts

Excuse me, Chair. Is the loop system on? No? Can we arrange to have it on, please? [Interruption.] Oh, we cannot; I understand.

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

One of the aims of the Bill—certainly in the terms of reference handed to the Law Commission, whose recommendations frame a lot of parts 1 and 2—was to provide a better deal for leaseholders as consumers and increase transparency and fairness. In your view, to what extent does the Bill as a whole do that? Are there any specific clauses or elements of the Bill that we might seek to tighten up to further improve the experience for leaseholders as consumers? I am thinking of the fact that leaseholders are still liable to pay certain non-litigation costs and that right-to-manage companies are still liable when claims cease.

Mr Martin Boyd: As you may recall, when the Law Commission originally looked at this area of the law, it suggested to the Government that a consolidation Bill was warranted. However, there was not the budget at the time, so it was then given the three projects on right to manage, enfranchisement and commonhold to look at. The enfranchisement proposals and some of the right-to-manage proposals, but none of the commonhold proposals, have been brought forward in the Bill. The difficulty with the Bill is that there is an almost endless list of things that could be added. In removing the one-sided costs regime, the Bill does quite a lot to balance the system during the enfranchisement process. It also attempts to address the problem of the costs regime at the property tribunal. In the current system, the landlord is in a win-win position. Even if they lose the case, they are able to pass on some of their legal costs under most leases. The Bill tries to address some of those issues.

We still have a whole set of problems in the way that resident management companies and RTMs operate. They do not have a legitimate means of passing on their company costs within the service charge. There are still sites where they effectively have to cook the books to pass on the legitimate costs to the service charge payers. There are still many more things to add to the Bill. Clearly, we will continue to have problems with multi-block right-to-manage sites as well. They do not operate effectively anymore, and unfortunately the Bill does not address that element of the problem.

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

Q Just so I am clear, you think there is scope to tighten the clauses in the Bill when it comes to non-litigation costs at tribunal and RTMs incurring costs?

Mr Martin Boyd: Yes. There are several things that could be added.

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

Q My second question relates to managing agents. Lots of the freeholders that leaseholders have to deal with are offshore and hard to reach. Managing agents are the first point of contact, and in many cases are the only point of contact. To what extent do you think that the Bill will function effectively without some kind of regulation of managing agents? Should we be looking to introduce that into the Bill?

Mr Martin Boyd: The RoPA—regulation of property agents—report, which the Government undertook some years ago under Lord Best and which proposed statutory regulation of managing agents in this sector and within the estate agency world, has unfortunately not moved forward. There are proposals in the Bill to bring estate agents within codes of practice, but nothing in particular changes on property management. We have a slightly strange position at the moment. In the social sector, there is now an obligation for a property manager to have a proper level of competencies to look after high-rise buildings, or high-risk buildings, as they are still called. In the private sector, though, we have nothing. There are no requirements to have any qualifications to look after and manage the highest of our high-rise buildings in this country. That is simply wrong, so I would support fully a move to the statutory regulation of agents.

Mike Amesbury Portrait Mike Amesbury (Weaver Vale) (Lab)
- Hansard - - - Excerpts

Q Hello Martin, good to see you. Are there any risks in banning new leasehold houses but not flats?

Mr Martin Boyd: Yes, there are risks. Currently, we do not have a viable commonhold system. Even if the Government were to come forward with the full Law Commission proposals, those had not reached the point where they created all the systems necessary to allow the conversion of leasehold flats to commonhold flats. I see no technical reason at the moment why we should not move quite quickly to commonhold on new build for extant stock. I think it will take longer—and, at the end of the day, conversion will be a consequence of consumer demand. People would want to do it. On my side, I would not want us to convert to commonhold, because I could not yet be sure that it would help to add to the value of the properties. It would make our management of the site a lot easier, but I could not guarantee to anyone living there that it would add to the value of their property—and that is what people want to know, before they convert.

Richard Fuller Portrait Richard Fuller (North East Bedfordshire) (Con)
- Hansard - - - Excerpts

Q Mr Boyd, I want to pick up something you said in answer to the shadow Minster, when you were talking about the treatment of property managers or managing agents in the private sector. You enumerated a list of three options: a code of conduct, which you said existed in the social sector; legislation or regulation; and also qualification, which I took to be professional qualification. Which of those three is the preferred path, in your view?

Mr Martin Boyd: I do not think the Leasehold Advisory Service would have a specific preferred path. At least two of those are important. I will add a fourth, actually. It is illogical that we do not have a requirement for professional qualifications for those managing particularly complex buildings.

Richard Fuller Portrait Richard Fuller
- Hansard - - - Excerpts

Q Why is it illogical? I have no qualifications to be an MP; I am supposed to look after lots of things.

Mr Martin Boyd: I will be cautious, so that I am not rude in answering that. There are a set of skills that you would expect to acquire as an MP, and a certain set of skills that you need to acquire as a property manager. Buildings are complex entities, particularly large buildings. They have a lot of plant and a lot of complex systems. There is quite a complex interaction with the people who live in those buildings. There are voluntary qualifications that we have in the sector. The Secretary of State decided recently that there should be a mandatory level of qualification in the social sector. I do not see there being a logic in saying that we need one or the other.

In terms of regulation of managing agents, there is a problem. The ex-chair of the managing agents’ trade body said that it is perfectly legal to set up a property management company in your back bedroom in the morning and be collecting a large amount of money in the afternoon, without any regulation. I think that is a problem. One of the issues not considered in the Bill—perhaps it would not be relevant, although the Government need to consider it at some point soon—is that there is still no proper control of leaseholders’ funds. It is very likely that the two largest managing agents in this country hold between them somewhere between £1 billion and £2 billion. There is no Financial Conduct Authority regulation of how that money is held.

None Portrait The Chair
- Hansard -

Just one more question—we have many coming up.

Richard Fuller Portrait Richard Fuller
- Hansard - - - Excerpts

Q I notice in Mr Boyd’s resume that LEASE is

“to champion the rights of leaseholders and park homeowners.”

I have a number of park home owners in my constituency, as I am sure many colleagues do. Are there any provisions in the Bill, or is there anything that could be added to it, that would improve the lot of park home owners?

Mr Martin Boyd: Yes, there is, but again that goes on to the long list of things that could be added to the Bill. Park homes have been a difficult area for many years. It is a relatively small part of LEASE’s work, but it is work that will be expanding as we move forward. I am more than happy to talk to you about some of the provisions on park homes that could be added.

Richard Fuller Portrait Richard Fuller
- Hansard - - - Excerpts

There is nothing that leaps out at this stage.

Mr Martin Boyd: Nothing leaps out.

Barry Gardiner Portrait Barry Gardiner (Brent North) (Lab)
- Hansard - - - Excerpts

Q Mr Boyd, you just spoke about the accounting of funds. At the moment, there is no requirement to show any separation between sinking or reserve funds and the normal service charges for managing the property. Many leaseholders have suggested that that is a problem, and that they are not clear what is happening with their sinking fund. Sometimes they believe that the moneys that were there for future capital works on the property are being raided. Would it be a good idea for the Bill to contain something that enabled leaseholders to see precisely what was happening to those reserve or sinking funds?

Mr Martin Boyd: There were proposals in sections 152 to 156 of the 2002 Act to help to improve protection for leaseholders’ funds. Currently, we are left with a set of voluntary codes. One is applied by the Association of Residential Managing Agents—the Property Institute, as it is now called—and sets out that managing agents should hold separate bank accounts for each of the sites that they manage. The Royal Institution of Chartered Surveyors’ code does not require that. I am aware from experience of my and other sites that, in the recent period of higher inflation, some managing agents used consolidation accounts, accrued the interest in the service charge funds to themselves and passed very little on to the leaseholders. So yes, I think it would be very helpful if we had greater transparency and protection.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q Indeed. You nicely lead me to my other question, which concerns something else that was in the 2002 Act but was never brought into effect: the provision that, if the landlord had not complied with the rules around service charges and the charges were unfair, leaseholders should be able to withhold their service charge. I have no idea why that was never brought into effect, but would it be a good idea? The Bill sets out extensive obligations that have to be followed in relation to service charges. If those are not followed, should leaseholders have the right to withhold the service charge?

Mr Martin Boyd: I can tell you why it did not move forward. One of the reasons it did not move forward is that, when there was a consultation, the organisation that I now chair argued very strongly against the implementation of that section. That was one of the things that annoyed me when I found out about it over a decade ago. It is not something that we would argue for now.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q So you would agree that it would be a good provision to insert into the Bill.

Mr Martin Boyd: It was a very good provision, yes.

Rachel Maclean Portrait Rachel Maclean (Redditch) (Con)
- Hansard - - - Excerpts

Q Mr Boyd, it is good to see you. You have talked about commonhold. Would you mind just being quite succinct and clear on your view about commonhold? There are proposals from various groups who are active in the sector to make it mandatory to sell all new leasehold flats as commonhold. Would that be a good idea, and if not, why not?

Mr Martin Boyd: I am proud to say that it was LKP that restarted the whole commonhold project in 2014. At the time, we were told, “The market doesn’t want commonhold.” The market very clearly told us that it did want commonhold; it was just that the legislation had problems in 2002. One of our trustees, who is now unfortunately no longer with us, was part of a very big commonhold project in Milton Keynes that had to be converted back to leasehold when they found problems with the law.

I think the Government have been making it very clear for several years that they accept that leasehold’s time is really over. I do not see any reason why we cannot move to a mandatory commonhold system quite quickly. What the developers had always said to us—I think they are possibly right—is that they worry that the Government might get the legislation wrong again, and they would therefore want a bedding-in period where they could test the market to ensure that commonhold was working, and they would agree to a sunset clause. They had fundamentally opposed that in 2002, and we managed to get them in 2014 to agree that, if commonhold could be shown to work, they would agree to a sunset clause that would say, “You cannot build leasehold properties after x date in the future.” I think that that is a viable system.

Marie Rimmer Portrait Ms Rimmer
- Hansard - - - Excerpts

Q Good morning, Mr Boyd. How will the Bill impact on your work as an advisory service and the advice that you give to leaseholders?

Mr Martin Boyd: As some of you may know, I have been very critical in the past of the organisation that I now chair, because I thought that it was doing the wrong thing. The Government took what some might see as a brave decision in asking me to take on the role as chair. LEASE is going to become a much more proactive part of the system, and, as far as I see it, we now have several roles rather than one. While we are predominantly there to help advise consumers about the legislation and how to use it—and hopefully when not to use it—we will also have a role in helping to press Governments to make sure that they improve the legislation. That was not a remit that we had, but it will be very much part of our remit going forward.

Marie Rimmer Portrait Ms Rimmer
- Hansard - - - Excerpts

Q Thank you. Will the provisions of the Bill lead to many more leaseholders seeking advice, and, if so, do you feel adequately resourced to provide that service?

Mr Martin Boyd: As I said to the all-party parliamentary group yesterday, the organisation does not currently have the budget. The Government have said that they will give us the relevant budget. If they do not give us the budget, I will not be staying, so I am very hopeful that we do get the budget.

Some aspects of the Bill do quite a lot to reduce the amount of time that leaseholders would need to spend asking for help. If the enfranchisement process goes through and we get to an online calculator system, where you simply feed in your data and it produces the answer, that will make that whole system much easier. That will reduce not only the amount of work that comes to us, but the amount of work that goes to various solicitors and surveyors in that field.

None Portrait The Chair
- Hansard -

That is the end of our allotted time for this session; I think we got everybody in who wanted to ask questions. Thank you for coming to talk to us today.

Examination of Witnesses

Sebastian O’Kelly and Liam Spender gave evidence.

9.50 am

None Portrait The Chair
- Hansard -

Q Good morning and welcome to our Committee. Could you briefly introduce yourselves, and then my colleagues will have some questions? You have been listening so you know the form.

Sebastian OKelly: I am Sebastian O’Kelly, director of the Leasehold Knowledge Partnership. I am not a leaseholder; I am a commonhold owner in another jurisdiction, not in the UK.

Liam Spender: I am Liam Spender, senior associate at Velitor Law. I am a leaseholder in London. I am also a trustee of the Leasehold Knowledge Partnership.

None Portrait The Chair
- Hansard -

As usual, we will start with the Opposition spokesman.

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

Q Gentlemen, thank you for coming to give evidence to the Committee. I could ask about a huge range of issues, but I will start with ground rents.

Various provisions in the Bill touch on ground rents. You will know, for example, that schedule 2 imposes a 0.1% cap on their treatment in valuation. Clause 21 and schedule 7 deal with existing ground rents and how we will treat those. What are your views on the fact that those provisions provide leaseholders with the enfranchisement right to buy out their ground rent under a very long residential lease, but we also have the consultation ongoing with five options? How do those provisions interact? Why have the Government specified an option in clause 21 for a particular type of very long residential lease, while we also have this consultation ongoing and, in theory, a commitment to bring forward further measures that apply to all existing ground rents? Does clause 21 in the Bill as drafted make sense to you?

Sebastian OKelly: Not especially. We are eager to hear the result of the consultation on ground rents. We very much support the peppercorn ground rent option and are delighted that the chairs of the all-party parliamentary group also support that. It would be a game-changing measure if that did come about—frankly, stripping out the one legitimate income stream in this ghastly system—but I can see that, as a precautionary measure, you might have that 0.1% provision in the Bill for dealing with enfranchisement. It will assist with some of the enfranchisements where you have very onerous ground rents.

Liam Spender: I agree; it is not clear why the 150-year threshold has been chosen. As far as I understand it, the Law Commission did not consider that in its work. That might be something that could be fruitfully explored in this Committee’s more detailed work.

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

Q I have two other brief questions. The Bill does not include provision to ban new leasehold houses. If the Government’s intention, as I think has been made clear, is to bring those provisions forward through Government amendments in Committee or on Report—at a later stage—what should they look like? In your view, should we look for those Government amendments to do or not to do particular things?

On the right to manage, only eight of the 101 Law Commission recommendations on right to manage have found their way into the Bill. We face the issue that Mr Boyd referred to—we could add in many more provisions to the Bill. Are there any specific RTM recommendations from the Law Commission that it would be really worthwhile to try to incorporate into the Bill?

Sebastian OKelly: In relation to leasehold houses, it is a bit of an embarrassing omission that the proposal is not there. The spreading of leasehold houses around the country simply to extract more cash from the unwitting consumers who had purchased houses from our plc house builders was a national scandal, actually, and it was frankly a try-on too far and caused a huge amount of kerfuffle. There will be times when you would have to build a leasehold house—when the builder does not actually own the land—but they are very isolated cases, and largely this scam has self-corrected through the adverse publicity.

On the right to manage, one of the most egregious issues is where groups of leaseholders have attempted to get a right to manage and have been hit for extortionate legal costs, where their petition for right to manage has been resisted by the landlord. There are certain landlords out there who always, always, unfailingly take this through the legal steps. They rack up legal costs, but of course they can get that back through the service charge. That is an issue that I urge is the worst deterrent to right to manage.

Liam Spender: The lack of right to manage for fleecehold estates—for estates subject to management schemes—is one of the most obvious omissions in the Bill. The Law Commission did an awful lot of work on how to improve the process for multi-block sites, particularly following the Supreme Court decision two years ago on Settlers Court. I think that is another missed opportunity.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

Q Mr O’Kelly, you are one of a large number of leaseholders who has been adversely impacted by your personal situation. If I am correct, what has happened in your case is that your freeholder has used the service charges from you and others in the block to take you to court—it is an appalling situation. You have updated the APPG and others. For the Committee’s benefit, will you say how much you are out of pocket and whether the provisions in the Bill will address the issues that you have faced and will face in the future?

Sebastian OKelly: This is for Liam really, because I am not a leaseholder at all; it is Liam’s court case.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

Sorry, I was looking at Mr Spender and I misspoke.

Liam Spender: I quite understand anyone being distracted by Mr O’Kelly. Thank you for the question. In our case to date, the freeholder has put £54,000 of its legal costs through the service charge. It did so in breach of a section 20C order, which is the current restriction that is supposed to prevent landlords from doing so. We complained and got most of that money back, but they have served something called a section 20B notice: they intend to recover the costs in the future if they prevail on appeal, by which point we could be looking at a substantial six-figure sum. This is all to do with us fighting to get back unreasonable service charges.

We are currently owed about £450,000—to give a round number—pending appeal. There is an appeal in April and I am carrying the burden of doing all that work myself. I quite understand why leaseholders without legal training give up and things will fall by the wayside. The system is very much stacked in landlords’ favour.

The cost provisions in the Bill are welcome. As you probably know, they changed the default so that the landlord has to ask for their costs. The issue is what has been created as a just and equitable jurisdiction; the tribunal can do what it thinks is fair in the circumstances. I believe—I think many people who have much more knowledge of this than I do would agree—that what that will mean in practice is probably that the tribunal will be inclined to give landlords their costs if they have won the case, so it will not change anything.

The other problem is that the first-tier tribunal considers itself a no-cost jurisdiction, and that is a generational way of thinking, so that has to be overcome and it has to get into the mindset of awarding costs to leaseholders and against landlords. Provisions could be included in the Bill that would make that that process easier—for example, prescribing a regime of fixed costs as applied to other low-value civil litigation. It is not a magic bullet, but I think that would be better than the current provisions in the Bill.

Mike Amesbury Portrait Mike Amesbury
- Hansard - - - Excerpts

Q Is there anything else you would like in the Bill that is missing at the moment?

Sebastian OKelly: We would like to see a commitment to mandatory commonhold for new builds, frankly. How many more times are we going to try to reform the leasehold system? How many goes have we had at this since the 1960s? If you keep having to reform leasehold, is the answer not that it does not work? Why do you want this third-party investor—now, invariably, somebody offshore—hitching a ride on the value of somebody else’s home? It is a nonsense. One Duke of Westminster we can accept—the political continuity of our country maybe allows a freehold such as that—but we will create 1,000 of them with this. It is a nonsense. Bring it to an end and bring us in touch with the rest of the world—that is my statement.

None Portrait The Chair
- Hansard -

Right, that is very clear.

Andy Carter Portrait Andy Carter (Warrington South) (Con)
- Hansard - - - Excerpts

Q Can I just pick up your comment to Rachel Maclean a moment ago on the legal aspect that you are fighting? Can you outline to the Committee what unreasonable service costs you are fighting to recover in court?

Liam Spender: Yes, happily. The main items in dispute are our intercom, car park gates and barriers. Our satellite TV dishes are rented in perpetuity; they were costing £240,000 a year, which is somewhere between 10 and 20 times what they should cost. The reason for that is that the developer chose to enter into a long-term rental and maintenance contract. That contract has never actually been—the technical term is “novated”—transferred to the current landlord, so there is no legal obligation on the current landlord to pay those costs at all. However, the landlord has dug in, so we are more than two and a half years into a service charge dispute. We prevailed in the first instance—that was the largest single item we won—and we must fight an appeal in April, and potentially another one after that, depending on what the landlord chooses to do.

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q Just so I am clear, at the point that you purchased the flat, did you know that those sorts of service charges would recur on an annual basis?

Liam Spender: I knew the general amount of service charges. I was not aware that there was a perpetual maintenance contract, because it was not disclosed in the searches.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q Mr Spender, I want to ask you about what I find to be one of the more complicated aspects of the Bill: the leaseback arrangements. Nominee purchasers can require a landlord to take a leaseback on certain units. Those are the units that, in an enfranchisement process, are not participating in the enfranchisement. You might have a block of 100 units, and 30 of them do not go in with the leaseholders who want to enfranchise. At the moment, they are then, in perpetuity, leaseholders, are they not? They cannot ever enfranchise because the others have already enfranchised. Should there not be a provision in the Bill to enable those locked-in leaseholders—if they have the money in future, because many times it will be because they did not have the money available at the time to participate—to buy their share of the enfranchisement?

Liam Spender: I agree; you have summarised it very well. To borrow a loose analogy from company law, there is something called a tag-along right. If someone comes along and buys a certain proportion of shares in a company, the other shareholders can exercise the right to tag along to join the purchase. That could be adapted to those who do not participate in an initial enfranchisement to address exactly the issue that you raise.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q Grand. If I can pursue that area, at the moment, the lease is granted to the demoted freeholder—so they become the head leaseholder, perhaps, and the other leaseholders are now subject to the head leaseholder. Their contract was always with the previous freeholder, who is now the head leaseholder. Should there not be some provision in the Bill that requires those minority leaseholders, who are still in a relationship with the former freeholder, to actually pay their service charge to the new freeholder? But there is not, is there?

Liam Spender: I think the provisions introduce a degree of complexity into buildings because, exactly as you say, you are creating a new class of landlord. That could be solved by—

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q But the specific question I want to probe with you is whether there is any provision in the Bill to require the minority leaseholders who did not enfranchise to pay their service charge to the new freeholder, namely the majority who enfranchised. I cannot see where that contractual obligation lies in the Bill. All I can see is that they will continue to have a relationship with the previous freeholder.

Liam Spender: That is right: there is no statutory mechanism to transfer to the newly enfranchised freeholders.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q So you think the Committee should look at that very carefully.

Liam Spender: The Bill creates a lot of new areas of complexity, and that is certainly one that would merit detailed attention.

None Portrait The Chair
- Hansard -

Well, gentlemen, I think that is it. Thank you very much.

Examination of Witnesses

Katie Kendrick, Jo Derbyshire and Cath Williams gave evidence.

10:06
None Portrait The Chair
- Hansard -

Q Welcome to our Committee this morning. Perhaps you would like to introduce yourselves.

Katie Kendrick: I am Katie Kendrick. I am the founder of the National Leasehold Campaign, which has been running for seven years. I am also a trustee of LKP.

Jo Derbyshire: I am Jo Derbyshire. I am one of the co-founders of the National Leasehold Campaign and a trustee of LKP. I am not a leaseholder; I enfranchised and bought the freehold on my home. I had one of the now-infamous 10-year doubling ground rents on my house.

Cath Williams: I am Cath Williams. I am one of the co-founders of the National Leasehold Campaign. I am no longer a leaseholder, but I did buy a leasehold house.

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

Q Thank you for coming to give evidence to us. I have a general question to start. Large parts of the Bill are broadly uncontroversial and uncontentious, not least because they implement Law Commission recommendations. There is lots we could add in, but let us try to keep a focus on what is in the Bill. In your view, to what extent does the Bill deliver for leaseholders in terms of transparency, fairness, enhanced consumer rights and empowerment? What areas could we look to strengthen or tighten up?

Katie Kendrick: The Bill is very much welcomed and long overdue. As we all know, the Law Commission reports were fantastic and very detailed. The Bill is lacking significantly on the detail of the Law Commission recommendations. The headline was that the Bill would ban leasehold houses, and obviously the Bill as it stands does not do that. I am confident that it will, in the end, ban leasehold houses, but currently that has not been achieved.

The Bill improves the transparency of service charges, but just being able to see the fact that leaseholders are being ripped off more does not actually fix the root cause of the problem. As we all know, the root cause of the problem is the leasehold system per se. I am concerned that the Bill sticks more plasters on a system that we all agree is immensely outdated and needs to go. There is no mention anywhere in the Bill of our long-term vision of achieving commonhold. That is our vision, and it is the elephant in the room. The Bill does not even mention commonhold and how we can move towards it.

A peppercorn ground rent would massively change the playing field and help us to move towards our vision of commonhold, so we need to get a peppercorn ground rent for existing leaseholders in there. With the Leasehold Reform (Ground Rent) Act 2022, which means new builds do not have a ground rent, we have created a two-tier system. The Bill really does need to look at existing leaseholders and what can be done to help to put them in a similar position to new leaseholders. If ground rents are wrong for the future, they were wrong in the past and we therefore need to be bold enough to go back and fix that. Peppercorn ground rent has to be the solution. This is an amazing opportunity and I hope that will be the outcome of the consultation.

Cath Williams: On peppercorn ground rent, we have noted a new definition of a long-term lease being 150 years, which we have never come across before. Many members in our group—there are over 27,000 members in the National Leasehold Campaign—have modern leases with ground rents at significantly less than 150 years, at around 99 or 125 years. That means that the provisions in the Bill do not give them the opportunity to revert to a peppercorn ground rent. If we have read it correctly—we are not legally trained—they would be excluded as having a non-qualifying lease. That is our understanding: that they would be excluded. That could be a significant number of leaseholders who will not benefit from the peppercorn ground rent opportunity in the Bill.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

Q You mentioned that you welcome the peppercorn ground rent. It has often been put to me by campaigners on the other side of this argument that leaseholders do not mind paying ground rents. What is your view on that proposition?

Jo Derbyshire: I had a ground rent that doubled every 10 years. It meant that my ground rent would be £9,440 after 50 years. It certainly is not a trivial issue in my experience. A ground rent is a charge for no service. That is the big thing for me. Some warped genius at some point in the mid-2000s decided to create an asset class on our homes. It is just wrong.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

Q Do you agree with some of the arguments that are put forward by the freeholders lobby and organisations that abolishing ground rent will destabilise the pensions industry and mean that nurses and care workers and the good people who are toiling very hard in our public services will have their pensions destroyed? What do you say to that?

Jo Derbyshire: I think that is project fear. I work in pensions. I work in administration, not investments, but I sit on a lot of pension committees where we talk about the assets that pension schemes hold. They have investment strategies and they protect themselves from over-investing in one asset class. The amount of ground rents held by pension funds in this country would pale into insignificance compared with, for example, the impact of the mini-Budget and what happened with equities shortly after that. This is deliberate scaremongering.

Mike Amesbury Portrait Mike Amesbury
- Hansard - - - Excerpts

Q I have two brief questions. Are there any risks in terms of banning new leasehold houses but not flats? Why do you think this country is an outlier in the world and is so wedded still to this day to the feudal system of leasehold?

Katie Kendrick: You cannot just ban leasehold houses and not flats—70% of leaseholders live in flats, so you are not tackling the problem. You are cherry-picking the easy things, and banning leasehold houses is easy. It is more tricky with flats, but that does not mean it is not achievable. As you have said, it has been achieved everywhere else in the world. We do not need to continue to mask that leasehold system. It is deeply flawed and it ultimately needs to be abolished.

We do understand that there is no magic wand and this is not going to happen tomorrow, but there have been a lot of campaigners, well before us, who have highlighted the issues of leasehold, and yet here we are, still, again, trying to make it a little bit fairer. It does not need to be a little bit fairer—it needs to go. That needs to be the ultimate aim. Everybody needs to work on this. There is something better out there, despite what the other lobbying groups will tell you.

Richard Fuller Portrait Richard Fuller
- Hansard - - - Excerpts

Q This is a question I will ask a number of witnesses. We do an impact assessment for legislative change to all Bills, sometimes done well and sometimes less so. This has an assessment of the total cost of the Bill, with the best estimate being £2.9 billion. That is quite large for a Bill. A large part of that—about two thirds—is a transfer of the value from freeholders to leaseholders. That is at £1.8 billion, or £1.9 billion. What are your thoughts about that transfer of wealth?

Jo Derbyshire: It is long overdue; bring it on.

Richard Fuller Portrait Richard Fuller
- Hansard - - - Excerpts

Q From that, are you implying that your view is that it has been a rip-off to date, and therefore there are monies that you should have been having for all the years you have been paying and there was no value to it?

Jo Derbyshire: If I think of my estate, there was no reason whatsoever to create leasehold houses other than to make money from the people who had bought them. That is partly why, going back to an earlier question, it is taking so long to dismantle the system in this country: it is because there is so much money for nothing in it. That is why it is so hard to dismantle it.

Richard Fuller Portrait Richard Fuller
- Hansard - - - Excerpts

Q I cannot remember whether it was you, Jo, or Kate—if I may call you by your first names—who works in a pension fund.

Jo Derbyshire: I work in a pension fund.

Richard Fuller Portrait Richard Fuller
- Hansard - - - Excerpts

Q On the change in pension funds and investments, you may have different views about how important that is and my colleague asked you that question. However, putting yourself in the place of the people who own the freehold—some may be large overseas entities, some may be members of the peerage of the realm and there may be others—what is your view and what assessment have you made of the impact on them?

Jo Derbyshire: From my perspective, it is just about how all investment carries risk. This is no different. This is about rebalancing the scales in terms of leaseholders and freeholders. For me, it is about fairness for leaseholders. That is what the Law Commission was tasked with a few years ago, it is what we have been fighting for over the last however many years and that is what this does.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q I apologise because I came in slightly late today, Chair, so I do not know if people have declared their interest. I should say that I am a freeholder; I am not a leaseholder. I have been a leaseholder in the past, but always with a share of the freehold.

Ms Kendrick, you said that there were things that the Law Commission report had talked about that have not been included in the Bill. One of those is in relation to shared services. Often, in a mixed development, if there is a commercial element to the block of flats, with flats above, you will find that there is a common plant room or a common car park. I welcome the provisions in the Bill that say that you can go from 25% commercial to 50%; that is a good move. However, the Law Commission actually said something specific about whether you should be allowed, if there are shared services such as the car park or the plant room, to be able to take over control, because the flats—the leaseholders—would only have control over the plant room as it related to their block. Is that a provision that you think should be introduced? Otherwise, it makes a mockery, to a certain extent, of increasing from 25% to 50% if you are still going to be precluded from gaining control of your block because of the plant room or shared services.

Katie Kendrick: Yes, there are clever ways in which they exclude people from being able to do that. We welcome the increase to 50%, but they are very creative when they design these buildings, with the underground car parks and stuff, as to what they can do to exclude the leaseholders from taking back control of their blocks. It is all about trying to have control over people’s homes. We should be able to control our homes—what is spent. No one is saying that you should not have to pay service charges, but it is about being in control of who provides those services. At the moment, leaseholders have no control. They just pay the bills.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q And the residents having the right to manage that themselves.

Katie Kendrick: Absolutely, yes.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q If commonhold will not be in the Bill, would you support a principle that all future leasehold flats should have to be sold with a share of the freehold?

Katie Kendrick: Absolutely.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q And that any residents’ association should be able to have the management of the block?

Katie Kendrick: Absolutely. If they are saying that commonhold is not ready to rock and roll, to have a share of freehold to mandate, a share of freehold for new flats moving forward would be a good step closer.

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q I hope you do not mind if I start by congratulating you on the work you have done with the National Leasehold Campaign. I know that my constituents in Warrington South have greatly valued the assistance and knowledge you have managed to secure through bringing people together. Thank you for the work you have done there. May we just go back a little bit? Can you tell the Committee what sort of problems leaseholders have when they go to buy their freehold?

Katie Kendrick: All three of us have now successfully bought our freehold. Yes, we are still here.

Jo Derbyshire: There are a number of things. The first is that most leaseholders do not understand the difference between the informal way and the statutory way to do that. The more unscrupulous freeholders will write to leaseholders with a “Get it while it’s hot” type of offer, which can be quite poor value for money. So, there is understanding the process in the first place. Then, regardless of which way you go—if you go the statutory way, currently you pay your own fees and the freeholder’s fees. There is an element of gamesmanship that goes on at the moment, which is why the online calculator is so important. Your valuer and the freeholder’s valuer will argue about the rate used to calculate the amount and then you will try and have some kind of an agreement. It is not a straightforward process at all. Cath will tell you what happened with her transfer, because they leave things in the transfer documents.

Cath Williams: Yes, they did. In my case, it took 15 months and £15,000 to get my freehold.

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q It cost £15,000?

Cath Williams: Yes, £15,000 on a house. It took that long because I found—this is one of the problems that leaseholders have—that I knew more than the alleged leasehold-specialist solicitor who was dealing with my case at the time. That was very early in the campaign, so a lot of education needs to go on for everybody: leaseholders, conveyancers and solicitors. Because I had done some research and tried to get my head round leasehold clauses and what were fee-paying clauses, shall we say, in the TP1, which is a transfer document, they tried to carry across all the fee-paying clauses. Essentially, it would be freehold but fleecehold, because I would still have to pay to the freehold investors.

It took that long because I kept redacting my own TP1, putting a red line through it and sending it back, saying, “I am not doing that, that or that.” Eventually, we got rid of them. The problem now is that we still have a lot of conveyancers who do not do that for the leaseholders. If the leaseholder does not understand the system or the lease terminology, that is always a big barrier. The way that leases are written—all their legalese—means the general public generally cannot understand; so, it is difficult.

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q Sorry to interrupt. When you were buying your house initially, did you know it was leasehold?

Cath Williams: No, there was nothing on the site or in the paperwork to say that it was leasehold.

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q So when did you find out?

Cath Williams: I found out on the day that I paid my deposit and went in to look at the extras list, which you tick to say, “I’m going to have carpets, curtains” and so on. The sales person said, “There’s something I need to add”, took a pencil and wrote “leasehold” along the bottom. [Interruption.] It is a true story. I said, “What’s this?”, because I had bought so many houses that were newbuild. I said, “I don’t understand why you are writing ‘leasehold’.” They said, “Did we not tell you?” I got a story about how it was local council land and had to be leasehold, which turned out to be completely untrue.

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q So you paid your deposit.

Cath Williams: Yes, I paid the deposit, and I had sold my other property. We were very late on in the process, so I believe that I was mis-sold and misled, as were many members of the National Leasehold Campaign. We hear very similar stories.

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q I have residents in 40 or 50 homes on an estate in Chapelford in Warrington where not one of them was told about them being leasehold until they paid the money.

Cath Williams: That is right. You are committed, and you are at a point where if you do not continue, you will lose even more money. You have an emotional connection to the property that you want to buy and lots of other pressures as well—people might be moving jobs or trying to increase the size of their home.

Jo Derbyshire: I knew, but the salesperson told me that we could buy the freehold at any point for about £5,000. What they did not tell me was that the business model was to sell it on and what the implications of that would be. They sold it on less than two years after I bought the house, and the price went from the £5,000 they asked for to £50,000.

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q Did you know that they were selling it on? Did they tell you that they were selling it on? Did they give you any notice of it?

Jo Derbyshire: No.

Katie Kendrick: No, because legally it is unlike in flats, where when they sell the freehold on they should offer the people in the flat the right of first refusal. That does not apply to houses, so the land was literally sold from beneath us and they told us afterwards. Because we were not entitled to buy the freehold for two years—you must live there to qualify to enfranchise—they sold the freeholds on before the two-year point, so the freeholder was no longer the developer that we originally bought from; it was an offshore investment company that then increased the price significantly. We were never told that that would happen.

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q Can I just go back to your point, Jo? You said that it went from £5,000 to £50,000. Have they given you any rationale for the £50,000? Where did that number come from?

Jo Derbyshire: That was the market value for a 10-year doubling lease.

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

Q A huge amount of the Bill is left to future regulations and statutory instruments. That is understandable in many cases—I am thinking of the service charge provisions and others. Are you concerned that it will take a long time to bring some of the measures into force? Is there a specific concern about the incentives that that creates in the time between them coming into force and the Bill receiving Royal Assent? As the Bill is drafted, there are some hard cliff edges, for example, on the new 999-year leases, where you have people who must extend before they come in. However, there are some potential cliff edges if the commencement dates on lots of these things are 12, 18 or 24 months away. Is that a concern?

Katie Kendrick: It is a big concern, because leaseholders are trapped. They are in limbo, so they do not know whether to enfranchise now or to wait for the Bill to go through. The Bill says that it will make it easier, cheaper and quicker, but the devil is in the detail, and we do not know what the prescribed rates will be. We are being promised that it will be cheaper, but will it? It all depends on who programmes the calculator. Ultimately, will it actually be cheaper? The Bill says that it will abolish marriage value, which is hugely welcomed by leaseholders, so those people with a short lease approaching the golden 80-year mark are waiting. Do they go now?

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

Q Some of them will not have a choice, will they?

Katie Kendrick: No, some people do not have a choice. People’s lives are literally on hold, and have been for many years, waiting for the outcome of the legislation. If we need further legislation to enact the Bill, people cannot sell. Housing and flat sales are falling through every single day because of the lease terms and service charges. It is horrendous. It will grind the buying and selling process to a halt.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q I want to ask you about this whole business of people being unable to sell, and, in effect, the interaction between what the Government have tried to tackle in the Building Safety Act 2022 and what we have in this Bill.

Under the Building Safety Act, the provision is to appoint a designated person—an agent—to deal with the safety of the building. Often it will be the developer who is responsible for the remediation of a building that has fire safety defects and so on, which the Government are quite rightly trying to address, but they will argue that it is not possible to do that unless they have control over the management of the block as a whole. Therefore, there is a conflict between the Building Safety Act and the provisions in this Bill to help leaseholders gain the right to manage.

You might have just enfranchised and got the right to manage your own block, yet there is now an appointed person who will be told by the court that they have the right to manage the block. Very often, it will be the person you have just liberated yourself from. You will have just enfranchised yourself from that freeholder, only to find that they are now back in control. Do you feel there is a way in which the Committee should try to remediate and address that problem when it is looking at the Bill, and do you have any ideas as to how we should go about it?

Cath Williams: First of all, the situation that flat leaseholders are in at the moment, where they have building safety issues and leasehold issues, is so complex. It is horrendous. We hear daily in the National Leasehold Campaign about these poor leaseholders. It is really heartbreaking.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

It is awful.

Cath Williams: People are at breaking point.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

People have committed suicide, have they not?

Cath Williams: People have committed suicide, yes. That is worth noting.

They ask for advice. We have never been flat leaseholders; that is the first thing, but there is a lot of support in the group to try to help people navigate their way through the Building Safety Act first of all, and now we have this Bill as well. In principle, I think they would really welcome some sort of cohesion between the two. I don’t know what that would be; it is really hard.

Katie Kendrick: It is really difficult because we are encouraging people to take control, but by doing that they are liable for more of the building’s safety. The two Bills have to work together.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q There is a real tension here, is there not?

Katie Kendrick: There is.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

Q You have talked extensively about ground rent and, Ms Derbyshire, your situation with it doubling. We all know the story about the inventor of chess, who asked for a grain of rice on the first square as his reward as long as it doubled until the last square, and then there was not enough rice in the world to provide it. This is clearly inequitable. You said that you welcome the provision in the Bill to be able to get rid of ground rent—to take it down to a peppercorn. Given that we have the consultation at the moment, would it not better if the Government just did that rather than you having to pay for it, which is what is recommended in the Bill? You should not have to pay to get out of a situation that is unjust. It was unjust in the first place, and it would be much better if the Government simply moved the consultation onwards and got rid of it.

Cath Williams: Yes.

Jo Derbyshire: The Leasehold Reform (Ground Rent) Act 2022 has essentially created a two-tier system where you have new builds without ground rent. As Cath mentioned, we are concerned that clause 21 and schedule 7 of the Bill seem to say a qualifying lease for buying out to a peppercorn rent must have a term of 150 years. We have seen lots of examples in the National Leasehold Campaign of new build properties—flats in particular—where the lease is 99, 125 or 150 years from the start, so a whole swathe of properties would be automatically excluded.

However, for us, because ground rent is a charge for no service, peppercorn is the answer. We also fear that, in terms of the timetable for legislation and getting this through, the sector will fight intensively and try to tie this up in the courts for years. It has nothing to lose; why wouldn’t it?

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q Katie, can I just go back to your earlier point about how lots of sales are falling through? Can you just explain why that is? What is causing sales to fall through on leasehold properties?

Katie Kendrick: Because an escalating ground rent worries mortgage lenders and buyers are unable to get mortgages because of an escalating ground rent. Where that is because of the £250 assured shorthold tenancy issue, my understanding is that that will be sorted through the Renters (Reform) Bill, so that will close that loophole, but lenders do not like—for most leases now, the doubling has half-heartedly been addressed and a lot of leases are now on RPI—the retail price index.

However, with RPI being the way that it is—it has been really high in the last couple of years—some of those ground rents are coming up to their review periods and are actually doubling. Therefore, RPI, as Jo said many years ago, is not the answer. Converting to RPI is not the answer because an escalating ground rent is still unmortgageable, and it takes it over the 0.1% of property value, which, again, mortgage lenders will not lend on.

Therefore, a lot of mortgage lenders are asking leaseholders to go to the freeholder and ask them to do a cap on ground rent, which is then costing the leaseholder more money to get a deed of variation from their freeholder. That is if the freeholder agrees at all, because the freeholder does not have to agree to do a deed of variation to cap the ground rent. That is coming at a massive cost if someone wants to sell, but without that people are losing three, four or five sales, and people have given up because their properties are literally unsellable.

Cath Williams: There is a house on my estate where sales have fallen through twice already. It is a townhouse; it is worth about £220,000. The ground rent currently—it is on an RPI lease—is £400, which takes it over the 0.1% of property value. Two sets of buyers have had problems getting a lender to lend in that situation.

Andy Carter Portrait Andy Carter
- Hansard - - - Excerpts

Q A final question from me: on your social media channels, you talk about the leasehold scandal as being very similar to Mr Bates—who is in Committee just over the way—against the Post Office. I mean, is that true? Is it David versus Goliath?

Katie Kendrick: Absolutely. When I watched the programme, I was shouting out loud. The parallels—the similarities—are astounding. The system there was a computer system; the system here is leasehold. People have been ripped off for so many years and paid unnecessary fees, and lots of leaseholders are thousands of pounds out of pocket. And that is because the system—the leasehold system—has allowed that to happen, and it is a scandal of the same magnitude, as far as I am concerned. People have, unfortunately, lost their lives. I have become a bit of an agony aunt for people; my phone never stops because people contact me in tears, and I have stopped people from taking their own lives because of leasehold. It is horrendous—absolutely horrendous—when you are living it and you feel completely trapped. It is when they feel that there is no way out that people look at taking another way out, and it is horrendous.

Cath Williams: And we were both told, weren’t we, by the CEOs of the developers that we bought our houses from, that there was no leasehold scandal?

Katie Kendrick: Yes.

Mike Amesbury Portrait Mike Amesbury
- Hansard - - - Excerpts

Q Can you tell the Committee about what is commonly known as “fleecehold”? Does this Bill in any way deal with aspects such as that?

Katie Kendrick: Our campaign coined the term fleecehold, and it has been used as a bit of an umbrella to describe all of the different ways that we can be ripped off through our homes. It first began because, when we were enfranchising and buying our freeholds, the freeholder was trying to retain all the same permission fees—such as permission to put on a conservatory or to paint the front door—in the transfer document. Ultimately, you could be a freeholder but still have to pay permission fees to the original freeholder.

That is where fleecehold came from, but fleecehold is now used as a much broader phrase because we have estate management charges. The new build estates all have estate management charges attached to them. They have replaced one income stream—leasehold—by creating another asset in the open green spaces. We all have lovely big open spaces and lovely parks, but it is the residents who pay for that. Again, it is a private management company that manages them. You have no transparency over what they are spending.

I can remember somebody ringing me up and saying, “Katie, I have a breakdown of my estate management charges and they are charging me such-and-such for a park, so I rang up and said, ‘You’re charging me.’ ‘Yes, Mr Such-and-Such. You have to pay for the upkeep of your park.’” And he went, “I understand that, but I haven’t got a park.” It is outrageous. It is great that they are going to give people more right to challenge the costs, which they do not currently have with their freeholders. They have fewer rights than leaseholders to challenge at tribunal. But ultimately why have we gone to a private estate model? Why are people paying double council tax? They are paying full council tax the same as anybody else is, yet they now have to pay thousands of pounds in estate management charges. It is a ticking timebomb.

The estates look very nice now, but in the future when the pavements are falling to pieces—I spoke to a police officer and things are not enforceable because they are classed as private. Speeding restrictions? You could have a boy racer running through the estate, but the police cannot enforce anything. The same with double yellow lines and things like that. It is a ticking timebomb, because new build estates are popping up all over the place with private management companies.

Jo Derbyshire: There are some things in the Bill that try to stop things. Typically on fleecehold estates there might be freehold houses, but the estate management charge is secured legally by something called a rent charge. What most people do not understand is that if they withhold their estate management fees, the property can be converted from freehold to leasehold. Again, that cannot be right.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

Q I just want to clarify your understanding of something that Mr Gardiner said earlier. I might need to put this to the Minister later, but Mr Gardiner said that if the new provisions on ground rent go through and ground rent goes to peppercorn or zero—I might be misquoting him.

Barry Gardiner Portrait Barry Gardiner
- Hansard - - - Excerpts

You have been spot on so far.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

You mentioned that in the new Bill leaseholders will have to pay to get their ground rent to zero. Can you set out what that provision is? Where is that in the Bill?

Cath Williams: I don’t think we know. That was one of our questions. There is a process in the Bill about how a leaseholder can acquire the peppercorn ground rent, but who pays for that is not clear. I think that was raised before. I do not think leaseholders should pay, because it should not have been there in the first place.

Katie Kendrick: Or there should be a prescribed cost—“apply for your peppercorn now”—with a simple process. Otherwise it will be exploited, and lawyer will charge different amounts to convert. You can see what will happen, so it needs to be streamlined. Whatever we go for, it needs to be streamlined.

Cath Williams: And we need an online system that cuts out everybody in the middle, so that there is no confusion or discussion about what it should cost.

Rachel Maclean Portrait Rachel Maclean
- Hansard - - - Excerpts

Thank you so much for clarifying that.

Alistair Strathern Portrait Alistair Strathern (Mid Bedfordshire) (Lab)
- Hansard - - - Excerpts

Q I could not agree more about the challenges you set out around people finding new ways to extort homeowners and the moves towards charging for the maintenance of public space. In my constituency of Mid Bedfordshire, many estates suffer from this issue. Mr Fuller will have similar ones on his estates in North East Bedfordshire. I completely agree that it feels shocking for lots of people that they are essentially paying twice for services: once for council tax and once for a charge that they have little control over and where there is often little guarantee of good services.

There are many estates in my patch where you can literally see where it becomes private because the condition of the road is shocking compared to 2 feet away, or the condition of the public space completely deteriorates. What measures would you like to see added to the Bill to help address that? Would you agree that ultimately we need mechanisms to ensure that a stated object can happen in a way that everyone can have confidence in?

Katie Kendrick: In an ideal world, the local authorities would be adopting these areas. I do not think there should be a private management at all. Local authorities used to, and they can charge the builders more for the land at the start.

Cath Williams: I agree.

Katie Kendrick: Adopt the lot.

Marie Rimmer Portrait Ms Rimmer
- Hansard - - - Excerpts

Q Katie, it seems to me that you and your team should be congratulated—you are the agony aunts. Believe you me, people look to these ladies and groups of people as their saviours rather than the Government. Already, leaseholders are saying, “Well, perhaps we can make this peppercorn. If we all go for this peppercorn, perhaps we can work then to get that peppercorn and get in there, and get shut of it that way.” Really, this is the opportunity. We should be listening to them—granted—and I genuinely believe there is listening going on with this Bill.

We have to tie it down and not let the situation become like the one we have seen with the post offices. It is an obstacle course. People have committed suicide. Managers have broken down. Homes have been lost. Jobs have been lost. The management charges are unbelievable, and I do not think people understand that. I have not seen it anywhere, but a leaseholder has to write if they want to change the carpet; they then get charged a couple of hundred pounds for that, they get charged for the answer, and they get charged when somebody comes to have a look at it. That is how it goes on. The management charges are as big a fear as the lease, because leaseholders do not know where they are going.

The Government simply have to step in. It is the biggest money-making racket in this country now—and it is a racket. It is said that people have sat down and designed this system, and we should not leave these people to do the fighting on their own. I genuinely believe that there is desire to do so from both the Minister and our shadow Minister. Please come forward with your thoughts; do not give up. I do not believe for one minute you will give up.

Katie Kendrick: I believe there is political will to do this from across the House; there is unanimous agreement and there is no dispute. If there is no dispute, we just need to get it done.

None Portrait The Chair
- Hansard -

Right, that is probably it then—[Laughter.] Thank you.

Examination of Witness

Amanda Gourlay gave evidence.

10:48
None Portrait The Chair
- Hansard -

Good morning. Would our last witness like to introduce herself?

Amanda Gourlay: I am Amanda Gourlay. I am a barrister at Lazarev Cleaver LLP and I am an associate member of Tanfield Chambers. I have been in practice for nearly 20 years—I think it is 18.

Matthew Pennycook Portrait Matthew Pennycook
- Hansard - - - Excerpts

Q Amanda, thank you for coming to talk to the Committee. You have expertise in a number of areas, but I wanted to probe you on something that we have not gone into the details of—the service charge provisions in clauses 26 to 30. Lots i