Leasehold and Freehold Reform Bill
Baroness Scott of Bybrook ExcerptsWednesday 24th April 2024
(3 days, 15 hours ago)
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The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, I thank the noble Baroness, Lady Taylor, for her amendments in this group, which seek to remove forfeiture from the leasehold and freehold estate.
Amendment 55 seeks to address one of the ways in which leasehold law is tilted in favour of landlords. I know that noble Lords from all sides of the House are sympathetic to this intention, as are Members from the other place, where this same clause has already been debated.
Forfeiture is widely recognised as a draconian and unfair measure which is open to abuse. The main objection to the current law is that, should the landlord forfeit the lease and go on to sell the property, this allows them to make a large windfall gain at the expense of the leaseholder, who loses everything. Abolishing forfeiture would reduce the risk to the leaseholder of losing their home and would prevent abuses.
Abolishing forfeiture without replacing it with an alternative enforcement mechanism would mean that landlords would have recourse only to ordinary civil debt recovery and injunction proceedings, which, as we have heard, can be lengthy and are not always effective. In the absence of forfeiture or an alternative, there is a danger that a greater number of leaseholders may refuse to pay their fair share of the cost of maintaining their block or estate, and we have to take this all into account.
Noble Lords asked how many cases there are. We do not have the exact number, but stakeholders give us estimates of between 90 and 120 cases per year. It is not a big issue, but it is a very important one for those people.
Lord Bailey of Paddington (Con)
The number of cases will not indicate the use of forfeiture, because forfeiture is wielded as a fiery dragon. Leaseholders speak about it as the dog that bites. The number of cases may be small, but I would argue that the use of forfeiture is probably far greater.
Baroness Scott of Bybrook (Con)
I have said that it is not the right way of doing it, and we want a different way. That is exactly what the Government are looking at.
We have to be clear that the upkeep and safety of buildings is also paramount. Landlords, be they third parties or resident management companies, need effective mechanisms for securing prompt payment to ensure that those properties are insured and maintained in the interests of everybody else in the block.
We recognise that there is the potential for significant inequity at hand where a landlord stands to gain a windfall when a lease is forfeited. However, I reassure the noble Baroness, Lady Taylor, and the Committee that the Government have been listening to calls for us to act. The Government continue to work through the detail and we will report to the House shortly with more information. In the meantime, I welcome members of the Committee sharing their views on this matter, which the Government will reflect on when formulating their position.
In addition, I thank the noble Baroness, Lady Taylor, for Amendment 95, which seeks to abolish Section 121 of the Law of Property Act 1925 in respect of all rent charges. Let me be clear: the Government are sympathetic to the issue raised by the noble Baroness. We recognise that forfeiture is an extreme measure and should be used only as a last resort. Any changes will require careful consideration of the rights and responsibilities of all interested parties.
Clause 111 already seeks to abolish forfeiture for income-supporting rent charges, which are still in existence, even though the creation of new charges of this nature has been banned since 1977. However, some types of rent charges may still be created, including estate rent charges, which are used for the provision of services on managed estates.
Where they are created, estate management companies need a means to recover sums owed to them. Failure to do so means that costs may fall on other home owners, or the upkeep of an estate will worsen, to the detriment of everyone living on that estate. The problem may be particularly acute for resident-led management companies which do not have alternative sources of funding.
It is important that we fully understand any unintended consequences. This is an issue that we are carefully considering. I hope that, with those assurances, the noble Baroness will withdraw her amendment.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, before the Minister sits down, most of what she said was very welcome. The acceptance that forfeiture is draconian, unfair and open to abuse—we agree with that. It is not the right way to do things, as the Minister said.
Specifically on inequality, we all agree with that, and it was good to hear the Government say that. A bit more disappointing was that I did not hear the Minister say, “I want to meet colleagues”; nor, “We hope to bring an amendment back on Report to address this”. All we got was, “We will formulate our position”.
There is agreement around the Chamber that what we need to see is an amendment that addresses all these issues. We would like a commitment to get us all together, and to hear from the Minister that she hopes there will be an amendment on Report. If we do not do that, there have been lots of warm words here but not much else has been achieved.
Baroness Scott of Bybrook (Con)
My Lords, I thought the Committee was probably fed up with me saying that I am always very happy to meet any group of noble Lords, on any subject, at any time. I apologise for not saying it in this group, and I will never ever forget to say it in any group in the future. Also, I said that we will report back to the House shortly with more details. I think the noble Lord needs to look at those words—they are quite positive.
Lord Kennedy of Southwark (Lab Co-op)
I am not saying they are not positive. At the end of the day, to make progress we need a government amendment, or an amendment that somebody else tables that the Government will support, at the next stage. That is progress; that is what I am trying to push. I know the Minister is very generous with her time, and wants to get this right, and wants to meet colleagues. I am just trying to get it on the record, that is all. I know the Minister has been good every time that colleagues have raised this issue in the House, and I have a Question on it again on, I think, 22 May. I thank her very much.
“Schedule Part 2: consequential amendments to other legislationParliamentary Commissioner Act 1967
1 In Schedule 4 to the Parliamentary Commissioner Act 1967 (relevant tribunals), in the entry relating to rent assessment committees, omit “and also known as leasehold valuation tribunals for the purpose of determinations pursuant to section 21(1), (2) and (3) of the Leasehold Reform Act 1967”.Leasehold Reform Act 1979
2 In section 1 of the Leasehold Reform Act 1979 (price of enfranchisement under the LRA 1967 not to be made less favourable by reference to superior interest), in subsection (1), after “the price payable on a conveyance for giving effect to that section” insert “, in a case where the price payable is determined under section 9(1) of that Act by virtue of section 7A of that Act,”.Local Government Act 1985
3 In Schedule 13 to the Local Government Act 1985 (residuary bodies)—(a) in paragraph 14(aa), at the end insert “, where it applies by virtue of section 7A or 32(5) of that Act”;(b) omit paragraph 17.Housing Act 1985
4 In the Housing Act 1985—(a) in section 115 (meaning of “long tenancy”)—(i) for subsection (2)(c) substitute—“(c) at the time it is granted, it complies with the specified requirements.”;(ii) after subsection (2) insert—“(3) The “specified requirements” are—(a) in the case of a tenancy granted before 11 December 1987, the requirements of the Housing (Exclusion of Shared Ownership Tenancies from the Leasehold Reform Act 1967) Regulations 1982 (S.I. 1982/62) (including where the tenancy was granted before those regulations came into force);(b) in the case of a tenancy granted on or after 11 December 1987 and before the 2024 Act commencement day, the requirements in paragraph 2 of Schedule 2 to the Housing Association Shared Ownership Leases (Exclusion from Leasehold Reform Act 1967 and Rent Act 1977) Regulations 1987 (S.I. 1987/1940);(c) in the case of a tenancy granted on or after the 2024 Act commencement day, requirements specified in regulations made by the appropriate authority.(4) The “2024 Act commencement day” is the day on which paragraph 11 of Schedule 8 to the Leasehold and Freehold Reform Act 2024 comes into force.(5) “The appropriate authority” means—(a) in relation to England, the Secretary of State;(b) in relation to Wales, the Welsh Ministers.(6) Regulations under subsection (3)(c)—(a) are to be made by statutory instrument;(b) may make provision generally or only in relation to specific cases;(c) may make different provision for different purposes or different areas;(d) may include supplementary, incidental, transitional or saving provision.(7) A statutory instrument containing regulations under this section is subject to annulment in pursuance of—(a) where it contains regulations made by the Secretary of State, a resolution of either House of Parliament; (b) where it contains regulations made by the Welsh Ministers, a resolution of Senedd Cymru.”;(b) omit section 175 (determination of price payable on enfranchisement under LRA 1967 where tenancy created under right to buy).Landlord and Tenant Act 1985
5 In section 26 of the LTA 1985 (exception to service charge restrictions for public authority tenants)—(a) for subsection (3)(c) substitute—“(c) at the time it is granted it complies with the specified requirements.”;(b) after subsection (3) insert—“(4) The “specified requirements” are—(a) in the case of a tenancy granted before 11 December 1987, the requirements of the Housing (Exclusion of Shared Ownership Tenancies from the Leasehold Reform Act 1967) Regulations 1982 (S.I. 1982/62) (including where the tenancy was granted before those regulations came into force);(b) in the case of a tenancy granted on or after 11 December 1987 and before the 2024 Act commencement day, the requirements in paragraph 2 of Schedule 2 to the Housing Association Shared Ownership Leases (Exclusion from Leasehold Reform Act 1967 and Rent Act 1977) Regulations 1987 (S.I. 1987/1940);(c) in the case of a tenancy granted on or after the 2024 Act commencement day, requirements specified in regulations made by the appropriate authority.(5) The “2024 Act commencement day” is the day on which paragraph 11 of Schedule 8 to the Leasehold and Freehold Reform Act 2024 comes into force.(6) Regulations under subsection (4)(c)—(a) are to be made by statutory instrument;(b) may make provision generally or only in relation to specific cases;(c) may make different provision for different purposes or different areas;(d) may include supplementary, incidental, transitional or saving provision.(7) A statutory instrument containing regulations under this section is subject to the negative procedure.”Housing and Planning Act 1986
6 In Schedule 4 to the Housing and Planning Act 1986 (shared ownership leases), in paragraph 11 (transitional provisions and savings)—(a) in sub-paragraph (1), at the end insert “, subject to sub-paragraphs (1A) and (2)”;(b) for sub-paragraph (2) substitute—“(1A) The amendment made by paragraph 7 (repeal of section 140 of the Housing Act 1980) also applies in relation to leases granted before the commencement of this Schedule, except in cases where, under section 7A or 32(5) of the Leasehold Reform Act 1967, the Leasehold Reform Act 1967 has effect without the amendments made by the Leasehold and Freehold Reform Act 2024.(2) In those cases, this Schedule does not affect the operation of section 140 of the Housing Act 1980, the enactments applying that section or regulations made under it.”Housing Act 1988
7 In Schedule 17 to the Housing Act 1988 (minor and consequential amendments)—(a) omit paragraph 40;(b) omit paragraph 68. Local Government and Housing Act 1989
8 In paragraph 5 of Schedule 10 to the Local Government and Housing Act 1989 (security of tenure for long residential leases)—(a) in sub-paragraph (4), for the words from “unless” to the end substitute “unless—(a) the landlord is a relevant authority, and(b) the premises are required for relevant development.”;(b) after sub-paragraph (4) insert—“(4A) For those purposes—(a) “relevant authority” means a person referred to in any paragraph of section 38(2) of the Leasehold Reform Act 1967;(b) “relevant development”—(i) in relation to a relevant authority other than a health authority, means development for the purposes (other than investment purposes) of that body;(ii) in relation to a relevant authority that is a health authority, means development for the purposes of the National Health Service Act 2006 or the National Health Service (Wales) Act 2006;(iii) in relation to a relevant authority that is a university body, also includes development for the purposes of any related university body;(iv) in relation to a relevant authority that is a local authority, also includes area development;(c) “health authority” means—(i) NHS England;(ii) any integrated care board;(iii) any Local Health Board;(iv) any Special Health Authority;(v) any National Health Service trust;(vi) any NHS foundation trust;(vii) any clinical commissioning group;(viii) any Strategic Health Authority;(ix) any Primary Care Trust;(d) “university body” and “related university body” have the same meaning as in section 29(6ZA) of the Leasehold Reform Act 1967;(e) “local authority” has the same meaning as in section 29(5) of the Leasehold Reform Act 1967;(f) “area development” means any development to be undertaken, whether or not by a local authority, in order to secure—(i) the development or redevelopment of an area defined by a development plan under the Planning and Compulsory Purchase Act 2004 as an area of comprehensive development;(ii) the treatment as a whole, by development, redevelopment or improvement, or partly by one and partly by another method, of any area in which the premises are situated.”Local Government (Wales) Act 1994
9 In Schedule 13 to the Local Government (Wales) Act 1994, in paragraph 24—(a) omit paragraph (b);(b) in paragraph (c), at the end insert “, where it applies by virtue of section 7A or 32(5) of that Act”.Housing Act 1996
10 In the Housing Act 1996—(a) omit section 109 (collective enfranchisement: valuation);(b) omit section 110 (lease extension for flats: valuation);(c) in Schedule 10 (consequential amendments)— (i) in paragraph 6, omit sub-paragraph (4); (ii) omit paragraph 18;(d) in Schedule 11 (compensation for postponement of termination in connection with ineffective claims)—(i) in paragraph 2, omit sub-paragraph (2);(ii) in paragraph 3, omit sub-paragraph (2).Commonhold and Leasehold Reform Act 2002
11 In the CLRA 2002—(a) omit section 126 (collective enfranchisement: valuation date);(b) omit section 127 (collective enfranchisement: freeholder’s share of marriage value);(c) omit section 128 (collective enfranchisement: disregard of marriage value for very long leases);(d) in section 130 (lease extension for flats: residence test), omit subsection (2);(e) omit section 132 (lease extension for flats: personal representatives);(f) omit section 134 (lease extension for flats: valuation date);(g) omit section 135 (lease extension for flats: freeholder’s share of marriage value);(h) omit section 136 (lease extension for flats: disregard of marriage value for very long leases);(i) in Schedule 13 (leasehold valuation tribunals), omit paragraph 15.Finance Act 2003
12 In the Finance Act 2003—(a) in Schedule 4 (stamp duty land tax: chargeable consideration), for paragraph 16C substitute—“16C The following do not count as chargeable consideration—(a) costs borne by the purchaser under section 9(4) of the Leasehold Reform Act 1967, where it applies by virtue of section 7A of that Act;(b) any amount payable by the purchaser under section 19C of the Leasehold Reform Act 1967;(c) any amount payable by the purchaser under section 89C or 89D of the Leasehold Reform, Housing and Urban Development Act 1993.”(b) in Schedule 17A (leases: further provision), in paragraph 10 (tenants’ obligations etc that do not count as chargeable consideration), for sub-paragraph (1)(f) substitute—“(f) any liability of the tenant for costs under section 14(2) of the Leasehold Reform Act 1967, where it applies by virtue of section 32(5) of that Act;(fa) any amount payable by the tenant under section 19C of the Leasehold Reform Act 1967 or section 89F of the Leasehold Reform, Housing and Urban Development Act 1993;”Companies Act 2006
13 In section 1181 of the Companies Act 2006 (access to constitutional documents of RTE and RTM companies)—(a) in the heading, omit “RTE and”;(b) in subsection (1), omit paragraph (a);(c) in subsection (4), omit the definition of “RTE companies”.Enterprise and Regulatory Reform Act 2013
14 In section 84 of the Enterprise and Regulatory Reform Act 2013 (redress schemes: property management work), in subsection (10), omit the words from “or which” to the end. Immigration Act 2014
15 In Schedule 3 to the Immigration Act 2014 (excluded residential tenancy agreements), in paragraph 13(2)(a), omit the words from “or which” to the end.Consumer Rights Act 2015
16 In section 88 of the Consumer Rights Act 2015 (duty of letting agents to publicise fees: supplementary provisions), in subsection (1), in the definition of “long lease”, omit paragraph (a)(ii) and the “or” preceding it.Housing and Planning Act 2016
17 In Schedule 10 to the Housing and Planning Act 2016 (leasehold enfranchisement and extension: calculations)—(a) omit paragraph 4;(b) omit paragraph 5.Tenant Fees Act 2019
18 In section 28 of the Tenant Fees Act 2019 (interpretation), in subsection (1), in the definition of “long lease”, omit paragraph (b) and the “or” preceding it.Building Safety Act 2022
19 In Schedule 8 to the BSA 2022 (remediation costs), in paragraph 6 (permitted maximum)—(a) in sub-paragraph (5), omit “total” in each place it occurs;(b) in sub-paragraph (8)—(i) for “total” substitute “tenant’s”;(ii) for “section 7” substitute “section 101(1)”.”Member's explanatory statement
This new Schedule would make amendments to other legislation in consequence of Part 2.
Baroness Thornhill (LD)
My Lords, I support Amendment 57 in the name of the noble Baroness, Lady Taylor of Stevenage. As has been said, Schedule 9 confers on a qualifying tenant the right to buy out the ground rent and replace it with a peppercorn rent. Instead of the extended leases that are paid for each time, it is a decision to make a one-off payment—job done once and for all.
This is a welcome measure. However, as has been said, under paragraph 2 of Schedule 9, the tenant must have at least 150 years left on their lease to qualify. Amendment 57 from the noble Baroness, Lady Taylor of Stevenage, would ensure that all leaseholders, not just those with residential leases of 150 years or over, have the right to vary their lease in this way and replace it with a peppercorn rent.
The provisions on the variation of leases and removal of ground rent are complex, but they are based on the principle of granting leaseholders flexibility and a recognition that different solutions might be preferable for the different situations that they are in. The argument has been put forward that these provisions should apply to leases that are sufficiently long, with the Law Commission recommending a very long length of 250 years and the Government settling on 150. Therefore, Amendment 57 rightly probes that length. If not 250 years, why not 125 years, 90 years or indeed no threshold for length at all?
Data on this was hard to find, but DLUHC’s English Housing Survey of owner-occupier leaseholders for the year 2020-21 found that 45% of leaseholders had a leasehold term between 71 and 120 years, and that the median length of leases was 112 years. This suggests that there could be lots of leaseholders with reasonably long leases who would not be given these rights in relation to ground rent.
I would also like colleagues to note that mortgage lenders are now getting very active on ground rent terms and taking an ever more conservative view on ground rent clauses. They are refusing to lend on leasehold homes where the ground rent is seen as onerous—the definition of that might be that it continues to double or that there are other strictures in place. This means that some leaseholders will be left with flats that are difficult to sell, as well as an escalating ground rent.
We would therefore welcome further information from the Minister about whether these provisions could be extended to cover more leaseholders, especially given their own figures.
Baroness Scott of Bybrook (Con)
My Lords, I will speak to government Amendments 58 and 59 in my name. Government Amendment 59 changes “premium” to “price”, referring to the sum paid for a ground rent buyout, to make the language consistent with the rest of the Bill. Government Amendment 58 makes a minor wording change to clarify that it is “the appropriate tribunal” that may make an order to appoint a person to vary a lease on behalf of the landlord or tenant in the case of a commutation following a ground rent buyout. I hope noble Lords will therefore support these amendments.
I turn to Amendment 57 from the noble Baroness, Lady Taylor, and moved by the noble Lord, Lord Khan of Burnley. This seeks to remove the threshold for the ground rent buyout right. I appreciate the concerns that lie behind this amendment and understand that the noble Baroness is seeking to ensure that as many leaseholders as possible can benefit from the new right. First, it is very important to note that all leaseholders, regardless of their term remaining, have the means to buy out their ground rent. They do so whenever they extend their lease or buy their freehold. It is only the right to buy out the ground rent without extending the lease or buying the freehold that is limited to leaseholders with 150 years or more remaining. The 150-year threshold exists to protect those leaseholders with shorter leases who will, at some point, require an extension from being financially disadvantaged by first buying out their rent, only having to extend later and paying more in total for doing so. However, we understand the argument that all leaseholders should be able to buy out their rent without extending their lease or buying their freehold if they want to, and we are listening carefully to that argument.
The Law Commission recommended 250 years, but it noted that the department might want to set the threshold lower. The department’s analysis showed that 150 years would enable more leaseholders to take advantage of the ground rent buyout right, while still being a long enough term remaining that the leaseholder does not need to extend if they do not want to. A lower minimum term would create a risk that poorly advised leaseholders might buy out the ground rent when an extension is in their best interest, then find out that they need to extend later and have to pay a higher premium, except for the extension, and two sets of transaction costs. We believe this is helping the leaseholder.
I hope that the noble Baroness will appreciate the reasons we have given for the existence of the threshold, and those assurances, and withdraw her amendment.
Lord Khan of Burnley (Lab)
My Lords, I rise very briefly to thank the Minister for her response. I appreciate the comments made by the noble Baroness, Lady Thornhill. In the future, we will look to work with colleagues across the House to see where we are on this. In the meantime, I beg leave to withdraw my amendment.
Member's explanatory statement
This amendment would correct an error.
Baroness Thornhill (LD)
My comments were not about right to manage. That was a good segue into another short speech by the noble Lord.
However, we are conscious that expanding right to manage to leaseholders under local authority landlords was never considered by the Law Commission, nor put out to public consultation. We are unsure whether the Government have done policy work in this area. It is a whole other ball game and will be challenging. But, in principle, given that many local authorities have been guilty of significant and tragic failures of service, to put it mildly, this should be a right of local authority tenants too. But it will be complex, for many of the reasons that were well outlined by the noble Baroness, Lady Taylor.
It is also worth reminding ourselves that local authority leaseholders have, since 1994, been able to take over management through tenant management organisations. I do not believe any work has been done regarding their success or otherwise. But such a review could ignite and inform this topic on another occasion. We welcome the probe by the noble Lord, Lord Moylan, and also the subtleties of his alternative proposals, and will certainly attend the said—and very popular —meeting.
Finally, I come to Amendments 65A and 65B, in the name of Lord Bailey of Paddington. The aim of Amendment 65A is a good one: to ensure that leaseholders in mixed-use buildings can avail themselves of the right to manage. At the House of Commons Public Bill Committee in January, MPs heard that many leaseholders in mixed-use buildings would still be unable to benefit from the reforms in the Bill to take over management—because, as the noble Lord said, of the existence of, say, a shared plant room or car park, under rules regarding structural dependency and self-containment. The existence of a plant room or other infrastructure is something decided by the original developer and leaseholders have no control over these factors, so it feels unfair to exclude them from right to manage based on the way a block has been designed, especially if they qualify under the new 50% non-residential premises limit.
Amendment 65B would put rocket boosters under the right to manage, opening it up to far more leaseholders. We on these Benches support the amendment and the intent behind it. Members in the other place have raised concerns that the 50% trigger is too high. The 50% participation limit on right to manage was also flagged as an issue by leaseholder campaigners at the Commons Public Bill Committee in January.
There may be concerns about 50% being less than a majority, but, as the noble Lord said, many leaseholders will never be able to obtain 50% support because of the high levels of buy to let in their block. But ultimately the Committee was persuaded of the case to bring down the 50% threshold. It is not right that just one person—the freeholder or landlord—has such control over leaseholders and can impact almost at will on their finances. As the noble Lord’s amendment suggests, 35% of leaseholders triggering a right to manage, with a right to participate for remaining leaseholders who did not originally get involved, is a far better situation than rule by one freeholder, whose interests, as the Law Commission concluded, are diametrically opposed to that of the leaseholder. Leaseholder self-rule with right to manage and a 35% participation threshold is a much more democratic state of affairs. Let us be honest: many councillors and MPs are elected to govern on much less than 50% of the vote—in fact, usually around 35%.
Baroness Scott of Bybrook (Con)
My Lords, I thank the noble Baroness, Lady Taylor of Stevenage, for Amendment 60, which would leave new Section 87B out of the Commonhold and Leasehold Reform Act 2002. This is a new power, inserted into the 2002 Act by the Bill, for the tribunal to order the repayment of a landlord’s process costs for right to manage claims which are withdrawn or cease to have effect in circumstances where a right to manage company has acted unreasonably.
The noble Baroness asked who would decide what was reasonable or unreasonable and the level of reasonableness. The costs will be determined by the tribunal, as is the case with other kinds of litigation or court proceedings.
While we strive to reduce costs for leaseholders, we do not believe it is right to do so where the right to manage company acts unreasonably in bringing a claim and the claim also fails. For example, landlords should not have to meet their own wasted process costs where leaseholders clearly make an unfeasible claim or fail to bring the claim to an end at an earlier stage.
The noble Baroness should be assured that the new power for the tribunal does not automatically entitle landlords to repayment. If the tribunal does not consider that costs should be payable, it can decline to make an order. Removing new Section 87B would expose landlords to unfair costs. For these reasons, I ask the noble Baroness kindly to withdraw her amendment.
I thank my noble friend Lord Moylan for his Amendments 61 and 62. The amendments seek to remove or amend the existing exception to the right to manage for local authority premises so that the right can be used by their long lease holders. I should explain that there is a separate right to manage scheme for local authority secure tenants and leaseholders under the Housing Act 1985 and its relevant regulations. The Commonhold and Leasehold Reform Act 2002 therefore excepted local authority leaseholders from the long-leasehold right to manage to avoid creating conflicting schemes.
The Bill delivers the most impactful of the Law Commission’s recommendations on the right to manage, including increasing the non-residential limit to 50% to give more leaseholders the right to take over management, and changing the rules to make each party pay their own process and litigation costs, saving leaseholders many thousands of pounds.
An alternative route to management is available in some local authority blocks that contain a mixture of tenants and leaseholders, where a prescribed number and proportion of secure tenants are in support of exercising the right. This involves setting up a tenant management organisation. It would complicate a system that we are trying to simplify if two separate routes were to apply to a single block, and the Law Commission made no recommendations on local authority leaseholders.
Lord Moylan (Con)
My Lords, I have some familiarity with the Housing Act 1985 from my time in local government. I am reasonably well aware of the obligation to create tenant management organisations, which are often not block-specific but estate-wide or, in many cases, spread across the entire local authority council housing stock. It seems a strange way to go about trying to exercise the right to manage if we are discussing a block held as an investment that has no local authority tenants. Can my noble friend assure me that the Housing Act 1985 is an effective means for leaseholders in the circumstances I describe to exercise their right to manage, when in fact it is an obligation on a local authority rather than a right granted to long lease holders?
Baroness Scott of Bybrook (Con)
We believe this is the correct way of doing it. I would be very happy to meet my noble friend to discuss this further but, with the evidence we have, we agree this is the correct way forward. But I really am very happy to meet with the noble Lord.
Lord Bailey of Paddington (Con)
I have heard what my noble friend the Minister has had to say and I am minded to do as she asks—if I could get one of those meetings that she has to offer. I am sure then that we could come to an accommodation.
Baroness Scott of Bybrook (Con)
I will be very happy to spend a week in here so that noble Lords can come in and out and speak to me as they like—and I would love to meet my noble friend to talk about this further. He talked also about transparency and it not being terribly necessary. The problem is that, if you do not have transparency, sometimes you do not know you are being ripped off, because you do not have the required information—so I think transparency is actually really important.
Lord Bailey of Paddington (Con)
My Lords, it was not that I do not like transparency. I agree with my noble friend that transparency is very useful so you know whether you are being ripped off. I was making an appeal for the ability to intervene in the process of being ripped off. I have been on the other end of this situation, where people have quite happily told us what they are overcharging us for, but we had no mechanism to interfere in that. That is what I was more concerned with.
Baroness Scott of Bybrook (Con)
I thank my noble friend for that but, for the reasons I have put forward, I kindly ask him not to press his amendments.
Lord Truscott (Non-Afl)
My Lords, I support Amendments 63 and 65 in the names of the noble Baronesses, Lady Taylor of Stevenage and Lady Pinnock, who outlined again the position on pension funds. I wanted to support what has been said by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Khan of Burnley. There has been a lot of scaremongering recently about the impact on pension funds, and I wanted to reinforce that with the Minister. Quite frankly, all this talk of pension funds and pensioners being hammered by low or peppercorn ground rents is rubbish, and it should be called out for what it is.
Baroness Scott of Bybrook (Con)
My Lords, I shall take Amendments 63 and 65 together, if noble Lords do not mind, as they both concern ground rents. Amendment 63 would require a report to be laid before Parliament, and Amendment 65 would require the publication of the Government’s response to the recent ground rent consultation and the laying of a Statement before Parliament. Before I move into what I am going to say, I want to say that I am not making any comment on any media speculation, as I said on Monday.
These amendments relate to the issues considered in the Government’s recent consultation entitled Modern Leasehold: Restricting Ground Rent for Existing Leases, which was published on 9 November 2023 and closed on 17 January this year. It sought views on limiting the level of ground rent that residential leaseholders can be required to pay in England and Wales. Noble Lords will be aware that the Government do not believe that it is appropriate that many leaseholders face unregulated ground rents for no clear service in return. There is no requirement for ground rents to be reasonable, and they can cause problems when people want to sell, buy or mortgage their properties.
The Government have already legislated to put an end to ground rents for most new residential properties in England and Wales through the Leasehold Reform (Ground Rent) Act 2022. We have also encouraged work, led by the Competition and Markets Authority, to investigate abuses of the system such as mis-sold “doubling” ground rent leases, securing commitments from freeholders to remove these costly terms, benefitting more than 20,000 leaseholders.
It is not right that many existing leaseholders are still facing these charges for no discernible service in return, which is why we have just consulted on a range of options to cap ground rents for existing residential leases. The Government are currently considering the responses to the consultation and we will set out our policy in due course. I hope noble Lords will understand that it would be inappropriate for me at this point to comment on or pre-empt any decision of the Government before a formal response to the consultation has been published, and that, given where we are, it would be premature to impose the requirements proposed in these two amendments.
The noble Lord, Lord Truscott, is right: we do not think it is appropriate that many leaseholders face these unregulated ground rents for no clear service in return. We recognise that our proposals would have some impact on the freehold market and explored this impact through our consultation. This impact is obviously being factored into the considerations of the options and is being taken into account in reaching our final policy position. The noble Lord has some very clear views on this, which I think we agree with.
At this late hour, I therefore ask the noble Baronesses, Lady Pinnock and Lady Taylor, for their continued patience as we consider what is a very complex issue. I trust that, in the light of the assurances I have given, they will be content not to press their amendments.
Baroness Taylor of Stevenage (Lab)
I am sure the Minister understands that this has dragged on and on, and we are now at a very late stage of a Bill that has already gone all the way through the Commons. Quite frankly, the degree of uncertainty and instability that is being caused to leaseholders—and to freeholders, to be fair to them—is unacceptable. Yet again in this Chamber, we hear the phrase, “in due course”. I do not know what that means; it can mean anything from tomorrow to in three years’ time when we get round to sorting it out. That is not acceptable either.
We had a very detailed report from the Competition and Markets Authority, which roundly condemned the use of ground rents as a mechanism. We have heard in this Chamber over and again that this is money for nothing and that it has resulted in the most dreadful exploitation. The example I gave in Committee on Monday of an elderly couple virtually being held to ransom by the freeholder is absolutely shocking. That will be going on in millions of homes across the country. This is just not acceptable any longer. I hope that the Secretary of State will very rapidly make up his mind as to what he is going to do about this, stop being bulldozed by freeholder interests in his own party, make a decision and get rid of ground rents, once and for all. This would let people sleep easy in their beds, which they have not been able to do while this debate has been going on.
Baroness Scott of Bybrook (Con)
I think there was a question there, and my response is that we went out, quite rightly, to consult, and the consultation did not finish until towards the end of January. This is a complex issue. If we do it badly or wrong then we will make mistakes and these people will potentially be in a more difficult situation. From the end of January to April is not a long time. We are doing it as fast as we can, and we will come back to the House with further details.
Lord Khan of Burnley (Lab)
I understand the response the Minister has given, but she has to understand that this consultation has its own process and in due course we will look at the analysis. I do not know whether I am accidentally calling for another meeting here, but how did we end up with reports in the newspapers? That causes more uncertainty and instability for people in their homes who are getting their information from the media. Surely there needs to be a statement or some clarification through the next stages of the Bill, so that, very early on, we can look at getting a clear, certain message out to the millions of leaseholders who have been adversely affected by the ground rent situation.
Baroness Scott of Bybrook (Con)
The Government have no control over what goes into the media, and it is something that the Government have to accept.
Baroness Pinnock (LD)
Let us end on a positive. I thank the Minister for her response. There is agreement that unregulated ground rents are unacceptable, and that some freeholders are unscrupulous and exploit their leaseholders, holding them to ransom, as the noble Baroness, Lady Taylor of Stevenage, said.
However, it would be really helpful if, as we complete the various stages of the Bill, the Minister could confirm that the Government will be able to bring forward a detailed amendment regarding ground rents before Report; otherwise, those of us who raised this issue in Committee will raise it again on Report. Unfortunately, this will put the Minister in a difficult position, one in which she has to say, “In due course, something is going to turn up”. Let us send a message to the department that “in due course” means “before Report”.
Leasehold and Freehold Reform Bill
Baroness Scott of Bybrook ExcerptsWednesday 24th April 2024
(3 days, 15 hours ago)
Lords ChamberRead Full debate Leasehold and Freehold Reform Bill 2023-24 View all Leasehold and Freehold Reform Bill 2023-24 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 50-II(b) Amendments for Committee (Supplementary to the Second Marshalled List) - (24 Apr 2024)
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, I thank the noble Baroness, Lady Andrews, for her Amendments 23 and 24 on development value. I also thank her very much for meeting me on this subject.
The amendments would introduce a scheme where enfranchising leaseholders would not pay development value if they guaranteed that they would not develop for a period of 10 years. Under the current law, lease- holders are sometimes required to pay development value when collectively enfranchising a block of flats. This is the value of the potential future development of the property, such as through adding another storey to the building, as we have heard. We recognise that development value can make the cost of enfranchisement prohibitively high.
We are committed to bringing forward a workable scheme and are exploring this area further. It is, as we have found, however, an area fraught with loopholes and technical detail. To be honest, it will take us time to get this right.
Before I finish, I want to bring up permitted development, because all noble Lords have brought this up. As noble Lords probably know, the Government have recently consulted on making changes to various permitted development rights. The consultation ran for eight weeks from 13 February to 9 April. We are considering the responses and I am sure we will have a debate on those in this House in due course.
The noble Baroness, Lady Andrews, is right about this issue. We know about it and we support her, but it is difficult. I would like to meet her again, and anybody else who would like to come, to go through her amendments in detail and take things forward in that way.
Baroness Pinnock (LD)
Could the Minister tell the Committee whether the problem that the noble Baroness, Lady Andrews, has defined could be resolved by removing permitted development rights altogether on these blocks of flats? This goes back to what was the case. If any development was proposed, it had to go through the normal application to the local planning authority.
Baroness Scott of Bybrook (Con)
I do not think that would be a sensible solution, because there might be times when permitted development might be the correct thing to do and everybody might be happy about it, including those leaseholders who have enfranchised. We need to take this steadily because it is fraught with complexity.
Baroness Andrews (Lab)
I am extremely grateful to everyone who has supported the amendment, especially the noble Baroness on my Front Bench. I am also particularly grateful to the Minister. I understood her to say that the Government are committed to bringing forward a workable scheme to deal with this problem, which is exactly what I wanted to hear. I know it must be fraught with difficulties. There are lots of rights and planning issues involved. There is a whole nest of issues that would have to be addressed. The important thing is that it be in line with the timetable for the Bill. Perhaps she will be able to say more about this when we meet, but I hope that it will be either aligned in the timetable, so that there is no more confusion and we can get this tracked as soon as possible, or, if it requires legislation, in the Bill. I take the point, and I would be very happy to meet her—and to take in with me an army, and its advisers.
I have one further reflection on the PDR review. I did my homework—I did what the Minister said, and I saw whether I could use the current PDR review as a way of raising this, but it does not allow me to do that; it is too narrow in scope. Therefore, in fact we need a proper review of PDR, because the implications are so varied and wide. If the Government could commit to that, there would be a lot of political capital in it. In the meantime, I am happy to leave this amendment, and we will see and wait on progress.
“(1A) If section 3(3) of the LRA 1967 applies to the current lease (successive leases treated as a single lease), sub-paragraph (1) is to apply only if the one of those leases which is in effect at the valuation date is a market rack rent lease.”Member's explanatory statement
This modifies the application of paragraph 8 where successive leases are “chained” to constitute a long lease under the LRA 1967.
Lord Khan of Burnley (Lab)
My Lords, this has been a more wide-ranging debate than was anticipated at the beginning of the group. The noble Lords, Lord Howard and Lord Moylan, made some interesting points in introducing their amendments, and it is for the Minister to clarify and address her noble friends’ concerns. All three amendments in this group attempt to make changes to Schedule 4, which is where the market- value element of the premium for any enfranchisement claim is determined.
I listened to the noble Baroness, Lady Fox of Buckley, in relation to the European Convention on Human Rights. Although we have differing views on that, it is interesting how legislation and the regard for international law are debated in different debates in this House—without pinpointing any noble Lord in particular.
The noble Baroness, Lady Deech, laid out and stipulated the complexity of the issue as a teacher in property law, while the noble Lord, Lord Thurlow, as a student of property law, made some interesting points about complexity and about working and bringing change in a fair manner.
In conclusion, I ask the Minister what consideration the Government have given to the principles of grandfathering for leases of various lengths and other conditions when developing the Bill? For example, in the instance of a lease of a very short length, when the Bill becomes law, what are the ramifications of the Bill as it is written? Do the Government think that some shorter leases are going to be treated in a way that may be fairer on wider principle but do not seem appropriate, given the shorter lengths? If so, did they consider any mitigation?
I finish by referring to my noble friend Lord Truscott, who advocated in a diligent manner the ending of marriage value and talked about the wider unfairness in leasehold properties. I look forward to the Minister’s response.
Baroness Scott of Bybrook (Con)
My Lords, I thank my noble friends Lord Howard and Lord Moylan for their amendments in this group. Amendments 26 and 27 would require marriage value or possible hope value to be payable by a leaseholder who has fewer than 80 years remaining on their lease on the passage of the Act.
The Government’s stated objective is to make it cheaper and easier for leaseholders to extend their lease or acquire their freehold. We want them to attain greater security of tenure. The amendments are directly counter to our objective. In particular, they would prevent us from helping the trapped leaseholder—that is, a leaseholder with a short lease who is unable to afford to extend because of the prohibitive marriage value payable, and so is trapped with an asset of diminishing value.
We do not believe that the leaseholder should have to pay marriage value. For the freeholder, the marriage value that is payable under the current law is a windfall created by the freehold and leasehold interests being married earlier than they otherwise would have been—namely, at the end of the lease. It is a sum that the freeholder would not receive if the lease ran its course. Parliament has previously determined that the value should be split equally and the leaseholder should pay half of it to the freeholder on enfranchisement, but we do not believe that freeholders should continue to receive that windfall.
The leaseholder needs to enfranchise, because by its very nature a lease is a wasting asset. Without either extending their lease or buying their freehold, they will suffer financial loss as the lease runs down or lose possession when it has fully run down. Nor has the lease- holder meaningfully chosen to enter such an arrangement, since leasehold is very often the only available form of tenure outside the rented sector at certain price points or in certain locations. The lease- holder’s need to enfranchise is born out of their insecurity of tenure; that is, out of the inherent injustice of the leasehold system. Our objective is to enable them to obtain greater security and to address that inherent injustice. By not having to pay marriage value to the freeholder, the leaseholder’s ability to obtain security of tenure is much improved.
A third party who bought the landowner’s interest would not pay marriage value, and we do not think it is right that the leaseholder should pay more than that same interest. Requiring leaseholders to pay more than a third party—or, in other words, enabling the freeholder to profit from the sale to a leaseholder by comparison to a third party—is to punish the leaseholder for their need to enfranchise, and therefore to affirm the very injustice we are trying to address.
The noble Earl, Lord Lytton, and many other noble Lords brought up compensation. Under our valuation scheme, the freeholder is compensated as if the lease simply ran its course. We believe that this is adequate compensation; it is sufficient to reflect their legitimate property interests.
Amendments 26 and 27 would also further complicate an already complex system. They would create a new two-tier system, with different rules for leases that were under 80 years at the time of the Act and those that fell under 80 years thereafter. This is undesirable, as it runs contrary to our stated aim to simplify this complex tenure.
Before I move on to Amendment 29, I will answer one or two specifics. First, the issue of human rights has been brought up by a number of noble Lords. The Government consider that all provisions in the Bill are compatible with the relevant convention rights and that in the case of the provisions engaging Article 8 and A1P1 any interference is justified and proportionate. There is a GOV.UK page where noble Lords can read further information on that should they wish.
The noble Baroness, Lady Deech, also brought up phasing, which is important. Following Royal Assent, we will allow time for a smooth transition to a new system, while making sure that leaseholders and freehold home owners on private and mixed-tenure estates— which is an issue—can benefit from it as soon as reasonably possible. We will also support leaseholders, freeholders, landlords and agents to adjust to and understand the new rules. We will work with delivery partners to make sure that the necessary support is in place, including through the publication of appropriate guidance.
Baroness Deech (CB)
I am grateful to the Minister for those comments. It reminds me that in the case of the 1925 legislation, the centenary of which approaches us, there were six different statutes with a long lead-in time. Apparently, many solicitors gave up practice entirely because they could not cope with the new law, so it is good to know this will be gently introduced.
On human rights, I am all in favour of the European convention; I would not want to drop it. I just find it rather dismaying that if the possible claimant were a hedge fund manager or a rich freeholder then we should not worry about them. The point about the European Convention on Human Rights is, whether you like the claimant or not, the thing must be taken as a whole; we cannot pick and choose. I would like some disassociation from the notion that hedge fund managers and rich freeholders should not have their rights considered under that convention.
Baroness Scott of Bybrook (Con)
I do not think that I will comment on that from the Dispatch Box, but the noble Baroness is absolutely right: we will make sure that it is phased in and that everybody understands it. Let us hope we do not lose too many solicitors in that journey.
Amendment 29, tabled by my noble friend Lord Moylan, would address the removal of marriage value far beyond that of a specific carve-out for charities, for example, which we are going to address specifically in the next group. The amendment would transfer the requirement to pay marriage value to freeholders in all enfranchisement claims on to the public purse. That would be unfair to hard-working taxpayers.
For the reasons I have outlined, I hope that my noble friends Lord Howard of Rising and Lord Moylan will withdraw or not press their amendments. Of course, I am always happy to meet noble Lords to discuss this further before Report.
Lord Howard of Rising (Con)
I thank the Minister for her comments. On human rights, I neither supported nor did not support them; I commented that human rights will prove a fortune for lawyers, as they argue for years and years over whether assets have been expropriated fairly or unfairly. The Minister referred to complexity; that really will bring complexity to what is at present a relatively simple situation.
When everybody is talking about this and how unfair it is on leaseholders, we should also remember that all a leasehold is is a discount on the freehold value. Somebody has paid less for that asset than they would have done had it been a freehold. If you take that logic to its full extension, why not go to the motor car industry, for example, and say that everybody who has bought their car on hire purchase should be able to have it without having to pay any more? They bought it under certain terms, as the leaseholder did—
(a) the relevant freehold on the transfer of a freehold house under the LRA 1967, or(b) the notional lease on”Member's explanatory statement
This amendment would correct the references in paragraph 18 to what is being valued under Schedule 4.
Baroness Scott of Bybrook (Con)
My Lords, I thank the noble Baroness, Lady Taylor, and my noble friend Lord Borwick for Amendments 41 to 45 in this group. I turn first to the series of amendments tabled by my noble friend, and I thank him for his constructive engagement with me and for the time he spent in trying to address this vital matter.
Amendments 41 and 43 to 45 would seek to replace the current provisions in the Bill, which will allow the Secretary of State to set the deferment rate used in enfranchisement valuation calculations, as well as removing a requirement to review these rates every 10 years. Instead, these amendments would require the deferment rate to be prescribed by a formula, which would be based on the Bank of England’s base rate plus 5%. The specific deferment rate would then be calculated based on the date of the leaseholder’s enfranchisement claim.
As I have discussed with my noble friend Lord Borwick, this is one potential solution for setting the deferment rate, but it is not the only one. I am aware of the importance of the deferment rate to both leaseholders and freeholders, and it is important that we take the time to take this decision carefully. There are serious consequences with any attempt to prescribe the methodology for setting the deferment rate in the Bill; this would tie the hands of this Government, and successive ones, in terms of adapting the approach if the need were to arise. It is also important that the Government retain their role in providing balance between market stability and the need to review the rates. It is the Government’s view that the proposals in the Bill enable this balance, and it would therefore be inappropriate, at this stage, to prescribe in the Bill the methodology for setting the deferment rate.
These deferment rates are a really important part of the Bill. At the moment, it is difficult for leaseholders to understand how much they may have to pay to the landlord when they enfranchise. Different rates are used across the country and across the industry on a case-by-case basis. The deferment rate is used to calculate the reversion value, and this provides the landlord with the compensation for the value of the freehold property with vacant possession in the future; that is, at the end of the lease. Prescribing these rates and using them to develop an online calculator, which will help leaseholders understand what they may have to pay, is also important. These rates will be prescribed at a market value to ensure that the amount that landlords are compensated reflects their legitimate property interests. These are important decisions.
The noble Lord, Lord Moylan, asked about the timing; this could take years and years, but we do expect the majority of these reforms to come into effect in 2025-26, as set out in the Bill’s impact assessment. Obviously, this may change, but that is what we expect. We will continue to carefully review all the information and views shared on the setting of rates, and I welcome any further thoughts that the Committee has on this matter.
Lord Moylan (Con)
Does my noble friend the Minister have a moment to give a response to my query about whether the Government regard the deferment rate as a real interest rate or one that incorporates inflation? I ask because the calculation, as I understand it, assumes zero inflation in the value of the asset over the time to the point at which it is being valued, and that a real interest rate is therefore appropriate. Is that her assumption or is she assuming an inflation-based interest rate, which, I suggest, would have consequences for how the asset is valued at the end of the term during which it is assessed? Does she have any comments on that?
Baroness Scott of Bybrook (Con)
I reiterate that this is why we would like the Secretary of State to be involved because it is complex and there needs to be a balance. I will come back to the noble Lord with any further comments, but this is why we would prefer the Secretary of State to have this role, to make sure that we are balancing the market at the time with leaseholders’ representation.
I turn to Amendment 42 from the noble Baroness, Lady Taylor, which would require the Secretary of State, when prescribing the deferment rate used in the enfranchisement valuation calculations, to set this at a level that would encourage
“leaseholders to acquire their freehold at the lowest possible cost”.
I assure the noble Baroness and the Committee that the Government are committed to making enfranchisement cheaper and easier and that these reforms will achieve that aim.
I understand how vital setting rates is for enfranchisement premiums. This very proposal was discussed in the other place, and I reiterate the importance of not constraining the Secretary of State via the Bill when making such important decisions. We have been clear that we will set the rates at the market value and recognise that many different elements need to be considered when setting them, as I have just reflected to my noble friend. We continue to have conversations with all relevant stakeholders. As I said, I welcome members of the Committee sharing their views on this matter so that the Government can take them into consideration when making a final decision. For these reasons, I ask my noble friend—
Lord Borwick (Con)
I am sorry to interrupt my noble friend again. One of the problems I see with this is the great difficulty in making a change except through statutory instruments, and the amount of time this takes. Whenever the Secretary of State decides that a change must happen, it must happen more quickly than through the route laid down in the Bill. At present, the amount of time doing the statutory instrument, and the fact that we cannot debate its details or change it, makes the whole thing very unfortunate.
There is something to be said for the point, made by my noble friend Lord Young of Cookham, that there is a route through that is used by the Lord Chancellor. I had not appreciated that the deferment rate had so many different implications. I am sure we could call it something different for this purpose, and thus carve out the rate for property matters. But, with a delay of one year or more between a decision and taking action, it is a very difficult subject to structure using the statutory instrument route.
Baroness Scott of Bybrook (Con)
My noble friend is absolutely right, and that is why we have not made this decision. We want to get it right, and that is why we listened to everything everybody said in this place and the other place. We will come back to my noble friend with our deliberations. This is important, and speed will also be important: you cannot take a year to change things that need changing, because of the market. They have to be dealt with in a timely manner.
Regarding my noble friend Lord Young’s point about the Lord Chancellor, I will take it back to the department and see whether any discussions have been had on a common approach, and if not, why not, and whether we should have those discussions.
For the reasons I have given, I ask my noble friend to withdraw the amendment.
Lord Borwick (Con)
My Lords, I thank everybody for their constructive points and for the education that I have received through this process. I beg leave to withdraw my amendment.
Member’s explanatory statement
This amendment would correct an error.
Member’s explanatory statement
This amendment is consequential on the removal of the amendment to the Housing and Planning Act 1986 in paragraph 16 of Schedule 8.
“(4) Subsection (1) does not apply in any of the following cases— (a) the tenancy was created by the grant of a lease under Part 5 of the Housing Act 1985 (a “right to buy lease”);(b) the tenancy is, by virtue of section 3(3), treated as a single tenancy with a tenancy created by the grant of a right to buy lease;(c) the tenancy is a sub-tenancy directly or indirectly derived out of a tenancy falling within paragraph (a) or (b);(d) the tenancy was granted under this Part in substitution for a tenancy or sub-tenancy falling within paragraph (a), (b) or (c).”Member’s explanatory statement
This amendment would prevent the tenants listed from exercising the right in new section 7A of the LRA 1967 to have that Act apply without the amendments in the Bill.
“Part 2: consequential amendments to other legislationSchedule (Part 2: consequential amendments to other legislation) contains amendments to other legislation that are consequential on this Part.”Member’s explanatory statement
This new Clause would introduce the new Schedule on consequential amendments to be inserted before Schedule 9.
Lord Khan of Burnley (Lab)
My Lords, I rise briefly to thank the noble Lord, Lord Young of Cookham, and my noble friend Lord Berkeley for providing the detail, with diligence and eloquence, in calling for what the noble Lord, Lord Young, called a level and equitable playing field for all leaseholders in that situation, particularly in relation to Crown land. I want to press the Minister on getting information from the Government about to what extent Crown and Duchy of Cornwall land would be affected by the amendments, and on providing clarification on the important and pertinent points that both noble Lords raised.
Baroness Scott of Bybrook (Con)
My Lords, I will briefly speak to the amendments in my name before turning to the amendments in the names of my noble friend Lord Young of Cookham and the noble Lord, Lord Berkeley. Government Amendment 83 is a clarificatory amendment. Clause 67 outlines that all of Sections 18 to 30P of the Landlord and Tenant Act 1985 bind the Crown, and that the relevant provisions bind the Crown whether or not they relate to Crown land.
As a result, Section 172(1)(a) of the Commonhold and Leasehold Reform Act 2002 will be repealed. Since subsections (4) and (7) of Section 112 of the Building Safety Act 2022 amend the 2002 Act, these subsections are no longer necessary.
I now turn to the amendments in the names of my noble friend Lord Young, and the noble Lord, Lord Berkeley. I thank my noble friend Lord Young for his Amendment 54, which seeks to bind the Crown to the enfranchisement measures in the Bill and to apply those measures to properties subject to escheat. It is a long-established principle that legislation does not bind Crown lands, including the Duchies of Lancaster and Cornwall, unless the Act expressly states so or by necessary implication. Where an Act, or a part of an Act, does not bind the Crown, the Crown can and often does agree to act in accordance with the legislation.
The current position is that most Crown leaseholders enjoy the same lease extension and enfranchisement opportunities as other leaseholders, by virtue of the Crown’s undertaking given to Parliament to act by analogy with the Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993, which are not directly binding on the Crown. We also expect that the Crown will agree to act by analogy with the Bill before us. The effect will be that most leaseholders of the Crown will have the same opportunity to extend their lease or buy their freehold as any other leaseholder would, except in certain special circumstances set out in an undertaking we expect to be given by the Crown. Therefore, the outcomes the Government want to see can be achieved without legislation, and the amendment is unnecessary.
I would also like to thank my noble friend for raising an important point in his amendment about properties subject to escheat. The Government recognise that when the freehold becomes ownerless, it can cause problems for some of those leaseholders. However, the amendment would not achieve its intended aim because when a property escheats to the Crown the freehold no longer exists, and the Bill is not the appropriate place for a review of the complex law surrounding ownerless land. When a property becomes ownerless the land and buildings escheat to the Crown. If a purchaser is interested, the Crown can sell it so that it goes back into private ownership.
Lord Berkeley (Lab)
My Lords, I am grateful to the Minister for a very detailed reply, and I thank her for her interest in this project. I have one question: will we be able to see a draft or a copy of the undertaking from the Crown, which she has mentioned several times, before Report?
Baroness Scott of Bybrook (Con)
My answer is that I am not sure, but I will make sure that I let the noble Lord know. If we can do that, obviously we will.
Lord Young of Cookham (Con)
My Lords, I am grateful to all noble Lords who have taken part in this short debate. I am grateful to the noble Lord, Lord Mann, for reminding us that it is often a rather one-sided battle, with leaseholders confronted by freeholders with massive resources. I am grateful to the noble Baroness, Lady Pinnock, for her support for my amendment.
As far as the noble Lord, Lord Berkeley, is concerned, I have happy memories of replying when I was on the Front Bench to his Duchy of Cornwall Bill. He spoke at somewhat greater length on that occasion about the need for major reform of the Duchy.
On the specific issue that I raised, I am not expecting any legislative change because my noble friend said, quite rightly, that the Crown is not bound by legislation, but she said on several occasions that the Crown would act by analogy with the terms of the leasehold Acts. I think that gives me what I want, so long as it covers the Crown acting as freeholder as well as the Crown acting as owner of land in escheat. At the moment, that is not the case. At the end of my remarks, I asked whether my noble friend would be good enough to get the necessary assurance from the Crown Estate and the Treasury that they would deal with escheat applications in the same way as applications for where they are the freeholder.
I am grateful to my noble friend for her sympathetic reply. I think I can build on the undertaking that she has given to make some progress. I do not want to wait until the Law Commission has gone round the course all over again, whenever that may be. The leases that I referred to are coming towards the end of their time, and each delay adds to the potential cost for the leaseholders.
I hope we can make progress without waiting for a Law Commission report. It is simply a case of the Crown acting equitably and doing exactly what my noble friend has said: acting by analogy and delivering the laws that have been passed by Parliament. On that basis, I am happy to withdraw the amendment at this stage.
Leasehold and Freehold Reform Bill
Baroness Scott of Bybrook ExcerptsMonday 22nd April 2024
(5 days, 15 hours ago)
Lords ChamberRead Full debate Leasehold and Freehold Reform Bill 2023-24 View all Leasehold and Freehold Reform Bill 2023-24 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 50-I(a) Amendments for Committee (Supplementary to the Marshalled List) - (19 Apr 2024)
Baroness Pinnock (LD)
My Lords, this Bill is really very important. It has been a long time since Second Reading, so I think it is worth reiterating some of the fundamentals that we hope it will achieve.
The first is that this is obviously a huge opportunity to reform the leasehold/freehold property rights and relationships. That is certainly one of the key aspects that we on these Benches will pursue with vigour. It is also an opportunity to tackle the huge omissions in the Building Safety Act to provide remedies for those leaseholders and tenants living in blocks of flats that are under 11 metres or five storeys. As we have all through the debates and discussions on the Fire Safety Act, the Building Safety Act and the levelling-up Act, we on these Benches will continue to pursue the safety of leaseholders and tenants in those blocks of flats, because that is the right thing to do.
On these amendments, we on these Benches acknowledge that there will, of course, be areas in the leasehold/freehold arrangement where the abolition of leasehold impinges on other important rights, so we accept that there will be examples where an exception is justifiably made. However, the noble Baroness, Lady Taylor of Stevenage, is absolutely right to probe the reasons for these exceptions, in this group and in the following group, and has drawn attention to them individually. For example, the noble Baroness drew attention to a situation where the developer has a head lease and has yet to build out to the development. She asked the pertinent question of what happens if leasehold is going to be abolished for houses. Where does that fit in with a development that is ongoing that will be developed under the terms of a leasehold? That is not explained either in the Bill or in the Explanatory Notes.
We on these Benches understand the importance of this for historic estates that are now owned by the National Trust in England, Wales and Scotland. The purpose of the leases in those instances ought to be protected, because the overwhelming responsibility is the protection of our national heritage. That makes good sense. However, although the schedule provides details of which properties are eligible for what was described as “permitted leases” under the tribunal certification, what is not clear in either the clauses or the schedule, or in the Explanatory Notes, is what criteria the Government are using to enable some leaseholds to be described as permitted. Can the Minister provide the reasons for the choices made by the Government in determining permitted leases in Schedule 1? This is important because the legislation will be challenged in the future. It is therefore vital that, before we get to Report, we understand the reasons, as well as the purpose, behind the tribunal certification. Perhaps the Minister can provide the details of the regulations that are to be provided to the tribunal for making those decisions.
The two examples used by the noble Baroness, Lady Taylor of Stevenage, and the noble Lord, Lord Young of Cookham, relating to retirement housing and homes for life, strike me as being very important in our discussions. Those of us who have been involved in leasehold, and in the debate about leasehold and some of the criticisms of the way in which leasehold is implemented in practice, have been astonished by the way in which some retirement housing service charges have risen exponentially, without, it seems, any recourse to an explanation or a reduction. It is important to understand, for both homes for life and retirement housing—one of which is referred to in the schedule and the other which is not, as the noble Lord, Lord Young of Cookham has said—how protections will be provided for these very important areas of housing in order to provide protection for the leaseholders in these arrangements.
We support the probing amendments of the noble Baroness, Lady Taylor of Stevenage, and look forward to the detailed response, I hope, from the Minister.
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, it gives me great pleasure to open Committee on the Leasehold and Freehold Reform Bill. Before turning to the debate on the amendments that have been tabled, it would be remiss of me if I did not take this opportunity to thank those Peers who have engaged with the Bill and those who have long championed the rights of leaseholders. I also thank colleagues from the Law Commission, without whose advice much of this vital legislation may not have been possible.
Lord Young of Cookham (Con)
I am most grateful to my noble friend for that undertaking, but I remind her that the Government said:
“We will provide an exemption”,
for these types of scheme.
Baroness Scott of Bybrook (Con)
I have noted that.
The noble Baronesses, Lady Pinnock and Lady Taylor, and the noble Lord, Lord Young of Cookham, also brought up the issue of the exempting of retirement houses. Retirement houses do not stand alone; they are usually part of a wider scheme with extensive communal facilities and packages of support care and hospitality services. A lease can help to organise the relationship between the two parties, with the home owner and provider managing the development in properties such as these. We think this justifies an exemption from the ban.
The noble Baroness, Lady Taylor Stevenage, also brought up the commencement day for this Bill. The letter that we wrote to the noble Lord, Lord Kennedy, explained that it is a complex Bill, and there will be complexities as we roll out the Bill after Royal Assent. However, I think we did put in that that commencement is likely to be 2025-26, not 2026.
I want to reassure noble Lords that there is a power in the Bill, should evidence of any abuse emerge, to tighten definitions further or remove exemptions entirely if there is evidence that a stricter approach is necessary. With these assurances in mind, I hope that the noble Baroness will agree not to press her amendment at this stage. In this group—
Baroness Pinnock (LD)
Before the Minister sits down, she referenced in the early part of her response the number of houses that were likely to be developed under circumstances where a lease had already been granted before the commencement of this Bill. Is she able to give the Committee a ballpark figure of the number of houses that would be caught up in this situation?
Baroness Scott of Bybrook (Con)
I am not prepared to give any ballpark figures from the Dispatch Box, but I will look into it and let the noble Baroness know. I apologise that I do not have that figure with me today.
Before I finish on this group, I have government Amendment 8, which makes minor clarificatory changes to the definition of shared ownership leases permitted under the leasehold house ban to clarify its intent. The amendment adds a further condition to permitted shared ownership leases, confirming that where a shared ownership leaseholder has acquired 100% of the equity in the house, they will then be transferred the freehold of the house at no extra cost. This brings the definition into line with government funding programmes and definitions elsewhere in the Bill. I look forward to hearing—
The Earl of Devon (CB)
Just to return to the National Trust exemption, are the Government satisfied that there are no other institutions similar to the National Trust that have similar obligations of heritage maintenance, will be impacted by these provisions and should also possibly be exempted? If there are, how would they be able to grant long leases on property that needs to be maintained for heritage purposes?
Baroness Scott of Bybrook (Con)
We have been working with the stakeholders for many months, if not years, on this. If the noble Earl looks in the schedule of exemptions, I think he will find everybody that wanted to be there. We have agreed to put them there, but if he has any particular group in mind, I would like to hear about it, please.
Government Amendment 8 is also relevant to the following group of amendments, so perhaps we could take that into consideration on the next group. In the meantime, I look forward to hearing from noble Lords about how they think these measures can be improved as we move through the Bill. I ask that the clause stand part and that the amendments are not moved.
Baroness Pinnock (LD)
My Lords, there are two elements of this category of permitted leases that are worthy of further exploration. One—on which the noble Lord, Lord Young of Cookham, has gone into great detail, questioning how it will work—relates to shared ownership. The second is to do with agricultural leases.
I would like the Minister to explain, first, why agricultural leases cannot be subject to tribunal certification, rather than the current self-certification process. There does not seem to be a reason why that does not occur under the first element of permitted leases.
There are other issues, such as shared ownership and self-certification, that are not necessarily covered in the details the noble Lord, Lord Young of Cookham, went into, but which are very important. I would like to understand how self-certification will be subject to challenge, what the process is and how such situations can be resolved. Will it be a costly process? If so, granting permitted leases for shared ownership, and agricultural leases, becomes an expensive legal minefield for those caught up in it.
So, I would like to understand why agricultural leases are not in the first set of certifications for permitted leases, and how challenges can be resolved. I look forward to what the Minister has to say.
Baroness Scott of Bybrook (Con)
My Lords, I thank the noble Baroness, Lady Taylor of Stevenage, for Amendments 5, 6, 9, 10 and 11. I thank the noble Lord, Lord Khan, for speaking to those amendments to Part 2 of Schedule 1. These amendments would remove exemptions to the ban on the grant of new leases on houses.
As I stated when addressing Amendments 1 to 4, the Government are aware that certain housing or financial products which support home ownership rely on granting a lease. We have therefore consulted extensively on scenarios where this may be justified. For example, shared ownership, a vital home-ownership product, relies on the use of a lease. We cannot surely be saying that the thousands of new shared ownership houses built each year should not be sold any longer. Equally, we cannot say that the use of home purchase plans—including, for example, through use of Islamic finance, a vital option for the purchase of houses for those who cannot, for faith-based reasons, apply for an interest-charging mortgage—should not be allowed, or that owners of existing leasehold houses cannot extend their leases.
For any of the exceptions in Part 2 of the schedule, including shared ownership, home finance plans, lease extensions, agricultural tenancies, or contracts on leases agreed pre commencement, it should be clear and unambiguous to consumers buying these that they are getting a lease on a house, and why that lease is needed. Because of this, the Government will not require these types of leases to obtain tribunal certification. However, again, we have taken powers in the Bill to adjust the definition if there is evidence of abuse, or to move permitted leases into Part 1 of the schedule, should there be a need for tribunal involvement. The Government will continue to monitor market behaviour and act accordingly.
The noble Lord, Lord Khan, asked for some more details of these groups of homes or products. On exempting shared ownership, I should say that shared ownership is one of the Government’s key affordable housing products, which helps consumers to get on to the property ladder. Consumers purchase shares in the property over time through the payment of rent to a provider, and a lease facilitates this arrangement between the two parties. The Bill therefore permits the grant of new shared ownership leases on houses.
When we go to financial products, the Bill includes an exemption to the ban on new leasehold houses for lease-based financial products, as I said, which can help people to buy a home or release equity from it. Here a lease is required because a third-party provider acquires a freehold on the consumer’s behalf as part of the financing of the purchase. Ownership is required by two parties and is best facilitated via a lease.
The noble Baroness, Lady Pinnock, and the noble Lord, Lord Khan, asked about agricultural tenancies. Farm businesses and agricultural landlords negotiate the length of a tenure to suit their business needs, and it is intended that this should continue, as longer-term leases can help to ensure that farmers have security to invest in their businesses over time. The Bill makes it clear that agricultural tenancies will be the permitted lease for the purposes of the ban on new leases of houses, and explicit exemption is provided in the Bill for tenancies that fall under the Agricultural Holdings Act 1986 or the Agricultural Tenancies Act 1995.
We are exempting lease extensions when a home owner extends their lease; often the original lease is surrendered and a new one granted in its place. While this is technically a new lease, the homeowner remains the leaseholder of the same property. Therefore, we believe that this should be treated as an existing rather than new lease, and warrants an exemption. In practice, we envisage that most leaseholders will purchase their freehold, where they are able to do so.
We are exempting agreements for lease. These AFLs are a contract between the prospective leaseholder and landlord to enter into a lease in the future. Where an AFL was agreed prior to commencement of the Bill, it is right that this contract should be honoured, and the lease granted. For this reason, an AFL entered into prior to the commencement of the ban will be treated as a permitted lease, as both parties have agreed on the terms of the lease and are aware that they will be entering into a lease. A tribunal certificate and a warning notice are not therefore required, we believe.
Lord Young of Cookham (Con)
I am enormously grateful for the assurances that my noble friend has given. Will the Government respond to the Select Committee report on shared ownership before Report? It raises some important issues which I touched on and it would be nice to have the Government’s response before Report.
Baroness Scott of Bybrook (Con)
I am not aware of the timescale for that, but I will make some inquiries and come back to my noble friend.
Lord Khan of Burnley (Lab)
My Lords, I thank the Minister for her response to what was a very interesting debate. I always appreciate the breadth and depth of expert knowledge from the noble Lord, Lord Young of Cookham, in particular. He talked about the rights of shareholders and what they are entitled to, and it is important that he finished by talking about the response to the Select Committee report on shared ownership. I appreciate also the probing of the noble Baroness, Lady Pinnock, alongside myself, on the definition of agricultural leases but, for the time being, I beg leave to withdraw my amendment.
(a) allows for the tenant to acquire the freehold of the house (if the landlord has the freehold), or(b) provides that the terms of the lease which make the lease a shared ownership lease cease to have effect (if the landlord does not have the freehold),without the payment of further consideration.”Member’s explanatory statement
This amendment amends the definition of a shared ownership lease so that it includes the case where a tenant has the right to acquire the freehold. This is in line with the definition being inserted into the LRA 1967 by paragraph 13 of Schedule 8 to the Bill.
Baroness Scott of Bybrook (Con)
My Lords, I thank the noble Baroness, Lady Taylor of Stevenage, and my noble friend Lord Bailey of Paddington for their amendments.
Amendment 12 would require the Secretary of State to publish a report, within three months of the commencement of the Act, into the legislative options for mandating that new-build flats be sold to leaseholders with a proportionate share of the freehold. We appreciate the benefits that share-of-freehold arrangements have over ordinary leasehold arrangements with third-party landlords, which is why we are making it simpler and cheaper for leaseholders of flats to enfranchise collectively and, therefore, achieve share-of-freehold arrangements. However, the commonhold framework has already been designed as the optimal legal vehicle for the collective ownership of flats. As such, the Government want to see the widespread take-up of commonhold, and for it to be the future preferred tenure for owners of flats, rather than share of freehold.
The noble Baroness, Lady Taylor of Stevenage, asked why the legal framework was so complex. We need to determine precisely what property the mandate is applied to, exemptions, the processes for phased developments, the enforcement of developer liabilities for remedial works and so on. We would also need to prescribe the constitution for resident management companies—since they are presently unregulated—and to consider how the management functions are to be exercised by such companies, resident participation in decision-making, and the procedures and jurisdictions for dispute resolution. It is a complex issue, but one that we are working on—the Law Commission has worked on it for us for a number of years—and we feel that it is important that we continue with moving to commonhold rather than mandate share of freehold.
We understand the desire to offer leaseholders a share of freehold in the interim between leasehold and commonhold while the Government consider the Law Commission report and work on commonhold. However, we do not believe that mandating share-of-freehold sales would be a simple and quick undertaking. We also have concerns about using share of freehold across the whole housing market. It is not an optimum product for managing all types of shared properties, such as large and complex buildings—as we have heard—or buildings with extensive shared spaces. That is why the Government are committed to commonhold instead. We would prefer to work on one widespread take-up of a new tenure, and for that new tenure to be commonhold.
Baroness Taylor of Stevenage (Lab)
I will ask for some clarification, then. The policy was originally announced in 2017. The Law Commission did a great deal of work on what needed to be done to enact commonhold, and yet it is not in this Bill. The Minister has just reaffirmed the Government’s commitment to move to commonhold, so can she say how much longer it will take to get us to a situation where we have it?
Baroness Scott of Bybrook (Con)
I reiterate that the Government remain absolutely committed to widespread take-up of commonhold for flats. We have reviewed the Law Commissioners’ recommendations to reinvigorate commonhold as a workable alternative to leasehold, and I can assure noble Lords that we will set out next steps in due course.
Amendment 15B from my noble friend Lord Bailey of Paddington would require mandatory share-of-freehold arrangements to be made for block of flats in instances where flats are subject to long leases or collective enfranchisement. I thank him for this amendment and for his interest in this specific instance. We are aware of the interest in this and appreciate the desire to ensure that more leaseholders can obtain control or ownership of their building. Although we understand the benefits that share-of-freehold arrangements can have over ordinary leasehold arrangements with third-party landlords, we are also conscious that mandating share-of-freehold sales on new builds would require a complex legal framework to be constructed and to accommodate the mandate. As I have said, we do not believe that mandating share of freehold would be a quick or easy fix for leaseholders. The Government consider that the best option, as I have also said before, is to continue to work towards the widespread use of commonhold in future, rather than mandating share of freehold.
My noble friend Lord Bailey of Paddington was particularly keen on service charges. The Government will bring forward, through this Bill, a number of measures to require landlords to provide further information to leaseholders on a very proactive basis and to increase the transparency of their service charges and administration charges, as well as providing more information to leaseholders on a reactive basis. Those measures include the introduction of a standardised service charge demand form to standardise the information that freeholders are required to provide to leaseholders. We will mandate the provision of an annual report that sets out key information of importance to leaseholders. We will compel landlords to provide more relevant information to leaseholders on request. We will ensure that service charge accounts are provided within six months of the end of the previous accounting period that they cover, regardless of the lease terms, and this will be subject to a number of exemptions. We will require freeholders to proactively disclose—
Lord Bailey of Paddington (Con)
Can my noble friend the Minister let me know how many of the 121 recommendations that the Law Commission made around commonhold will be adopted?
Baroness Scott of Bybrook (Con)
All I can say to my noble friend is that that is exactly what the Government are working on and that further details will come forward in due course.
A number of things in this Bill will affect the transparency and accountability of freeholders to leaseholders, particularly on service charges, which is the one thing that my noble friend brought up. For these reasons, I hope that the noble Baroness and my noble friend will not press their amendments.
Baroness Taylor of Stevenage (Lab)
I thank all noble Lords who have taken part in the debate. I found it a bit of a frustrating debate in many ways. As I said, this policy was announced in 2017; we have had a very detailed Law Commission review and endless discussions in this House about how we move to commonhold. In a sense, my amendment was set out to probe whether we could have some route map towards commonhold, and this might be a first step towards that, to provide leaseholders with at least a share of freehold with a view to moving towards commonhold in the future. It seems that the Government want neither to set out what their route map to commonhold is or what the steps on it might be, nor to give us a timescale for that route map towards commonhold. Now we are faced with an indefinite timescale to get there and a Bill which could have enacted it but has not. I wonder how much longer we will have to wait. The seven years we have already waited is quite long enough.
It has been frustrating to unlock that but worth probing the Government’s intentions. I am grateful for the reassurance that commonhold is still the aim, but I would like to know how long it will take. However, in view of the discussions here today, I will for the moment withdraw the amendment.
Baroness Scott of Bybrook (Con)
My Lords, Amendment 13 concerns the conversion of existing leasehold buildings to commonhold. I thank the noble Baroness, Lady Pinnock, for raising this important subject. In future, the Government would like to see widespread use of commonhold for new and existing buildings, empowering consumers to fully own, control and manage their buildings. Reforming the route through which existing leaseholders in England and Wales can convert to commonhold will be a crucial stepping stone on this path to commonhold. The Government welcome the Law Commission’s excellent work on this subject, and continue to consider its recommendations in this space.
Baroness Fox of Buckley (Non-Afl)
My Lords, I forgot to declare my interest as a leaseholder. I feel as though I might have to declare an interest to the noble Earl, Lord Devon, as a serf, or at least somebody who is rather pleased that democracy has allowed me to move from that particular interest.
In her response, the Minister said that all this change needs to be managed. In response to my amendment, she said there should not be a ban without due consideration. Fine, but this was a sunset clause in five years; it is hardly rushing it. The endless contributions that have been made suggest that this has been talked about for a very long time. The noble Lord, Lord Kennedy, made the point that we can all go back. This sort of response, saying that we need to go slowly and that it needs to be managed, makes it seem a little unclear as to what the Government are responding to. Nobody here is exactly rushing through.
Also, can I have some clarification on the idea of a danger to the supply of new homes? I was glad that the Minister responded to the noble Earl, Lord Devon, saying that there does not appear to be any evidence of that, but she said we had to be careful about a ban without due consideration. She herself said that it could damage the supply of new homes, and to be honest I think that is an unjustified threat—although not by the Minister. I keep hearing this: “If we rush this through, nobody will ever build a flat again. We have a housing crisis; what are we going to do?” I know the developers are saying that, but I was interested in the fact that Lendlease is one of those saying that this may disrupt building supply, but actually it seems to be building away and thriving, with massive developments in Australia, where it is from and where, indeed, there is a form of commonhold of which Lendlease was supportive. It is not going to stop the development of houses. We can build, build, build—just not build, build, build leaseholds, surely.
Baroness Scott of Bybrook (Con)
My response to the noble Earl, Lord Devon, was a response on commonhold. My response to the noble Baroness, Lady Fox, was more about the fact that her amendment would just ban the sale of leasehold, which I suggest would give an uncertainty to the market.
Lord Bailey of Paddington (Con)
Maybe my noble friend the Minister can give us some detail on the Government’s new-found support for commonhold. It would be easier not to move my amendment if I had some idea of the progress of the Government’s thinking, the timetable and how they intend to increase the adoption of commonhold, because that would make my amendment largely unnecessary.
Baroness Scott of Bybrook (Con)
I thank my noble friend for that. As I have said, we are working on it, we are working on further changes and we will come back in due course.
Lord Khan of Burnley (Lab)
If I can just probe the Minister on the answer she gave me, that the Commonhold Council met in September, can I just confirm that she is chairing that Commonhold Council? The government website still has the noble Lord, Lord Greenhalgh. As the Commonhold Council advises the Government, what advice did it give in relation to the plan for commonhold? Surely it was not, “Take your time”, was it?
Baroness Scott of Bybrook (Con)
I do not have that detail with me, but I will make sure the noble Lord gets it.
Lord Kennedy of Southwark (Lab Co-op)
Can the Minister tell the Committee whether the Government have a strategy for commonhold?
Baroness Scott of Bybrook (Con)
Yes. The noble Lord knows, and I have said it enough times at this Dispatch Box, that the Government fully support commonhold. It is a matter of getting through the complexities and ensuring that it is delivered in a safe, secure way for the future.
Lord Kennedy of Southwark (Lab Co-op)
It is good to hear that they have a strategy; maybe the Minister can explain to the Committee what the strategy is. All I see at the moment is that there is a lot of support for commonhold—everyone is committed to it and wants to bring it in in due course—but I would like to see some sort of timeline. When are we going to get it? They will have had this report from the Law Commission for four years in July. Where is the plan? If they had a plan they could set out for the Committee, I am sure they would get a lot of support from us here, but the worry is that we will be sitting here in another four years. What is the plan from the Government?
Lord Kennedy of Southwark (Lab Co-op)
I am sorry, but I asked a couple of questions there and I am hoping for a response.
Baroness Scott of Bybrook (Con)
I am sorry, but I have made it very clear that the Government are fully in support. I am trying to remember whether it was 219 or 120, but large numbers of amendments were required to be put into place to ensure that, while we have commonhold in this country now, it can be delivered across all our leasehold flats. We do not have the time on this Bill to do that amount of legal work, and that is why we are not promising it at present, but we want to get as far along that journey to commonhold as we possibly can within the Bill.
Lord Kennedy of Southwark (Lab Co-op)
But we are not, are we? That is the whole point. We are not getting anywhere, just making commitments and promises with no timescale, no plan, nothing. That is the problem and why we are getting so frustrated here. They have had the Law Commission report for four years. What have they been doing for the last four years?
Baroness Scott of Bybrook (Con)
Working on getting towards commonhold, which is what the Government want for this sector.
Lord Kennedy of Southwark (Lab Co-op)
The noble Baroness will obviously know this really well, then: how many more years do we need before we get a Bill to deliver this?
Baroness Pinnock (LD)
My Lords, the purpose of Amendment 13 in my name was to encourage a debate on commonhold and the route to achieving it, and in that it has been successful. I am pleased about that and thank all noble Lords for their involvement. It has been a long time since the first legislative proposal was made to abolish leasehold. I think it was in the Liberal Government of 1906, so we are going back a long way.
“(ca) in section 23 (agreements excluding or modifying rights of tenant), in subsection (2)(b), omit the words from “or any provision” to “or any part of it”;”Member's explanatory statement
This amendment would prevent a landlord and tenant agreeing to a restriction on the tenant making a repeated enfranchisement or extension claim.
Baroness Scott of Bybrook (Con)
My Lords, to be clear, the Bill already removes the automatic 12-month bar on leaseholders that stops them making another enfranchisement claim, should an earlier claim have been withdrawn. My Amendment 16 supplements this by removing the right for a voluntary 12-month agreement to be made between parties to restrict further enfranchisement claims for a leasehold house. Removing the ability for a voluntary 12-month restriction makes sure leaseholders are not put under undue pressure to withhold their claims. This is an important protection for leaseholders and makes it clear that they can make fresh claims as needed.
I look forward to hearing from noble Lords as to how they think that our enfranchisement reforms can be further improved. I beg to move.
Baroness Taylor of Stevenage (Lab)
My Lords, our Amendment 17 would enable the Secretary of State—or, in Wales, Welsh Ministers—to change the description of premises that are excluded from collective enfranchisement rights. Such a change would be subject to the affirmative resolution procedure. I thank the noble Lord, Lord Thurlow, for all his time in discussing the Bill with me, and I acknowledge his expertise in this area.
Clause 28, which our amendment targets, makes changes to the non-residential limit for collective enfranchisement claims. At present, Section 4(1) of the 1993 Act excludes from the right to enfranchise buildings in which 25 % or more of the internal floor area, excluding the common parts, can be occupied or are intended to be occupied for non-residential use. The clause increases that non-residential use percentage to 50%. We welcome the change, which enacts recommendation 38 of the Law Commission’s final report on leasehold enfranchisement and was supported by the National Leasehold Campaign, among others.
Of course, if the purpose of the non-residential limit is to confine enfranchisement to predominantly residential blocks, the Law Commission determined that the existing 25% limit does not achieve that purpose. There is a significant amount of evidence that, instead, it regularly prevents leaseholders from undertaking collective freehold acquisitions because a sizeable proportion of buildings fall slightly above it and that 25% is a significant bar to the ability of leaseholders to undertake a collective freehold acquisition. The Law Commission further argued that
“the arbitrary nature of the limit makes the bar to enfranchisement a source of considerable frustration for many leaseholders”.
We accept that there is no easy or non-arbitrary way in which to determine where that bar should be. However, it is the stated intention of the Bill to bring as many leaseholders as possible into enfranchisement, and it is therefore questionable as to whether limits under 50% would feel inherently fair. We would hope that a 50% non-residential limit would mean that the number of genuine cases excluded would be small and would remove the opportunity for developers to play the system, because only a genuine split between commercial and residential would apply.
Our main concern on this clause is that there is no flexibility built into it, and we are keen to probe whether a review after a period of time to determine whether the non-residential policy as set out is working in practice could be undertaken, or another mechanism used, so that changes for the limit in respect of collective enfranchisement rights do not require primary legislation but can be enacted through regulations. Enacting small but necessary changes that may occur in relation to the Government’s proposed limit—for example, whether that relates to individual cases that fall just above the limit, or a change in the criteria on using internal floor area to determine the rights, or changing altogether the criteria on which the limit is based—may need alternative mechanisms to resorting to future primary legislation. That is the purpose of our amendment.
I will comment briefly on the other amendments in this group. We understand the reasons for the amendments of the noble Lords, Lord Sandhurst and Lord Thurlow, and look forward to hearing the comments of the Minister on those amendments. In relation to the Question on whether the clause should stand part of the Bill, to be put by the right reverend Prelate the Bishop of Manchester, we understand the Church position as a landholder, but we feel it would go against the spirit of increasing the enfranchisement through the Bill to retain the 25% limit.
Baroness Fox of Buckley (Non-Afl)
My Lords, the descriptions that have been put forward—the right reverend Prelate described these thriving communities, which sounded idyllic, and the noble Earl, Lord Lytton, talked about making sure that we understood that there might be some bad players but that there are also some very enlightened players—made it sound as though this is really just a question of having the right people in charge, whereas I think it is a systemic problem.
One of the reasons why I am anxious about this is that although it is always nicer to have friendly, non-rip-off freeholders—that is genuinely a positive thing—we should not be grateful that we are not being ripped off in the homes that we live in. The system problem is that people lack autonomy and control over where they live and their destiny. I just throw in that a successful community depends on people retaining their autonomy rather than being grateful that they are being looked after.
What the noble Baroness, Lady Thornhill, pointed out is incredibly important; the noble Lord, Lord Truscott, also made an excellent speech laying some of this out. There are thriving communities with mixed-use abilities all over the world that do not use leasehold. We are now getting to a point where we are saying, “If we don’t have leasehold here, we’ll never have a local swimming pool and there will be no community centres. What will happen to all the shops?” That is mythological. Although I agree that one needs to look at the complexities, and I for one am actually all for nuance in relation to this and not just blunderbussing away, we should also stop myth-building about the wonders of the system, when in fact the reason why we want enfranchisement in the first place is that when our citizens buy a house they should have control over it. It is their home, and they can work collectively on building the community. At the moment they are denied that, which is why we are trying to tackle the problem of leasehold in the first instance.
Baroness Scott of Bybrook (Con)
My Lords, I thank all noble Lords for their contributions, and I start by thanking especially the noble Baroness, Lady Taylor of Stevenage, for Amendment 17, which seeks to amend the description of premises that are excluded from collective enfranchisement rights, where leaseholders would otherwise qualify. I know the amendment is well intentioned, with the aim that there is flexibility to amend the description of exceptions without new primary legislation. The amendment introduces a broad power for Ministers to change fundamental elements of the structure of the regime, which are substantive areas of policy. The Government are already making changes to primary legislation by increasing the non-residential limit from 25% to 50%, following extensive consultation, which is right and proper. The powers in this amendment would affect the very core of the regime and how it is structured rather than amending mere procedural changes.
To make sure that stakeholders have certainty as to how the law will work in practice, changes to the fundamental structure of the statutory regime should be clear and stable. Although the intention behind the amendment is noble, the Government are not able to accept it as it is not proportionate or reasonable for the proper functioning of the regime. It would be a sweeping power to change the fundamental structure of the enfranchisement regime after it has been approved by Parliament.
This amendment would introduce uncertainty into the new system, meaning that both leaseholders and landlords would need to second-guess whether changes may be made at relatively short notice, introducing volatility to the regime. This could potentially lead to undesirable outcomes, such as undermining confidence in long-term investment decisions for mixed use-premises, or lead to irregular design of floor-space in anticipation of future changes. I want to make it clear that the Law Commission has spent years considering qualifying criteria and assessed different options in its consultation process before putting forward its recommendations to increase the non-residential threshold to 50%.
The amendment could also remove rights of leaseholders or landlords in a disproportionate way and create unnecessary uncertainty and divergence likely to complicate the overall regime, with consequential effects on the behaviour of different stakeholders in different ways. Therefore, I hope that I have convinced the noble Baroness that the amendment is not proportionate, and that it is not moved.
I thank my noble friend Lord Sandhurst for Amendment 17A, which would exclude long leases held by overseas companies from being qualifying tenants for the purpose of collective enfranchisement. The Government’s aim is to improve leasehold as a tenure and address the historic imbalance of power between freeholders and leaseholders. The Bill does not confer different rights on leaseholders by how their leases are held. The Government do not think that implementing such a definition, in respect of which leaseholders have rights and which do not, is workable or desirable.
Amending the definition of a qualifying tenant for collective enfranchisement will make it harder for other leaseholders in a building to meet the numbers required to enfranchise, should they so wish. Attempting to restrict some leaseholders may well disenfranchise others, meaning that many leaseholders up and down the country could lose the opportunity to exercise their rights. Furthermore, it would remove the existing rights of some leaseholders and complicate the system overall, contrary to the aims of the Government.
I understand that the intention of the amendment may be to safeguard against circumstances in which non-resident or overseas companies do not take an active interest in the management of a building or are slow to respond. However, we expect that most multi-occupancy buildings will be managed by professional management companies on behalf of freeholders, as they are now.
I thank my noble friend again for the amendment, but I cannot accept it because it runs contrary to the aims of the Government and may restrict leaseholders’ rights. I therefore hope that he is content not to move his amendment.
I thank the right reverend Prelate the Bishop of Derby for speaking on behalf of the right reverend Prelate the Bishop of Manchester, with whom I have had a number of meetings about this issue. I am happy if the right reverend Prelate takes back the fact that I will continue that discussion if the right reverend Prelate the Bishop of Manchester so wishes.
I thank my noble friend Lord Moylan for his clause stand part notice. Clause 28 increases the non-residential limit for the collective enfranchisement claims to proceed in mixed-use buildings from 25% to 50%. The clause implements a Law Commission recommendation that has been subject to comprehensive consultation by the Law Commission and the department. I note the right reverend Prelate’s and my noble friend’s concerns, which have been raised through various consultations with freeholders and landlords.
The Bill’s impact assessment considers the impact of increasing the non-residential limit for collective enfranchisement claims, including the potential impact on freeholders, high streets and businesses. The increase to 50% strikes a fair and proportionate balance and will ensure that leaseholders are not unfairly prevented from claiming the right to manage in respect to buildings that are majority residential. It protects the freeholders and commercial leaseholders in buildings that are majority commercial. Freeholders can also protect their commercial interests by taking a leaseback of the commercial unit, securing their interest with a 999-year leaseback at a peppercorn rent.
We recognise the importance of the responsibility of building management and, as I have said, would expect that those who exercise their right to take over their buildings will employ professional managing agents—ensuring that the building is managed with the appropriate expertise, as we have heard from the noble Lord, Lord Truscott, about the issues that he is aware of.
The Government consider that this increase is proportionate, and I ask the right reverend Prelate and my noble friend to support Clause 28 standing part of the Bill.
I thank the noble Lord, Lord Thurlow, for Amendment 18, which seeks to apply a residency test to the collective enfranchisement claims in buildings with more than 25% non-residential floorspace. As we have discussed, Clause 28 amends the Leasehold Reform, Housing and Urban Development Act 1993 to increase the non-residential limit for collective enfranchisement claims from 25% to 50%.
Clause 28 implements a Law Commission recommendation that seeks to broaden access to collective enfranchisement for leaseholders living in mixed-use buildings where the non-residential elements constitute up to 50% of the floorspace. The existing qualifying criteria require leaseholders representing at least 50% of the flats in a building to participate in a collective enfranchisement claim. When combined with these existing criteria, the noble Lord’s amendment would allow claims only in mixed-use buildings with more than 25% non-residential floorspace, where at least 25% of the flats are owner-occupied.
For leaseholders in mixed-use buildings where less than 25% of the flats are owner-occupied but more than 25% of the floorspace is non-residential, this new clause would have the effect of removing all the benefit of Clause 28. This would leave leaseholders unable to collectively buy the freehold of their building because of how their neighbours chose to use their properties. It would also complicate all claims in buildings with over 25% non-residential floorspace, as participating leaseholders would be required to demonstrate that they are owner-occupiers. This could lead to claims taking longer and costing more, and would provide freeholders with another opportunity to frustrate leaseholders’ right to buy their freehold. This is counter to the Government’s aims in this area to broaden access to collective freehold ownership for all leaseholders, and to simplify, not complicate, the system leaseholders use to do so.
Leasehold and Freehold Reform Bill
Baroness Scott of Bybrook ExcerptsWednesday 27th March 2024
(1 month ago)
Lords ChamberRead Full debate Leasehold and Freehold Reform Bill 2023-24 View all Leasehold and Freehold Reform Bill 2023-24 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 27 February 2024 - large print - (27 Feb 2024)
Baroness Scott of Bybrook
That the Bill be now read a second time.
Relevant document: 16th Report from the Delegated Powers and Regulatory Reform Committee. Welsh legislative consent sought.
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, I thank those Peers who have already engaged with the Bill and, indeed, those who have championed reforming the leasehold market for many years. I also thank colleagues from the Law Commission, without whom much of this vital legislation may not have been possible.
The Bill delivers long-awaited reforms to improve home ownership for millions of leaseholders across England and Wales. Reforming the leasehold system is a long-standing ambition of this Government. The comprehensive package of reforms before us will bring greater fairness, security, transparency and competition to the leasehold housing market. At present, leasehold home owners are too often at the whim of their freeholder, disempowered by the fundamentally unfair system. The Bill will address this power imbalance and give people the security of home ownership for their future and their families’ futures.
I will now move to the specific content of the Bill and outline the ways in which, when taken together, this package of reforms will transform the leaseholder housing market and the lives of millions of leaseholders across England and Wales. The core enfranchisement reforms of the Bill will give both families and individuals the security of an automatic 990-year lease extension, with ground rent reduced to a peppercorn on payment of a premium. This ensures that leaseholders can enjoy secure ground rent-free ownership of their properties for years to come without the hassle, distress and expense of repeated lease extensions. Removing the requirement to pay marriage value, capping the treatment of ground rents at 0.1% of the freehold value in the calculation, and prescribing the rates for those calculations will bring significant tangible financial benefits to leaseholders if they choose to extend their lease.
The Bill will also give more leaseholders the right to manage their own building, enabling them to appoint a managing agent that delivers good-quality work at reasonable prices and replace one that does not. As well as empowering leaseholders to make these important decisions themselves, this Government believe that making managing agents more accountable to the leaseholders who pay for their services will encourage these companies to up their standards.
Allied to this, we have also focused measures on cracking down on the poor, unresponsive practices blighting the daily lives of leaseholders, whether a managing agent is involved or not. This will give them true transparency over service charges, so that they can better understand the costs they are being charged and are better equipped to challenge them if they are unreasonable. Following the excellent work of the FCA, we will end the practice of leaseholders being charged exorbitant, opaque commissions on top of their building insurance premiums. We will also extend access to redress schemes for leaseholders to challenge poor practice. The Bill makes it a requirement for freeholders who manage their property to belong to a redress scheme, so that leaseholders can challenge them if needed. This will again empower leaseholders to challenge bad practice and bad management. This Government do not believe it is right that somebody can mistreat a leaseholder and their private property, while said leaseholder has no means to seek redress or compensation for that mistreatment.
Through these reforms, we will also scrap the presumption that leaseholders must pay their freeholders’ legal costs even when they win tribunal cases, levelling the playing field and correcting an historic power imbalance. There must be equality before the law. This Government believe firmly that leaseholders should not pay for a freeholder’s legal costs when said freeholder is found guilty of mismanagement or abuse.
I know that many across the House will be pleased to note that we are also granting further rights to home owners on private and mixed-tenure estates, which many here today have campaigned for. The Bill will give home owners the power to apply to the appropriate tribunal to challenge the reasonableness of charges they face or to replace a failing manager, access to support via a redress scheme, and measures to make buying or selling a property on such estates quicker and easier by setting a maximum time and fee for the provision of information required to make a sale. This measure encapsulates what the Bill is trying to do, which is to bring fairness and equality to the housing market. It is not right to force someone who has bought a freehold property to deal with only one managing company, which is not required to give them any information or charge them reasonable fees. It is also not right that someone who has bought a property on these estates has no effective way to hold the management company to account for the services they provide. These reforms will address that.
The Bill also clarifies and extends the protection in some specific areas of the Building Safety Act 2022, building on the legislation previously brought forward. These specific changes will further prevent freeholders and developers from escaping their liabilities to fund building remediation work, ultimately protecting leaseholders.
The package of reforms in the Bill before us is substantial and far-reaching for existing leasehold properties, but the Government wish to reform the future leasehold housing market too. The Bill therefore now explicitly bans the creation of future leasehold houses, with all new houses needing to be sold on a freehold basis, other than in exceptional circumstances.
In addition to the measures I have outlined today, I want to assure your Lordships that I understand the strength of feeling in the House to make even more changes to the Bill, in particular on the issue of forfeiture. We recognise that this is a real and significant problem and that there is huge inequity at stake here. We are working through the detail of this and will report back to the House shortly with more details as we consider the matter further.
I reassure noble Lords that the Government remain committed to commonhold reform and see it as a long-term replacement for leasehold. The Law Commission did fantastic work to review the commonhold framework and set out 121 separate and detailed recommendations on how to modernise it. These are not trivial changes; implementing them requires detailed consideration to make sure that we get it right, so that commonhold works for everybody.
The Government are also committed to reviewing the leasehold market and considering ways to improve its fairness. As such, we have launched a consultation on the capping of existing ground rents, which we are still carefully considering. The results will be published in due course.
In conclusion, this Bill will give leaseholders and their families greater security of ownership over their own private property for generations to come, and improve the lives of millions of home owners who have been forced to enter into a system that is unfair and outdated. I know that many in this House have campaigned to see these reforms, and I look forward to hearing the contributions of noble Lords during the debate on this important Bill. I beg to move.
Baroness Scott of Bybrook (Con)
My Lords, it is a pleasure to close this debate and to reflect on the many thoughtful contributions that we have heard. I thank all noble Lords for their engagement with the Bill thus far, and especially all noble Lords who met me before this debate to discuss their concerns. As the Bill progresses, I am keen to continue engaging. If any noble Lords would like a briefing, please get in touch. I will put further dates forward ahead of Committee, and of course noble Lords can ask for a meeting at any time, and I will try and accommodate them.
I have heard that some noble Lords would like to see what is in the Bill clarified and improved. Other noble Lords want to see it go further still, and I look forward to engaging with them on all those issues as the Bill comes to its Committee. That said, listening to this debate, I am also struck by the strength of consensus among noble Lords that the system of leasehold needs reform. I will now seek to address all noble Lords’ points in turn.
The noble Baroness, Lady Taylor of Stevenage, began the debate and set out her wide range of concerns, particularly those areas where she expects to bring forward amendments. I am grateful to her for her engagement and her work with the Bill so far; I look forward to continuing this as the Bill progresses. I will turn right away to the Government’s position on ground rents, on which she and noble Lords right across the House, including my noble friend Lord Moylan and the noble Lords, Lord Adonis and Lord Palmer, courteously asked for updates.
I understand the strength of feeling about this issue and the level of interest, given its size. We are aware that reforms to protect leaseholders will have a negative impact on those who benefit from ground-rent income, and are carefully considering this as we formulate our policy. That is why we are studying the recently closed consultation very carefully. Next steps will be set out in due course to this House as soon as I am able to do so.
I also want to address the specific point made by noble Lord, Lord Adonis, about the ECHR. The Government consider that all provisions in the Bill are compatible with the relevant convention rights; and that, in the case of provisions regarding Article 8 and A1P1, any interferences are justified and proportionate.
The noble Baroness, Lady Taylor, also had a specific question about marriage value, setting deferment rates in primary, rather than secondary, legislation. My noble friend Lord Borwick also raised this point. I understand their concerns, but we do not feel that setting rates on the face of the Bill would be appropriate. The Government absolutely recognise that careful consideration is needed on how to set rates, and that many different elements need to be considered when setting them. We have been clear that we will set the rates at market value to ensure that the amount landlords are compensated reflects their legitimate property interests, and we have had active conversations with relevant stakeholders. Ultimately, the Secretary of State’s flexibility to make these decisions is paramount, and we will continue these conversations. I welcome any further views that noble Lords might have on this matter.
I will come to the overall principle of marriage-value reform shortly, but with regard to the specific points made by the noble Baroness, Lady Thornhill, and the noble Lord, Lord Truscott, about the online calculator, it is an important issue, and I can confirm that the Government absolutely remain committed to launching this. This will help leaseholders understand how much it will cost to extend their lease or acquire their freehold up front. However, before we can launch such a vital tool and make a true success of it, we must first pass the Bill, so that the online calculator reflects the final provisions of the reforms in the Bill.
I turn now to the central issue that the noble Baroness, Lady Taylor, and many others raised: the future of the leasehold market. The Bill delivers our manifesto commitment to ban new leases of houses. Once commenced, other than in exceptional circumstances, new houses will have to be sold as freehold. I know that noble Lords across the Chamber, including the noble Viscount, Lord Hanworth, have expressed particular interest in the exceptions where a lease might still be justified, such as shared ownership, which helps consumers take their first step on the property ladder, or National Trust land where the freehold cannot be sold on. We expect a developer to prove it through the new steps included in the Bill. We believe that each can be justified, but we will keep a close eye on the market, and will not shy away from using the powers in the Bill to tighten or remove exceptions if required.
I turn now to the issue of banning leasehold flats, not just houses. The majority of houses have always been provided as freehold. There are few justifications for building new leasehold houses, so this Government will ban them. Flats, on the other hand, have shared fabric and infrastructure, and therefore require some form of arrangement to facilitate management. This has historically been facilitated by a lease.
None the less, the Government recognise the issues in the leasehold system, and I have heard the concerns from the noble Baronesses, Lady Taylor, Lady Thornhill and Lady Andrews, my noble friends Lady Finn and Lord Bailey and many other noble Lords regarding a lack of commonhold measures as a meaningful alternative to replacing leasehold for flats. I want to reassure your Lordships that the Government remain committed to commonhold reform and that we see it as a long-term replacement for leasehold.
Lord Kennedy of Southwark (Lab Co-op)
The Government have now had the report from the Law Commission for four years. I think the noble and learned Baroness, Lady Butler-Sloss, who is not in her place at the moment, raised the question: how much longer do they need?
Baroness Scott of Bybrook (Con)
As I think I have said to the noble Lord many times from this Dispatch Box, this is a complicated issue. I think there are about 121 recommendations in the Law Commission’s framework and we just have not had the time to go through them. However, this takes us a good way towards commonhold for the future.
The Law Commission did fantastic work to review the commonhold framework, and, as I said, it set out 121 separate detailed recommendations on how to modernise it. I appreciate the points from the noble Lord, Lord Kennedy, about commonhold and his frustration that these reforms have not come forward. However, these are not trivial changes. Implementing them requires detailed consideration. It is a complex policy, and to make sure we get it right and so that commonhold does not fail to take off for a second time, we will take the time required to make it work. We will therefore set out our response to the Law Commission’s report as soon as that work is concluded.
On the comments made by the noble Baroness, Lady Thornhill, the noble Lord, Lord Stunell, my noble friends Lady Finn and Lord Moylan and many others about leasehold rights to manage, managing a large or complex building is not an easy feat, especially meeting building safety requirements, and some leaseholders may simply not want this responsibility. That is why the Government believe that leaseholders should therefore have the choice to manage their buildings, which they now do. The Bill delivers the most impactful of the Law Commission’s recommendations on right to manage, including increasing the non-residential limit to 50% in mixed-use buildings to give more leaseholders the right to take over management, and changing the rules to make each party pay their own process and litigation costs. These measures will help existing leaseholders now and save them many thousands of pounds into the future.
The Government recognise that the participation threshold of one-half can frustrate leaseholders if they cannot reach it. However, we agree with the Law Commission that the threshold is proportionate and ensures that a minority of leaseholders are prevented from acquiring the freehold against the wishes of the majority of leaseholders in the building. We are therefore very clear that we should hold the participation requirement at half of the total number of residential units in the premises.
The noble Baroness, Lady Thornhill, my noble friend Lord Moylan and many others have also made powerful arguments that the creation of new freehold estates must end, and that local authorities should be compelled to adopt all communal facilities on a new estate. It is up to the developers and the local planning authority to agree on specific issues relating to new development, including appropriate funding and maintenance arrangements. That said, we are carefully considering the findings and the recommendations of the Competition and Markets Authority report to address the issue that home owners on these estates face.
On the questions from the noble Baronesses, Lady Taylor and Lady Thornhill, about expanding the right to manage regime to cover the residents of freehold estates, the Government recognise the benefits that the right to manage regime on freehold estates would bring, empowering home owners to manage and take a greater control of the estate on which they live. However, there would be many detailed practical issues to work through to deliver this, which would all require careful handling since they affect property rights and existing contract law. Instead, we have introduced measures in this Bill to empower home owners and make estate management companies more accountable to them for how their money is spent, including the ability to apply to the appropriate tribunal to appoint a substitute manager.
The noble Lord, Lord Best, spoke extensively and eloquently about the regulation of property agents, which my noble friend Lord Young, the noble Lord, Lord Truscott, and many others, supported. This Government remain committed to driving up professionalisation and standards among property agents. We welcome the ongoing work being undertaken by the industry and others to drive up standards across the sector, including on codes of practice for property agents. I put on record my sincere thanks to the noble Lord, Lord Best, and the noble Baroness, Lady Taylor, for their valuable work on this issue. However, as a Secretary of State made clear at Second Reading, legislating to set up a new regulator would require significant additional legislative time of a kind that we simply do not have in the lifetime of this Parliament.
On cost, the Government believe that any regulation can and should be done in an appropriate and proportionate way that controls the cost to business. Managing agents must already belong to a redress scheme and leaseholders may apply to the tribunal to appoint a manager to provide services in cases of serious management failure. The Leasehold and Freehold Reform Bill will make it easier for leaseholders to scrutinise costs and challenge services provided by landlords and property managing agents, and ultimately for them to take on management of the buildings themselves, where they can directly appoint or replace agents. These measures, alongside existing protections and work undertaken by the industry, will seek to make property managing agents more accountable to the leaseholders who pay for their services.
The valuable work on the regulation done by the noble Lord, Lord Best, remains on the table, but this Bill is tightly focused on the fundamental improvements for leaseholders. These, alongside our building safety reforms, already make this a time of great change for managing agents, necessitating higher standards across the sector. We continue to listen and look carefully at the issues that Members across the House are raising on this.
My noble friend Lord Young spoke specifically about forfeiture, as did the noble Baronesses, Lady Taylor and Lady Twycross, my noble friend Lord Bailey and many others. As I said in my opening remarks, the Government recognise that this is a real and significant problem. There is huge inequity at stake. We have heard from colleagues today about why we should act. We think it is the job of government to go away and work through the detail of this, which we are doing. We will report back to the House shortly with more details as we consider the matter further.
My noble friend Lord Young, the noble Lord, Lord Stunell, the noble Earl, Lord Lytton, the noble Baroness, Lady Pinnock, and many others, raised several concerns about building safety, which I will try to address in some detail. The Government understand that many individuals are frustrated with the distinction between qualifying and non-qualifying leaseholders. We have been clear that the primary responsibility for resolving issues in buildings requiring remediation is with those who caused them. In circumstances where it does not prove possible to recover the cost of remediation from the developer, we have established a threshold that strikes a balance between leaseholders and landlords as to who should be paying for the costs of remediation. No leaseholder, whether qualifying or non-qualifying, can be charged more than they otherwise would have been in the absence of the leaseholder protections for costs relating to historical building safety defects.
A range of support is in place for leaseholders whose lease does not qualify for protection. All residential buildings above 11 metres in England now have a pathway to fix unsafe cladding, through either a taxpayer-funded scheme or a developer-funded scheme. With regard to buildings under 11 metres, it is generally accepted that the risk to life from fire is proportionate to the height of the building. Therefore, the risk to life from historic fire safety defects in buildings under 11 metres will require remediation only in exceptional circumstances.
The Earl of Lytton (CB)
In relation to critical fire safety, the Minister referred to the risk to human life. I understand that that is what the independent expert statement was intended to cover; namely, critical life safety. What would she say about the other critical issues: finances and the cost of remediation, which none the less continue and are the matters that concern insurers and finance houses, which are by and large less concerned with questions of human life?
Baroness Scott of Bybrook (Con)
We have taken the issue of human life as the important one. I think we will have further debates on 11 metres as we go through the Bill. I am conscious of time; if the noble Earl does not mind, we will deal with those matters in Committee.
Given the number of small buildings under 11 metres that need remediation, our assessment remains that extending leaseholder protections to below 11 metres is neither necessary nor proportionate, as I think the noble Baroness has heard many times before.
Regarding my noble friend Lord Young’s issue about enfranchised leaseholders, the Government decided that the leaseholder protection provisions in Part 5 of the Building Safety Act would not apply to leaseholder-owned buildings. That was because the freehold to the building is de facto owned by all or some of the residents who, as leaseholders, have collectively enfranchised and would still have to pay to remedy the safety defects in their buildings. However, leaseholders in those buildings, either individually or collectively, can pursue developers and their associated companies via a remediation contribution order for funds that they have spent or will spend remediating their buildings for relevant defects.
I turn to joint ownership. This Government understand that individuals are frustrated with the distinction between leaseholders who own properties jointly and those who do so independently. We are listening carefully to feedback from stakeholders on this matter. We have also published a call for evidence on jointly owned leasehold properties, which was launched on 22 March; this will enable the Government to understand the scale of the issue and consider whether any further changes can be proposed.
The noble Baroness, Lady Andrews, asked about development value. I am very grateful to her for engaging with me beforehand about this issue. I can say to the noble Baroness, as she acknowledged, that we committed to enabling leaseholders voluntarily to agree to a restriction on future development of their property to avoid paying development value as part of the collective enfranchisement claim. We are consulting on making changes to the existing permitted development right and are seeking views on whether sufficient mitigation is in place to limit potential impacts on leaseholders. I urge the noble Baroness to contribute her views to that consultation before it closes on 9 April. When it closes, the Government will carefully consider and review all the responses and see how the regime can be improved.
I was very sorry to hear of the personal difficulties of the noble Lord, Lord Campbell-Savours, when purchasing his freehold, and I hope that the reforms in this Bill will address the issues he raised. With regard to the point that he and my noble friend Lord Bailey raised on service charges, the level of service charges that leaseholders pay will depend on many factors, such as the terms of the lease and the age and condition of the building. This means that the cost of things such as repairs, maintenance of common areas and management of the building will differ considerably. The transparency and redress reforms in this Bill will empower leaseholders to take action against any unreasonable costs.
As well as speaking extensively about building safety issues, the noble Earl, Lord Lytton, made a compelling case for thinking about leasehold from the perspective of consumer protections. The Government are committed to improving consumer protections against abuse and poor service from landlords, managing agents and freehold estate managers. That is why we will set a maximum time and fee for the provision of information as part of the sales process for leasehold homes and those homes encumbered by estate management charges, and introduce rights of transparency over service charges, extended access to redress schemes and reform of legal costs. We consider that it is a powerful package of consumer rights and reforms, and, following Royal Assent, we will make sure that appropriate guidance is available for consumers. None the less, I look forward to meeting the noble Earl after Easter to discuss how this package can be further improved and well implemented.
The noble Lord, Lord Palmer, the noble Baroness, Lady Bray, and my noble friend Lord Howard asked about the Government’s policy on marriage value. Any suggestion of retaining marriage value—wholesale or in limited circumstances—would be counter to our aim of making it cheaper and easier for leaseholders to extend their lease or acquire their freehold. Such proposals would risk both perpetuating and creating a two-tier system—eroding the benefits that the Government are delivering through the Bill. Removing marriage value and hope value will deliver a level playing field and wide access for leaseholders who may otherwise find it prohibitively expensive to extend their lease or purchase their freehold. Our wider reforms to enfranchisement value will ensure that sufficient compensation is paid to landlords to reflect their legitimate property interests.
The right reverend Prelate the Bishop of Manchester spoke about the positive contribution that charities make to our society, which this Government wholly recognise. He asked specifically about exemptions from our reforms for charity. Although well-meaning, attempting to created carve-outs for specific groups of landlords—for example, charities—would complicate the system that we aim to simplify and would risk both perpetuating and creating a two-tier system. We appreciate the engagement that the right reverend Prelate has conducted with us so far and hope that we can continue that engagement on issues that we know, and he knows, are significant.
The noble Baroness, Lady Twycross, and the noble Lord, Lord Kennedy, brought up the renters Bill and assured tenancies. We are aware that leaseholders with ground rents of more than £250 per year can be legally regarded as assured tenants. In the Renters (Reform) Bill, we are addressing this problem by removing all leaseholders with a lease longer than seven years from the assured tenancy system. That Bill is progressing through Parliament, and our priority is to pass this vital legislation before the end of this Parliament.
The noble Lord, Lord Khan, brought up the issue of the Commonhold Council. The council has met regularly since it was established in 2021 and last met in September. The Government are currently reviewing the Law Commission’s proposal to reform the legal framework for commonhold and plan to reconvene the group ahead of finalising their response to the Law Commission.
If I have missed any other specific issues raised, I can only apologise. A tremendous amount has been said in this session—all of great value—and I reiterate my commitment to meeting any Member of this House who wishes to discuss the Bill further after Easter. I hope that is acceptable to the House.
The Leasehold and Freehold Reform Bill will deliver on the Government’s 2019 manifesto commitments, promoting fairness and transparency in the residential leasehold sector. I look forward to working with noble Lords during the passage of this most important Bill.
I have noted forfeiture, commonhold, the regulation of property agents, marriage value, ground rent and service charges as areas of serious interest to noble Lords, although others of equal importance have been raised. I am sure noble Lords will recognise that this is a very long list and there is little time remaining in the parliamentary Session. However, we are listening and looking carefully at what can be done on all those things.
Lord Kennedy of Southwark (Lab Co-op)
Before the Minister sits down, although I am frustrated about the Bill, I have great respect for her and look forward to our debates in Committee. I particularly asked about commencement, because this is a Bill of 123 clauses and 15 schedules, and only the issues on rent charges and three parts of the Building Safety Act are going to be brought into force after two months. Nothing is being brought in on Part 1, on leasehold houses, Part 2, on leasehold enfranchisement and extension, Part 3, on the rights of long leaseholders, Part 4, on the regulation of leasehold, Part 5, on the regulation of estate management, or Part 6, on redress schemes. Basically, about 95% of the Bill is not going to come into force until a date that the Secretary of State determines. As in my earlier remarks, I am a bit frustrated sometimes that what we should get from the Secretary of State does not materialise. Will the Minister write to me and be clear about when these are going to come into force? We need to know what date they are coming into force, otherwise all the promises amount to nothing.
Baroness Scott of Bybrook (Con)
I am happy to write to the noble Lord on this issue, and I will put a copy of that letter in the Library.
Baroness Scott of Bybrook
That the Bill be committed to a Committee of the Whole House, and that it be an instruction to the Committee of the Whole House that they consider the Bill in the following order:
Clauses 1 to 7, Schedule 1, Clauses 8 to 18, Schedule 2, Clauses 19 to 29, Schedule 3, Clauses 30 to 36, Schedules 4 to 7, Clauses 37 to 44, Schedule 8, Clauses 45 and 46, Schedule 9, Clauses 47 to 68, Schedule 10, Clauses 69 to 103, Schedule 11, Clauses 104 to 108, Schedule 12, Clauses 109 to 123, Title.
Local Government Finances
Baroness Scott of Bybrook Excerpts(1 month, 1 week ago)
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The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, I thank the noble Lord, Lord Shipley, for bringing forward this important debate on the current state of local government finances and the impact on local communities. I also thank all noble Lords for their considered and insightful contributions today.
The Government are clear in their support for councils—there is no decline in that support—and the vital work they do to support local residents in all corners of the country. It is important to start by recognising some of the things that are happening. In Bolton, Stoke and Wandsworth, the councils have all recently renovated or opened new library spaces to the public. In Warwick and North Yorkshire, we have seen the opening of new leisure centres in Kenilworth and Knaresborough, and in Sandwell, Knowsley and Rushmoor, levelling-up funding will deliver improved leisure centres and facilities for local residents.
The Government are committed to delivering for our towns. In October of last year, we announced the investment of £1.1 billion into 55 towns across the country, with each town receiving a £20 million endowment-style fund to invest over the next decade. This will allow our towns to develop long-term visions and to deliver change for their residents, such as the regeneration of Ashburner Street, in Bolton. Finally, in Blackpool, the central regeneration scheme is scheduled to get under way, following planning approval, with an estimated 1,000 jobs set to be created as a result.
That is only a very small sample of the achievements and developments that councils across this country have made in recent months and years, all of which have made a positive impact on their local communities. All local authorities across the country should know that we place the utmost importance on the partnership between central and local government, and recognise the crucial work they do in delivering day in and day out for our local communities.
However, as has been mentioned, the Government recognise the pressures that some places face in delivering this work. We have heard from the noble Lord, Lord Shipley, and the noble Baroness, Lady Pinnock, that we are letting it get worse. We are not letting it get worse, and I will mention more about what we have done this year to help local authorities. Many of the problems that these places face, and that we all face as a country, are driven by global economic factors and the resulting higher inflation. That is why the Prime Minister has prioritised and successfully delivered on his commitment to halving inflation. However, we are all aware that demand for key services that councils provide, and the costs of those services, continue to rise steeply as well, not least because of an ever-aging population that, quite rightly, requires increasing social care support.
In February, the Government announced the local government finance settlement for 2024-25. This settlement makes up to £64.7 billion available to local authorities next year, an increase in core spending power of £4.5 billion on last year, equivalent to 7.5% in cash terms. This above-inflation increase demonstrates that the Government are standing behind councils up and down the country and are listening to them.
We have additionally taken action to provide further support to local government to enable continued delivery while wider system reforms for social care are implemented. At the final local government finance settlement, the Secretary of State announced that we are providing £1.5 billion in additional grant for social care through the settlement for 2024-25 compared to 2023-24. Having listened to the views of local government, this includes an additional £500 million for the social care grant.
While being mindful of the level of adult care provision, where possible councils should use this uplift to invest in areas that help also place children’s social care services on a financially sustainable footing. This includes investment in expanding family help and targeting early intervention, expanding kinship care and boosting the number of foster places.
Further to this, in the Budget earlier this month the Chancellor announced £165 million to support councils to improve the quality of, and increase capacity in, residential children’s homes, so that children with the most complex needs can be cared for in a provision that meets those needs. This funding will boost local authority-run provision and, in doing so, respond to concerns that excessive profiteering—as we heard from the noble Baroness, Lady Taylor of Stevenage—and often poor quality is threatening the sustainability and outcomes of local government children’s services.
Nevertheless, we recognise that, sometimes, private placement costs are too high, and that council tax payers are stuck footing the bill. The Government’s position is that this is an issue with profiteering rather than profit. Through reforms to children’s social care, they will continue to explore what action is needed to best support councils. The Government will be developing proposals on what more can be done to combat profiteering, bring down costs and create a more sustainable market for residential placements, which they will publish later this year.
The Government recognise the significance of special educational needs pressures on councils. This is why the Spring Statement committed £105 million towards a wave of 15 new special free schools, to create over 2,000 additional places for children with special educational needs and disabilities across England. On top of this specific funding for social care and SEND, the Government have committed to a 4% funding guarantee that will ensure that all councils receive at least a 4% increase in their core spending power before any local choices on council tax, efficiencies or reserves. We have listened to the many councils and the many things they told us. They would otherwise have experienced cash losses in funding next year, and we have stepped in to prevent that.
We are committed to supporting councils wherever they are in the country. This is in answer to the issue raised by the noble Lord, Lord Hussain, about Luton. The most relatively deprived areas of England will be receiving 18% more per dwelling in available resource through the 2024-25 settlement than the least deprived areas; those councils, such as Luton and others, will be getting more. We understand that those councils have faced historic challenges in tackling deprivation. It is also why we have increased the value of the rural services delivery grant—as mentioned by the noble Lord, Lord Foster of Bath—by over 15% to £110 million, to support rural authorities dealing with the unique challenges of serving very dispersed populations. That is a second successive year of above-inflation increases for this grant.
The action we have taken to support local government in this financial settlement and beyond demonstrates our commitment to the sector. We recognise and thank those in the sector for the important contribution they make in delivering local services for their communities, up and down the country. We have worked in partnership with representatives, sector leaders and local councils, to ensure that this settlement helps to meet the needs of local government. This engagement has been a vital part of the decision-making for this settlement. When local councils speak to us, we listen, and this includes those councils that face the most significant challenges.
The Government also work closely with councils to understand the specific pressures that local government is facing. They are looking at a range of data on demand for services and the costs faced by councils. As a result of the local government finance settlement, the vast majority of local authorities will be able to set balanced budgets in 2024-25. We have published details of exceptional financial support agreed with a small number of councils, but the vast majority of this support relates to six councils where there has been severe local failure. The Government have had to step in there and take the most serious action through statutory intervention.
A small number of other councils requested financial support on an exceptional basis, due to specific local pressures that they were unable to manage themselves. We stand ready to speak to any council that has concerns about its ability to manage its finances or faces pressures it has not planned for. Our door is always open to them.
Before I conclude, I will answer as many of noble Lords’ questions as I can. If I do not get through all of them, obviously I will write. First, the noble Lord, Lord Shipley, and the noble Baronesses, Lady Hamwee and Lady Bull, brought up local government funding reform. We remain committed to updating the system in the next Parliament, and will work closely with local partners to take stock of the challenges and opportunities that they face. Of course we will consult with them before any potential funding reforms, but we talked to councils last year about any of the reforms we could make and they did not want any disruption or uncertainty at that time.
The noble Lords, Lord Shipley and Lord Hussain, brought up council tax reform. The Government continue to protect local tax payers from excessive increases. We believe that our approach strikes a fair balance and is an additional local democratic check and balance on local authorities. We are not allowing council tax to increase in place of increased funding; it is provision for a balanced package that includes a substantial increase for this coming year, as I said.
The noble Baroness, Lady Scott of Needham Market, and the noble Lord, Lord Shipley, brought up audit issues and the backlog. Local audit is vital in supporting democratic accountability and providing assurance for local people and their elected representatives. At the time of its abolition, we believed that the Audit Commission was too centralised and that it encouraged local bodies to focus more on the views of the commissioner than on local people. The Government are working with the Financial Reporting Council to tackle a significant backlog of local audits and put the system on a sustainable footing for the future.
Baroness Taylor of Stevenage (Lab)
Does the Minister think it acceptable that 99% of local authorities did not clear their audits in time last year?
Baroness Scott of Bybrook (Con)
No, I do not. We will work with local authorities on that issue.
The Government have invested £5.5 billion on highways maintenance since 2021. In 2023, we provided an additional £200 million to fix the equivalent of 4 million potholes. In October last year, the Government announced £8.3 billion of new funding, over a 10-year period, for local road resurfacing. We are putting in extra money and not asking councils to find it in their base budgets.
My noble friend Lady Eaton and the noble Lord, Lord Shipley, brought up the Office for Local Government. Oflog aims to provide authoritative and accessible data and analysis about the performance of local government, which is important, and to support its improvement. It is still in its infancy, but its three aims are: to inform, by improving access to data; to support, by facilitating sector-led improvement; and to seek any potential failures that it can find, getting in early to support our local authorities.
The noble Baroness, Lady Hamwee, brought up the issue of local democracy and devolution. If anybody sat through the levelling-up Bill in this Chamber, they will know that devolution is at the heart of our plans to increase economic growth and level up the whole country. We remain committed to seeing more empowered and accountable local leaders to do this, who can pave the way for that growth and innovate because they know the challenges and what is best needed for their areas.
There was quite a lot of talk on planning authorities and whether local authorities should have the ability to set their own planning fees. This came from my noble friend Lady Eaton, who has so many years in local government—probably more than many of us who have a lot there. I thank her for her speech and her insight. We increased the fees considerably last year, by 38% for major applications and 25% for other applications. We have done another couple of things to help the planning sector. We have what we are calling a planning super-squad: this is an important team of senior planners who can go into a local authority that has a large or complex application and help it with the capacity and delivery issues. We hope that this will get some of our bigger planning applications away much quicker. We have invested £13.5 million in that. We have also put £29 million in a planning skills delivery fund. That is to help local planning authorities with their backlogs. We are doing a lot but, as we said on the LURB as it went through, we will not look at local authorities setting their own planning fees because we feel it might destabilise things, by having different areas with different fees across the country.
My noble friend Lady Eaton also brought up the right-to-buy receipts. At the Budget earlier this year, the Government announced increases in flexibilities available for local authorities to fund a higher percentage of the cost of replacement of affordable homes. That is taking right-to-buy sales from 40% to 50%. We hope that this will allow local authorities greater resources to allocate towards what we know is important housebuilding in the social rented sector.
The noble Lord, Lord Shipley, brought up business rates. We have ensured that all current enhanced business rate retention areas will continue for the next year. During this time, the Government will continue to review the role of such arrangements as a source of income for areas, and their impact on local economic growth and as part of the deeper devolution commitments as set out in the levelling-up White Paper.
The noble Lord also brought up council reserves. The Government consider reserves to be an important part of the resources available to local councils. Interestingly, reserves remain significantly higher since the pandemic, having risen £31.6 billion over that time, but we expect councils to use their reserves appropriately when there are pressures on them.
I am conscious of the time, so I will move to something that most noble Lords brought up, which was quite an interesting part of the debate: culture and the arts. I will ask my noble friend Lord Parkinson, the Minister for the DCMS, to read Hansard—oh, he is here; that is good timing. The debate was wider than just local government, and is something to do with the responsibilities between local and central government, so we will talk about it.
There were some interesting issues. The majority of funding that comes to local government is not ring-fenced in recognition, quite rightly, that local authorities are best placed to make local decisions. I totally agree with all the speakers that arts, culture, sport and heritage make our communities unique and vibrant. They also drive economic growth, give jobs and improve well-being. We encourage councils to reflect on the important role that these sectors play.
We have provided support for the cultural sector across the country. At the Spring Budget in 2024, the Chancellor confirmed the allocation of £100 million for local cultural projects, recognising the importance of pride for the place. This included a number of nationally significant cultural projects such as the British Library North project in Leeds and the National Railway Museum in York. Smaller amounts were also given to places that did not get levelling-up programmes, including Maldon, Erewash and North Northamptonshire, which have all been awarded £5 million of capital funding. I was also interested to hear that a new studio was announced in the north-east last week. The new north-east mayoral combined authority intends to use £25 million of flexible funding to help that scheme.
I am out of time so I close by saying that we recognise the scale of the financial pressures caused by inflation and the wider economic circumstances that have put local authorities across the country under acute strain. To address this, we have listened to the public and engaged with local authorities; this is why we have provided the substantial increase in support above inflation that this funding settlement provides. Once again, I thank the noble Lord, Lord Shipley, for bringing forward this debate and all noble Lords for their contributions. I look forward to continuing discussions with them.
Representation of the People (Variation of Election Expenses and Exclusions) Regulations 2024
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Baroness Scott of Bybrook
That the draft Regulations laid before the House on 29 January be approved.
Relevant document: 13th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, if approved and made, these draft regulations will uprate the maximum campaign spending limits at the Greater London Authority and local authority mayoral elections in England to reflect changes to the value of money. This instrument also provides an exclusion for reasonable security expenses from the various election campaign spending limits. Finally, the draft regulations make some technical amendments to remove drafting that is now redundant from the Police and Crime Commissioner Elections Order 2012.
Elections rely upon the ability of political parties, candidates and other campaigners to communicate their views so that voters can make an informed decision at the ballot box. If approved by Parliament, this statutory instrument completes the package of reforms the Government announced in July 2023 to uprate reserved and excepted party and candidate spending limits and donations thresholds. This is a necessary action, as many of these statutory limits, which were set in absolute terms, have not been uprated in recent times. If we do not uprate them in line with inflation, it means that they continue to be lower in real terms, which has real impacts on campaigning.
Furthermore, no one should feel afraid to participate in our democracy. As noble Lords will be aware, in the past eight years we have witnessed the horrific murders of two parliamentarians, Jo Cox and Sir David Amess. The safety of parliamentarians and candidates is important, and in recent years the Government have introduced numerous measures to tackle intimidation in public life. It is of the utmost importance that candidates feel safe to campaign. Therefore, the Government are explicitly exempting reasonable security expenses from contributing to spending limits for political parties, candidates and other campaigners at reserved and excepted UK elections. I am pleased to confirm that this fulfils a recommendation made by the Jo Cox Civility Commission in its recent report No Place in Politics: Tackling Abuse and Intimidation.
I turn to the specifics. The draft regulations will uprate the spending limits for candidates at Greater London Authority elections and local authority mayoral elections. The various spending limits for Greater London Authority elections have remained unchanged since they were set in 2000. Due to this significant gap, the regulations will uprate the spending limits by 81.05%. This means that the limit for a candidate at an election of the Mayor of London will increase from £420,000 to £760,410, the limit for a candidate at an election of a constituency member of the London Assembly will increase from £35,000 to £63,360, and for an individual or party list candidate at the London-wide assembly election the limit will change from £330,000 to £597,460.
The draft regulations will uprate the spending limits for local authority mayoral elections in England by 29.09%. The uprating is done from 2017, to align with the new spending limits for combined authority and combined county authority mayoral elections recently approved by Parliament in the Combined Authorities (Mayoral Elections) Order 2017 (Amendment) Regulations 2024. This is to ensure parity between mayoralties and means that the limits for local authority mayoral elections in England will change from £2,362 and 5.9p per elector to £3,040 and 8p per elector.
Lord Khan of Burnley (Lab)
My Lords, I thank the Minister for her introduction to this statutory instrument. I offer my appreciation to the noble Lord, Lord Rennard, for his eloquent speech and detailed analysis before the House today.
The Minister will be glad to know that these Benches support the implementation of Regulation 4 of the instrument. It would be wrong for expenses incurred to protect candidates, their families and supporters to be seen as part of the cost of campaigning, and it would set a dangerous precedent if candidates requiring extra security had to forgo elements of their campaign simply to feel safe. I say that as a Member of your Lordships’ House who has unfortunately faced death threats to me and my family in recent months. I totally understand the need for parliamentarians to exercise all security measures in order to do their job and serve.
This instrument stops an obvious injustice in our electoral expense law, but our response to candidates feeling unsafe cannot simply be to tell them to open their pockets and hire security. The Government must make sure that adequate resources are in place to ensure that candidates feel secure without needing to spend their own money.
I turn to another significant part of the instrument relating to the increase to election expenses in Greater London Authority elections and local authority mayoral elections. The noble Lord, Lord Rennard, dissected the issue using percentages and statistics to a profound effect. The point that election expenses have remained the same since the introduction of mayoral elections in the year 2000 has rightly been made loud and clear by noble Lords. Sadly, that figure has failed to be updated in line with inflation. It was used during the last mayoral election, 21 years after it was introduced. I understand that a significant increase is expected, given that the limit has been untouched for 24 years.
I hope that the Minister recognises why we need to ask questions about why we are raising the limit by over 80% less than two months out from the elections. The real reason why we are seeing this rise in the proposed figures is the compound failure by successive Tory Chancellors to get inflation under control. The reality is that we have seen a huge rise in inflation under this Government.
We do not intend to oppose this instrument outright, but I hope the Minister agrees that this rise does not reflect the reality that people are seeing in their day-to-day expenses. I hope she also agrees with me that future Governments should not wait until six weeks before an election to carry out an increase that is 24 years late.
The noble Lord, Lord Wallace of Saltaire, made an interesting point about election spending across the Atlantic. In 2018, after the midterm elections, I visited Capitol Hill and spoke to a Congressman. As I was congratulating him on winning his election, he said, “Well, I can’t take too many congratulations because I have to start fundraising for my next election”. This increase in the region of £19 million to £36 million is bringing money into our politics like never before. That means a lot of people are spending time fundraising when they should be serving their communities.
I hope the Minister reflects on those points and tells us when the periodic review will be for the next uplift in expenses. Will we have to wait another 24 years for a decision, or will we get told six weeks before the next set of mayoral elections? I look forward to the Minister’s response.
Baroness Scott of Bybrook (Con)
My Lords, I thank noble Lords for their contributions. They have made a number of points and I will try to respond to all of them. First, I say to the noble Lord, Lord Rennard, that I remember Andrew Pennington; I remember the case and I am really sorry. To the noble Lord, Lord Khan, I say that nothing changes, does it? The noble Lord and his family are still getting death threats, which is totally unacceptable in a country as democratic as ours.
Baroness Bennett of Manor Castle (GP)
My Lords, the Minister used the term “strayed into” the issue of donations, as if we were going off the subject. Will she acknowledge that the question of where the money is coming from is just as central to this statutory instrument as what the limit is?
Baroness Scott of Bybrook (Con)
It is, but we already have the Elections Act, which looked at donations and the rules behind them. That part of election law is already being dealt with.
Fundraising is a legitimate part of the democratic process; we cannot get away from that. I am sorry, but the Government do not agree with the noble Baroness opposite that we should have political parties funded by government. That is not a policy of this Government, and I am not sure that it is a policy of the parties opposite.
Within our current system, while there are no caps on donations received, there are limits on what can be spent in order to maintain the level playing field—and the level playing field is the same now as it was in 2000. All reportable donations over the relevant thresholds will continue, as always, to be published online. This allows anyone to see who funds a political party and ensures that a transparent and accountable system is in place for those donations, so nothing has changed in that way.
It is important that people have the opportunity to know about their political parties’ policies. We cannot get away from the fact that that takes money. All we are doing is to ensure that the money agreed in 2000 has the same spending power this year as it had then.
The noble Baroness, Lady Bennett, brought up an issue relating to disabled people. I am sorry that I do not have an answer to that, but I will make sure I get one tomorrow. It is an important issue and I thank her for bringing that up.
I think that I have answered the noble Lord, Lord Wallace of Saltaire. This is about necessity within democracy; there has to be money to communicate one’s policies.
Lord Wallace of Saltaire (LD)
The Minister has used the phrase “level playing field” several times. Does she think that there ought to be something about a financial level playing field in political campaigns if we are to regain the trust of the public? If one party is able to raise such large sums—much larger than the others—then the playing field is tipped heavily in one direction.
Baroness Scott of Bybrook (Con)
At different times, different parties have raised large sums of money from different places over many years. I look at the party opposite, which has been funded by the unions over the years; I believe that I have seen quite large donations given to the Liberal Democrats too. On party donors, I think it was the noble Baroness, Lady Bennett of Manor Castle, who asked why anybody would want to give money. Some people feel very strongly and passionately about the policies of some parties—I am not talking about just ours—and that is how politics works. The level playing field is the fact that no party can spend more on one candidate in any election than the other party.
Asking why we have waited so long, as the noble Lord, Lord Rennard, did, is a reasonable question. As intended by Parliament, it is for the Government of the day to review the limits and update them when they consider that to be necessary. The fact that we had low inflation for so many years probably meant that there was no real necessity to change them as quickly as perhaps we should have done. But, as we have heard, inflation has increased in recent years and the Government decided that uprating these sums was now necessary to ensure that we get that communication out to our electorate.
I think that I have answered everything, unless anybody has something that they want to repeat. I will look at Hansard to make sure, but I think the only thing that I need to respond on is the disabled allowance question.
These regulations are essential to ensure that campaigners can continue to communicate their views to voters and, importantly, that candidates and other campaigners can feel confident in procuring the security they need at any UK elections. I hope noble Lords will join me in supporting this instrument.
Lord Rennard (LD)
My Lords, I thank the Minister for bringing this statutory instrument before us. We have shown in this short debate that it was worthy of greater consideration than the 16 minutes which it attracted in a committee in the House of Commons. There are many important issues here and I congratulate her on single-handedly defending the Government’s position in the face of all the opposition parties this evening, which suggests that the arguments are not quite so straightforward as she might suggest.
The principal argument which the Minister made, that this instrument had to be brought forward now with such huge increases in election expenses, was not about election expenses at all. The argument here and in the other place was on the urgency of clarifying election law about security arrangements for candidates and their teams. As an experienced election agent, I would never have allowed security considerations to be part of the election expense return which I was making.
If this was necessary, it could of course be done simply on its own and with all-party agreement, but there is not all-party agreement on such huge increases and on them being made at the last minute. No satisfactory explanation is given as to why they are so large or have been made so suddenly before polling day. On all these issues where the Government are clearly changing the rules in their favour, they are abandoning the principles of the level playing field. A level playing field requires not just the same maximum limit for everyone but equal resources on each side. An army with 100 tanks against an army with one tank is not an even competition, so we do not have a level playing field of the kind which the law provided for in the 1880s and the Political Parties, Elections and Referendums Act tried to provide for in 2000.
I do not feel the need to test the opinion of the House again, when I feel that its opinion on all these issues was well tested when the noble Lord, Lord Khan, did so a few weeks ago. I note that 90% of the Cross- Bench Peers voted in support of his Motion and against the Government, so as we know the opinion of the House on this issue, I will not test it further. I beg leave to withdraw my amendment.
North East Mayoral Combined Authority (Establishment and Functions) Order 2024
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Baroness Scott of Bybrook
That the Grand Committee do consider the North East Mayoral Combined Authority (Establishment and Functions) Order 2024.
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, with the agreement of the Committee and its Chairman, I would like to say a few words in tribute to Paul Rowsell, who was head of the governance reform and democracy unit within DLUHC. He died suddenly on Thursday on his way to work at the age of 71. Paul had worked as the head of that unit since it was formed in 2011. Before that, he had dealt with all things to do with local authority governance since the 1990s.
Paul and I worked together on a weekly basis in the early 2000s on the Wiltshire unitary bid; he became a good friend of mine, and I hope I became a good friend of his. I will miss him terribly—including his not sitting behind me today. Paul was a wonderful public servant and he will be very sorely missed, not just by his colleagues in DLUHC but by the many people in local government whom he met and supported over the years. May Paul rest in peace.
Baroness Taylor of Stevenage (Lab)
With permission, I would like to respond to that tribute. I have been in local government for nearly 30 years now, and I knew Mr Rowsell for most of that time. He was a formidable public servant, as the noble Baroness, Lady Scott, said. He was one of the great experts on local government finance—there are not many of those. Paul probably knew more about local government finance than anybody else in the country. I remember the trepidation that you would feel—I was a deputy leader of the LGA for many years—when you went into a meeting with him because you knew, however good your arguments were and however well you had been briefed by the LGA, he would pick it apart in five minutes and decimate your argument.
In spite of his tough approach to those of us who came up against him in meetings, he was very much a trusted member of the team in DLUHC and its predecessor departments—it has had many names over the years. I first encountered him way back when we were working on some of the “best value” initiatives. He was trusted, effective, incredibly knowledgeable and a consummate professional. His public service to this country in the local government department—that is what I will call it—was exemplary. I hope that he will rest in peace and that, for those who knew him personally, his memory will be a blessing. I thank him from our side of the Committee for his wonderful service to local government.
Lord Shipley (LD)
My Lords, it is deeply sad news to learn of Paul Rowsell’s death. I think back to the advice that he gave me during the passage of the Localism Act in the period of the coalition Government from 2010 to 2015. He had the ability to listen, to explain and to stay very polite, even if I was completely wrong on the issue. He had the ability to make things clear so that the understanding of those of us who were dealing with legislation was improved. It is a sad day for local government. He will be sorely missed. I appreciated his presence as part of the Bill team so many times. You knew that if Paul was leading a team, the work had been done and was of an enormously high, professional standard. It is with deep regret that we say that we will miss Paul profoundly.
Baroness Scott of Bybrook (Con)
My Lords, the purpose of this order is to implement the devolution deal agreed between the Government and seven councils across the north-east—County Durham, Gateshead, Newcastle upon Tyne, North Tyneside, Northumberland, South Tyneside and Sunderland—on 28 December 2022.
We have been working closely with these seven councils. On 2 February 2024, they consented to the making of the order. The institutions that are to be abolished by the order—the two existing combined authorities and the North of Tyne Mayor—consented to the making of this order, which also provides the foundation for the deeper devolution deal for the north-east that we announced in the Budget on 6 March 2024. This trailblazing deal deepens and extends the devolution settlement in the north-east and provides new tools for the future mayor and local leaders to drive regional economic growth.
The order provides for the establishment on 7 May 2024 of the north-east mayoral combined authority, comprising as constituent councils the seven north-east councils. It simultaneously abolishes the existing North East Combined Authority and the North of Tyne Combined Authority, together with the office of Mayor for the North of Tyne. It provides for a new mayor for the whole of the north-east to be elected by local government electors across the area of the seven constituent councils with the first election to take place on 2 May 2024.
That elected mayor will take up office on 7 May with a four-year term ending after the next mayoral election in May 2028. Thereafter, there will be elections every fourth year to be held on the ordinary election day for that year—that is, the first Thursday in May. Following the enactment of the Elections Act 2022, the mayoral election will use the first past the post voting system.
Baroness Scott of Bybrook (Con)
My Lords, I thank all noble Lords—in particular, the noble Baroness, Lady Quin, and the noble Lord, Lord Beith—for their input into this because of their long experience of living and working in the north-east. We do not always get the voice of the area so it is lovely to hear it. I thank them very much for taking part.
As we have heard, this order is widely welcomed by the people of the north-east. It is a significant development for the whole area. Unifying two combined authorities into a single cohesive institution and uniting seven councils to build on a history of collaboration to shape the north-east as it has never been shaped before—or been given the opportunity to shape itself before—is a significant step in English devolution and in furthering this Government’s levelling-up agenda. We have heard that in the debate; I thank all noble Lords for supporting this move for the north-east.
I will address a few specifics. The noble Baroness, Lady Quin, mentioned culture, which is really important. As I said in my opening speech, Crown Works Studios is investing in Sunderland. Perhaps this will be the catalyst for culture, as well as for joining up culture across the north-east. I look forward to that investment, as I am sure the noble Baroness does. Other things are also being done. In Durham, £19.9 million from the future high streets fund has been granted to support the town’s culture, heritage and visitor economy. Things are beginning to come in for the cultural industries in that area; I wish them all well.
The noble Baronesses, Lady Quin and Lady Taylor of Stevenage, mentioned levelling up. Levelling-up funds have been made available to a number of individual councils. For example, in round 1, Durham got £20 million to improve transport connectivity, particularly between rural areas and around the areas of Bishop Auckland, and £20 million was given to the Gateshead Quays conference centre. Levelling-up funds, together with other government funds such as the town deals funding that I mentioned, show commitment to a large number of other investments coming to the north-east.
The noble Lord, Lord Beith, who knows the area so well, mentioned transport decisions. I quite understand his point that not all transport is covered, but this deal gives a very strong voice to the mayor and the mayor’s team when any other transport decisions are being made. On local funding, particularly for rural transport —having come from Wiltshire, I know all about rural transport and the issues it brings—this is an opportunity for the mayor, working with the individual councils, to plan that in a proper way that is efficient and effective for rural areas in the north-east. They may not get all the money, but there is a huge opportunity to change the transport systems. I encourage them to lobby hard on those decisions being made by others.
Lord Shipley (LD)
Before the Minister sits down, can I add one thing to her list? In relation to the mayoral development corporations, she talked in terms of scrutiny and audit and said that guidance will be issued at some point—I hope sooner rather than later. However, it is not just the question of scrutiny and audit; it is also about risk. In my view, mayoral development corporations should quite separately think about their structures for assessing risk. Scrutiny tends to come slightly after an event as opposed to alongside a decision being made. Audit normally comes significantly after, in practice. It is that management of risk in a mayoral development corporation to which I think greater attention needs to be paid.
Baroness Scott of Bybrook (Con)
I absolutely agree; I think that is the same in all local authorities, however small or large. I see that as part of the overview and scrutiny. We have used “scrutiny” too often without using the word “overview” before it. I would expect that the overview, before anything is delivered, should look at the risks of delivering.
In conclusion, this order, which is strongly supported locally, is a significant step forward for the north-east, for its businesses and its communities. It is key to the future economic development and regeneration of the area, and it will enable local leaders to effectively invest in and address local priorities. I commend the order to the Committee.
Social Housing (Regulation) Act 2023 (Consequential and Miscellaneous Amendments) Regulations 2024
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That the draft Regulations laid before the House on 18 January be approved. Considered in Grand Committee on 12 March.
Housing: Young People
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The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, I thank my noble friend Lord Young of Cookham for bringing forward this important debate, and also for the continued passion and knowledge that he gives to this House about the sector. I appreciate his challenge, as I am sure many others in the Chamber do. This is an important debate about the needs of young people within the overall housing market and I thank all other noble Lords who have spoken today for their considered and insightful contributions.
Throughout the debate, we have heard about the challenges the younger generation of this country face in achieving home ownership, and in accessing affordable housing to rent. Securing affordable, decent and stable homes is critical to ensuring young people can meet major life milestones, move for career opportunities, and start a family. The Government are committed to delivering the warm, safe, decent and affordable housing needed to support them through their life journeys.
Young people are part of a housing market significantly different from the one experienced by previous generations. Children of home owners are over twice as likely to be home owners than children of renters—an issue raised by the noble Baronesses, Lady Donaghy and Lady Thornhill. The dependence on the bank of mum and dad, as mentioned by my noble friend Lord Attlee, to afford a home shows the difficulties in accessing the housing ladder. This is reflected in how the historic home ownership rate for those aged 25 to 34 has fallen from 51% in 1989 to 28% in 2019.
The Government have worked hard to reverse these historic trends with our long-term housing strategy. We have made huge strides since 2010 to increase home ownership, provide stability and security for those renting, and improve the quality of houses young adults own and rent. This will ultimately improve their life outcomes and quality of life. The hundreds of thousands of new homes we are delivering will create the homes young people need now and in the future. I am proud of the progress this Government have made to deliver on these priorities, but we cannot stop. We will therefore continue to press ahead in meeting these challenges.
First, almost all noble Lords brought up the planning system. We have built more homes in places young people want to live, and at prices that they can afford. Since 2010, over 2.5 million additional homes have been delivered, and the four highest rates of additional housing supply in over 30 years have all come since 2018. Increasing housing supply is at the heart of solving our housing challenges; crucial to that is reforming our planning system. Not only must we have enough homes in the right places, we must also have homes suitable for those with a range of needs, including those with disabilities and special care needs, and the vulnerable.
My noble friends Lord Young of Cookham, Lord Jackson of Peterborough and Lord Attlee raised important questions about how we are unblocking the planning system to deliver the houses that we need in the places where we need them. Building on our work since 2010, in December 2023 the Government revised the National Planning Policy Framework in response to the Levelling-up and Regeneration Act. The framework sets out the Government’s planning policies for England and how we expect them to be applied. While the Government’s standard method for assessing local housing need is used to assess the total number of homes needed in a local area, the framework makes it clear that local authorities should assess the size, type and tenure of housing needed for different groups, including young people, young people with disabilities, care leavers and students.
Government housing targets have not changed. We remain committed to our ambition to deliver 300,000 homes a year. The Secretary of State’s Written Ministerial Statement of 6 December 2022 confirmed that the standard method for assessing local housing need will be retained. The Government have made it clear that every local authority is expected to progress their local plans. If sufficient progress is not made, the Secretary of State will consider using his powers of intervention to ensure that plans are put in place. We also recently consulted on proposals to implement reforms to plan-making processes to ensure that plans are prepared in 30 months. The reason for that is that we know that local authorities that have up-to-date local plans deliver more houses.
The Government have in place a strong programme of support to upskill the capacity and capability of local planning authorities, as raised by my noble friend Lord Jackson of Peterborough. This includes a £13.5 million “planning super-squad” of leading planners and other experts that will deploy teams of specialists into planning authorities to accelerate development and a £29 million planning skills development delivery fund to help planning authorities deal with the backlog of planning applications ahead of the forthcoming changes to the planning system through the Levelling-up and Regeneration Act. To ensure that local authorities are doing everything they can to build the homes that are needed, in February this year the Secretary of State set out clear expectations for every council in England to prioritise building on brownfield developments —a key point raised by my noble friend Lord Jackson.
However, it is not enough just to build more houses. The Government are committed to ensuring that the planning system creates more beautiful and sustainable buildings and places everywhere, as raised by the noble Lord, Lord Best. The duty introduced through the Levelling-up and Regeneration Act for all local councils to produce a design code at the spatial scale of their authority area will give design codes significant weight when planning applications are determined, and the establishment of the Office for Place will support the creation of healthy, beautiful places. This Government will not compromise on quality and beauty.
Turning to housing supply, an area raised by the noble Lord, Lord Best, with regard to the 300,000 target, I recognise the significant challenges faced by the housebuilding sector in the current economic climate. The Government continue to prioritise support to the industry and local areas as part of our commitment to deliver 1 million new homes over the lifetime of this Parliament, which we are on track to deliver. This is critical in ensuring that housing across that the market is affordable—a crucial topic raised by the noble Baroness, Lady Thornhill. We are investing billions to support housebuilding and achieve that commitment, including through our £1 billion brownfield, infrastructure and land fund, and to manage different drivers of demand, such as migration—an important area raised by my noble friend Lord Lilley. Our £1.2 billion local authority housing fund is providing capital funding directly to councils. It will provide capital funding to local authorities to obtain better-quality temporary accommodation for those owed homelessness duty and to provide safe and suitable homes for those on the Afghan resettlement schemes—an extremely important point noted by the noble Baroness, Lady Valentine.
As my noble friend Lord Jackson mentioned, ensuring that we are facilitating institutional investment in housebuilding in this country is of paramount importance. The £1.5 billion Levelling Up Home Building Fund leverages institutional investment from both private capital and pensions to achieve our ambitions.
My noble friend Lord Jackson and the noble Lord, Lord Best, raised the recent Competition and Markets Authority report on housebuilding. I welcome the report. The Government will carefully consider the findings and the recommendation to formally respond to it within 90 days of publication.
I want to note where we have made substantial progress through our delivery of affordable homes, an issue raised by the noble Lord, Lord Best, in particular. Since 2010 we have delivered almost 700,000 new affordable homes, making it easier for young people to access the housing ladder. We have scaled up the delivery of affordable housing by investing £11.5 billion through the affordable homes programme, working ambitiously towards meeting our target of a quarter of a million new affordable homes.
At the same time, we have taken steps to reduce demand competition. Although the expansion of the short-term lets market has brought a range of benefits, as mentioned by the noble Baroness, Lady Donaghy, we want to ensure that housing continues to be affordable. That is why the Government have announced a mandatory national short-term lets registration scheme to provide valuable information to local authorities in supporting the application and enforcement of planning changes. The Government also introduced higher rates of stamp duty land tax in April 2016 for those purchasing additional properties.
The noble Lord, Lord Best, raised the issue of the Church of England’s report Coming Home, which argued that an ambitious approach is needed to solve the housing challenges facing this country. As he said, it was debated in detail on 24 February, when the Government set out the comprehensive long-term housing strategy in responding to those challenges.
Turning to home ownership, the Government have a robust programme of interventions. My noble friend Lord Young, the noble Lord, Lord Best, and the noble Baroness, Lady Donaghy, raised the important question of how we are making it easier for young people to buy their own home. One key programme to note, shared ownership, is a unique scheme targeted at first-time buyers. It allows young people to purchase a share of a home through a mortgage while paying rent at below-market value on the rest of the home. Over time, young people can buy more shares, until they have bought the home in its entirety. I have seen many schemes like this and how pleased young people, particularly young families, are when they feel they are getting towards owning that home of their own.
Baroness Taylor of Stevenage (Lab)
Many young people who have gone into those schemes are now having incredibly high service charges imposed on them, and we need to come back to that issue when we look at the Leasehold and Freehold Reform Bill. In a case I saw today, the charge had gone up from £94 a month to over £600, and as a result that young couple cannot sell the property or afford to live in it. The colloquial term for this is “fleecehold”. We need to think very carefully about those schemes.
Baroness Scott of Bybrook (Con)
The noble Baroness is right, and I have heard similar stories. That is why we have the leaseholder Bill coming through, which we will be debating in just a few weeks’ time.
In 2022-23, of those reported to my department, an estimated 77% of shared ownership purchases were made by first-time buyers and 33% of those purchases were made by buyers under the age of 30—a testament to the effectiveness of the action of this Government. Furthermore, our First Homes scheme offers first-time buyers under the age of 40 a minimum 30% discount on the price of an eligible new home, helping the younger generation get a foothold on the property ladder. The noble Baroness, Lady Donaghy, asked for further detail on what the programme has delivered. I have only the top line, which is that there were 1,250 completions through the First Homes early delivery programme to the end of September 2023. If the noble Baroness wants more detail, she is welcome to come and ask me.
Through our lifetime ISA scheme, we have helped more than 56,000 account holders to become first-time buyers. More recently, we have recognised and responded to the challenging market conditions for lenders and buyers alike through the introduction of the mortgage guarantee scheme. This supports participating lenders to continue providing 5% deposit mortgages. We have extended this until June 2025 so that we can continue providing this vital support.
My noble friend Lord Young raised the question of stamp duty, land tax and cutting capital gains tax when landlords sell to sitting tenants. The Government have already taken action by cutting stamp duty during the pandemic, up to March 2025. This is reducing the financial burden on first-time buyers across the country, but particularly in and around London and the south-east, where these pressures are felt most acutely. On cutting capital gains tax for landlords’ sales to sitting tenants, this is not a policy the Government are currently considering. Taxation is a matter for the Chancellor and any decisions he takes on tax are considered, obviously, in the context of the wider public finances.
On the work of government on preventing homelessness and rough sleeping, as raised by the noble Baronesses, Lady Thornhill and Lady Valentine, I want to set out the measures we have prioritised to prevent vulnerable people—young people particularly—such as care leavers ending up homeless. In 2022 we published our cross-government strategy Ending Rough Sleeping for Good, which recognised that young people face particular challenges accessing and maintaining accommodation.
For young people with disabilities, my department, alongside the Department for Health and Social Care and the NHS, provides capital grant funding to subsidise the delivery of a new supply of supported housing, including for disabled people. Young people with disabilities who satisfy needs-assessment eligibility criteria and a means test benefit from a wider statutory duty to provide home adaptions. There are powers to provide adaptions for those who do not qualify under that duty. Under this Government, the disabled facilities grant has risen from £220 million in 2015-16 to £625 million in 2024-25—a more than doubling of the grant. This has been well received by disabled people.
When young people do find themselves homeless or at risk of homelessness, within the next 56 days they are owed a homelessness duty by their local authority. Our single homelessness accommodation programme will deliver over 650 homes and support services for young people in this situation. This is in addition to other support, including the £109 million top-up to the homelessness prevention grant for councils and an initial £6 million for rough sleeping winter pressures.
Many of our young people want to be free to move to places where they can connect their talents with economic opportunities before choosing to settle down. This is where the private sector steps in. Increasing security and quality in the private rented sector requires ambitious reforms and the Government have stepped up to deliver. We have introduced the Renters (Reform) Bill, which will support tenants with a raft of measures, including applying the decent homes standard to the private rented sector for the first time and abolishing Section 21 evictions. The Bill is awaiting Report in the other place, which is subject to parliamentary scheduling, and it will be announced in the usual course of business management. I say to the noble Baroness, Lady Thornhill, that the proportion of private rented sector households has remained relatively stable for nearly a decade, and the number of renters has doubled since 2004.
For those in the social rented sector, we have enshrined in law, through the Social Housing (Regulation) Act, a rebalancing of the relationship between landlord and tenant. We are ensuring that landlords are held to account for their performance—an important step in improving the quality of houses across the market, which was an issue raised by the noble Baroness, Lady Valentine. We are creating a housing market fit for the future.
The Leasehold and Freehold Reform Bill will reform the outdated leasehold system in this country. From 2025, the future homes standard will future-proof our homes, ensuring that new homes produce at least 75% less CO emissions than those built to previous standards. We know that making long-term changes takes time to deliver, and the Government are doing all they can against a challenging economic background to ensure that the younger generation can access affordable, safe and high-quality housing.
Following the £188 million allocation to the housing projects in Sheffield, Blackpool and Liverpool at the Convention of the North on 1 March, last week’s Spring Budget allocated over £240 million to housing projects in London, an area where affordability is challenging, particularly for young people, as we have heard today.
The noble Lord, Lord Best, my noble friend Lord Young of Cookham and others brought up intergenerational housing. I totally agree with them that we need better older people’s housing and more choice for older people because, if we give them better housing and more choice, we can start to move the housing stock around. Some local authorities are doing that really well, but more can be done. The Government’s independent older people’s housing task force is looking at housing for older people, and it will make its final recommendations to Ministers this summer.
I hope I have answered as much as I can—
Lord Jackson of Peterborough (Con)
There is consensus across the House, among Members of all parties and none, that we should reinstate the local housing targets. Nevertheless, 65 local planning authorities have frozen their local plans. Is my noble friend in a position to explain or tell the House when the Secretary of State is likely to invoke his statutory powers to force those local planning authorities to come up with local plans?
Baroness Scott of Bybrook (Con)
I cannot say when he will do that; all I can say is that the Act is now in statute. The NPPF is now being updated, so we will encourage and support those local authorities to get the local plans in place as soon as possible.
I am being told I have run out of time, so, in conclusion, we fully recognise the unique housing needs of young people and the importance of homes to their lives. The Government are absolutely committed to ensuring those needs are met, whether that be through home ownership, the private rented sector or social housing. This debate has served as a valuable reminder of the critical responsibility we share in supporting the next generation and making sure that the housing market works for all. I once again thank my noble friend Lord Young of Cookham for bringing forward this debate and all noble Lords for their contributions today. I look forward to continuing discussions and working with noble Lords on issues relating to the housing needs of not just our younger generation but the whole of our communities.
Social Housing (Regulation) Act 2023 (Consequential and Miscellaneous Amendments) Regulations 2024
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That the Grand Committee do consider the Social Housing (Regulation) Act 2023 (Consequential and Miscellaneous Amendments) Regulations 2024.
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, this draft instrument makes technical, consequential and miscellaneous amendments to primary and secondary legislation following the passage of the Social Housing (Regulation) Act 2023.
For far too long, too many tenants have not received the quality homes and services they need and deserve. Social housing tenants deserve decent homes and to be treated with fairness and respect by their landlords. Where they experience problems, these should be resolved quickly. Where they have complaints, these must be listened to. On too many occasions, this has not happened, and we know that getting this wrong can, sadly, lead to tragic consequences. We cannot forget the Grenfell Tower tragedy, nor the tragic death of two year-old Awaab Ishak from prolonged exposure to damp and mould that was left untreated. These events were the catalyst for change.
The passage of the Social Housing (Regulation) Act was a landmark moment for the social housing sector. The Act facilitates the biggest change to the regulation of social housing in a decade, paving the way for the introduction of a new proactive consumer regulation regime. The proactive regime will drive up standards in social housing, with regular inspections of large landlords, new tenant satisfaction measures and stronger enforcement powers for the regulator to take action when things go wrong.
During the passage of the now Act, we made a number of major amendments, and I am thankful for the constructive input from noble Lords and the other place. A key addition was the introduction of Awaab’s law. This will help to ensure that hazards in social housing are assessed and then repaired within set timescales. The Act facilitates the introduction of new competence and conduct standards that will professionalise the sector to improve the quality of service that tenants receive. The 2023 Act also made a number of changes to strengthen the existing economic regulation regime.
To ensure that existing legislation remains accurate following the passage of the 2023 Act, the regulations contained in this instrument make several consequential amendments to relevant primary and secondary legislation. Part 1 of Schedule 1 makes consequential amendments to the Housing and Regeneration Act 2008, which are necessary in response to the provisions set out in the 2023 Act. Such changes include amendments that reflect the change to when a housing moratorium starts and the addition of new entries in the index of defined terms in the 2008 Act which signpost definitions added or amended by the recent Act.
Part 2 of Schedule 1 makes consequential amendments to other relevant legislation, including the Housing and Planning Act 2016. These changes are a consequence of provisions in the 2023 Act which make changes relating to moratoriums in the event of an insolvency, the definition of whether a registered provider is “non-profit” and what constitutes an “English body” for the purposes of who can be registered.
Part 3 of Schedule 1 makes consequential amendments to the Social Housing Rents (Exceptions and Miscellaneous Provisions) Regulations 2016 in consequence of a change made by the 2023 Act. This change relates to the definition of “community land trust”, which has been inserted into the Leasehold Reform (Ground Rent) Act 2022 by the 2023 Act.
Lastly, the regulations make two miscellaneous adjustments which correct minor errors in statute. The first removes a redundant reference to a section in the 2008 Act which was later repealed by the Housing and Planning Act 2016. The second amends a provision inserted by an SI; this change is intended to ensure consistency across the two pieces of legislation.
Although the changes I have outlined are of minor significance in themselves, they are required to ensure accuracy and consistency across the statute book following the changes made by the 2023 Act. I commend these draft regulations to the Committee.
Baroness Thornhill (LD)
My Lords, as the Minister knows, this Act has been well received by all sectors concerned with social housing, and it is supported on our Benches. As she said, this is due largely to the Grenfell tragedy, but also to subsequent high-profile failures of social housing, including the tragic death of young Awaab Ishak. Let us not forget the recent deaths in temporary accommodation, which are truly shocking.
We know that the devil will always be in the detail, and we all hope that the rhetoric accompanying the Act will live up to the reality. The Minister is clearly aware that there have been several consultations since last July, when the Bill was passed, and issues have emerged, which the sector is rightly bringing to the Government’s attention in this process. It appears that the full and cumulative impact of the new changes thus far has been evidentially to expose the wide variation in the quality of provision of social housing by registered providers and councils. This was recently outlined very robustly by the deputy social housing regulator. Is the Minister confident that the new approach to inspections and the C categorisation will allow for a nuanced approach to allow those lagging behind to learn from the best and hopefully catch up, or will it be an adversarial system—a weeding out of the worst? In short, what will the approach to inspections be? I know from experience of Ofsted in schools and the CPA in local government that they can vary.
It is no surprise that there are concerns about the additional costs associated with all the changes, which I am sure the Minister will be aware of. What is in place to ensure that landlords can make progress without financially falling over, as we are seeing with some local authorities? Regrettably, we are already hearing that they are cutting back on development plans to focus on the detail of the new regime, which itself is a separate concern due to the considerable shortage of social housing. I echo the comments of the noble Baroness, Lady Taylor, with which I wholeheartedly agree. In fact, I add that I found that announcement bitterly disappointing because I believed that this Government had genuinely shaped the agenda towards a real understanding that social housing was one of the first bricks we needed to get in place to unblock the logjam and the housing crisis.
Does the Minister accept that there is also a recruitment and retention problem, highlighted and exacerbated by the professionalisation of housing management and maintenance? That is a good aspect of the Act and had cross-party support, but not surprisingly it is having an impact, as some people are jumping before being pushed—probably a good thing in some cases, I am not afraid to say, having had to do the pushing sometimes—or feel that perhaps now is the time to retire rather than go back to the classroom, but it is a very real and relevant issue.
The speed and breadth of the changes cause me to ask how confident the Government are that the sector can and will have the capacity to cope with these genuine changes.
Briefly, on the Awaab’s law changes, I thank the Minister for her detailed letter in response to my question in the Chamber and her generous offer of her time. On a tangential issue, the consultation that has just closed proposed an extension to hazards beyond mould, damp and condensation to include the 29 hazards in the—this is a bit of a mouthful—housing health and safety rating system. This has caused considerable disquiet for the National Housing Federation and the Chartered Institute of Housing, to name but two. They have given convincing reasons why this extension should be reconsidered. Does the Minister agree that it is probably best to see how the sector copes with mould and damp before extending the hazards further?
It seems that there is still much to do to clarify these changes, particularly around the regulator’s use of powers and the approach to inspections. Further clarity is needed on how the regulator will interact with other sector regulators, such as the building safety regulator and the Housing Ombudsman. This will take some getting used to. Such clarification is particularly important for tenants, who will also have an important role to play. In fact, the Act enshrines in law their rights to have a safe and decent home, to make their voices heard and to influence policy so that tenants can shape the homes they live in and the services they receive. I have a pertinent, but perhaps tricky, question. Does the Minister feel that the residents panel—I notice that it is currently recruiting new members, so the current one has not been in action for very long—is a strong, independent and influential voice for tenants or just a sounding board?
Lastly, I look forward to the day when private sector landlords are also subject to the same regime because it is long overdue and much needed.
Baroness Scott of Bybrook (Con)
I thank the noble Baronesses opposite for their support, not only today but when we were taking the Bill through, and their challenge on what could be made better. We took some of those things on board.
The noble Baronesses, Lady Thornhill and Lady Taylor of Stevenage, brought up the pressures on the sector. We totally understand them, which is why we work closely with the sector, but my view is that it is the sector’s responsibility. It is the sector’s stock. It needs to keep that stock up and its tenants deserve the very best. So, we will support the sector, but we will not stop challenging it to ensure that social housing tenants live in safe, good accommodation. That is what has come from the Secretary of State right the way through this process.
On right to buy, all I can say is that there were many pressures on the Budget this year. The percentage did not get extended but, again, we are working with the sector to see how we can make the building of more social houses, particularly by local authorities, affordable into the future. I think that noble Lords will hear more on that.
Moving on to the noble Baroness, Lady Thornhill, am I confident in the approach to inspections and learning from the best? I think learning from the best is the important thing and, yes, I am confident. I talk regularly to the social housing regulator, and it gets it and understands its role. I do not think it will go in heavy to begin with; it will allow the sector to begin to understand this important new regime. However, I think it is important that it can go in quickly if it thinks there is a particular issue to deal with and that it will do regular inspections throughout the sector in future. We will weed out the worst providers, but it is also a matter of helping them to improve and learn from the rest of the sector.
I understand the pressures on the sector, particularly for building new houses, as it has quite rightly had to put more money into making sure that the stock it has is of good quality, so there is possibly less money left for building more houses, but we have a fund of more than £11 million to do that. Housing providers are looking to use that fund continually, and we are supporting them to do that.
Recruitment and retention is out for consultation. We will listen to the sector. This was extremely important to members of the Grenfell community, in particular. They felt that their housing officers were sometimes as important as people working in social care in the council. We listened, and we found a way through that one. We also need to listen to the sector and the regulator as we move forward about the timeliness of implementing this. It is not going to be done overnight, so we will work with the sector after the consultation and listen to what it is saying on that one.
It is the same with Awaab’s law, although I am very passionate about getting Awaab’s law in place as soon as possible. I probably agree with the noble Baroness that perhaps we should start with the timings on damp and mould; that may be something we can look into further. We have only just finished that consultation. I have not seen the responses yet, so I do not want to pre-empt what will come out of that, but we will look, listen and do what we can to get that important part of the Act in place as soon as possible.
The noble Baroness also brought up the interaction between the Housing Ombudsman, the building safety regulator and the social housing regulator. In the department, I have talked many times with officials about the communication on this because it is a new regime; we want it to work and to work well for the tenants concerned. I think noble Lords will see a lot more communications with tenants about who to go to. Of course, if they have a problem, they should first go to their housing provider. We want to make sure that they do that and, if it is an individual case, go to the ombudsman, and then to the building safety regulator which will be working very closely with the ombudsman to make sure that it is picking up any themes coming out from a particular provider or group of providers. That is the way it will work, but communication to the tenants about this regime is important.
Finally, I turn to the residents’ panel. I have been to the residents’ panel, and I do not think that it is a talking shop at all. It is quite challenging. That is why we are extending them for a further year beyond just one year. What the panel says is very important not just for us as a department but for our partners, including the social housing regulator, the ombudsman and the building safety regulator. It is important to listen to the panel; it certainly tells us what it thinks.
I think that I have covered everything; I will check and, if I have not, I will write as usual. To conclude, these changes will ensure that the statute book remains accurate following the passage of the 2023 Act. This is just a small part of our wider mission to drive up the quality of social housing and ensure that all tenants are treated with fairness and respect.