Leasehold and Freehold Reform Bill

Earl of Lytton Excerpts

Committee stage
Wednesday 24th April 2024 Lords Chamber

[Lord Thurlow (CB)]

My Lords, I support each of the three amendments in this group. I was going to say that the amendment from the noble Lord, Lord Moylan, concerning compensation, was so articulate that it really needed no reinforcement, but I was not expecting the fine history lesson just now, which has reinforced it with great skill and humour. The noble Baroness, Lady Deech, explained that she taught property law for many years. I studied property law for many years, and I am sure that, if I had studied under her—which would of course not have been appropriate at all in age terms—it would not have taken me so many years.

The expropriation is bad enough, but to add the retrospective characteristic in this legislation is shameful. My principal interest in contributing is the 80-year rule referred to by the noble Lord, Lord Howard of Rising, because that is a very sensible, intelligent compromise to the sledgehammer of absolute abolition of marriage value and hope value in the calculation being entirely reserved to the lessees. Many of the highest-value elements of this paragraph are, indeed, in central London and the south-east, and many are non-resident.

This clause would save the Treasury billions, in addition to earning it some billions, which we heard referred to by the noble Lord. There is logic to the 80 years proposed in his clause. That is the threshold below which mortgagees such as banks and building societies are very reluctant to lend on property. Lessees therefore have no choice but to negotiate an extension if they want to use borrowed money—and, of course, nearly all do. The 80-year rule is a compromise between the very long leases and those moving into the unmortgageable zone. It makes a great deal of sense to cut the pack in this way because it excludes those freeholders of over 80 years but encapsulates the value of the expiring leases. It should be supported.

[The Earl of Lytton (CB)]

My Lords, like the noble Baroness, Lady Deech, I come to this from a professional viewpoint. I am a chartered surveyor and, until recently, I was a registered valuer with my professional body. Coming from my background, I see the balance to be struck. When I was in the public sector, I was dealing with matters of compulsory purchase and compensation. Later on, after the passing of the Leasehold Reform, Housing and Urban Development Act 1993, I became the first chairman of the Leasehold Advisory Service. Although I was not a practitioner in the matter of leasehold enfranchisement, I had a very close up and personal involvement with what was happening there.

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[Baroness Pinnock (LD)]

I thank the noble Lord for his intervention. To me, the issue here is quite simple. We expect leaseholders to fund the enfranchisement of their lease—to pay the costs of the enfranchisement—and then to share the increased value of the lease with the freeholder, who has made no financial input to the extension of the lease. From a leaseholder’s point of view—although I do not have a leasehold myself—that seems to me to be the wrong balance. This is what the proposals in the Bill are attempting to put right. From that perspective, we would want to agree with that.

We are constantly warned that no investments can be regarded as safeguarded for all time. That must be true for property as it is for any other investments. We have heard arguments this afternoon about protecting freeholders, seemingly for ever. I accept the argument of the noble Baroness, Lady Deech, that phasing might be an answer to freeholders’ difficulties, but you cannot keep things in aspic for ever. Change is on the move and the Government are right to try to provide a better balance of rights and responsibilities between freeholders and leaseholders.

We on these Benches would prefer to move entirely to commonhold—but that argument has yet to be completed. I accept that the situation is very complex. Whenever we have a substantial change in legal rights, there is a loss on one side and arguments about that, and benefits on the other. Nobody can be absolutely clear and certain how the balance will be reset.

[The Earl of Lytton (CB)]

I take the noble Baroness’s point about things changing, but I ask her to cast her mind back—although she was not there at the time, any more than I was—to the great reforms in the Law of Property Act 1925. There was a big discussion about all sorts of matters to do with tenure and getting rid of things such as entails, and modernising the system. If we are to make a seismic change—and I think this Bill will produce something of a wobble—there ought to have been that big discussion about the fundamentals of property law. Does the noble Baroness not agree that, instead of tinkering around piecemeal with this and trying to shoehorn it into the unfortunate focal point of leasehold reform and the balance between leasehold and freehold, that discussion should have taken place first?

[Baroness Pinnock (LD)]

I thank the noble Earl for that intervention, because he is right in many cases. I am not a lawyer, but I know that the 1925 property Act made a huge change away from the old system, which was feudal at that point, and modernised property legislation. This Bill may do the same. In some instances, as we have heard this afternoon, it will have big consequences—for freeholders, in the context of this set of amendments. I accept that maybe there ought to have been—as we heard on Monday from the noble Lord, Lord Young of Cookham—a draft Bill on commonhold. Maybe it requires an in-depth, cross-House, cross-party committee to get into the detail, rather than the 300 or so pages of the Bill that we have in front of us, in order to get to grips with the consequences of what is being proposed.

I go back to the principle, and the principle has to be right. We are trying to rebalance the rights between freehold and leasehold. There is frequent talk on the Conservative Benches that the basis of Conservative philosophy is a property-owning democracy, but leaseholders will not be full participants in that until these changes are made. So it will be interesting to hear what the Minister has to say with regard to this very challenging debate.

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[The Earl of Lytton (CB)]

My Lords, I am very pleased to be able to speak to this amendment and very grateful to the right reverend Prelate for tabling it. His office asked me whether I would add my name, and I am afraid I neglected to do so. Implicit in what the right reverend Prelate and the noble Lord, Lord Moylan, said is that we have within the Bill a carve-out for the National Trust as a charity that does not apply to other charities. My understanding, and I think noble Lords will know the principle, is that this touches on and concerns the question of hybridity of a Bill. That is dangerous territory for somebody who is a non-lawyer, but none the less I raise the question, because public Bills should apply equally to all citizens and entities. If you single out one, you have to face the consequences of having a hybrid Bill.

I scanned around earlier to see how many legal minds there might be sitting around the Chamber, because I am not one and I stand to be shot down, not being a lawyer, but the matter did crop up on the levelling-up Bill and I had reason to look into that in some detail, although it was not debated in the Chamber. So I hope I am reasonably up to date in believing that the only workaround here is if the entity singled out in the legislation is what is known in the jargon of the legislator as “a class of one”. I have seen the letter dated 22 April to the right reverend Prelate from the Minister. She appears to allude to the uniqueness of the National Trust in that its lands are inalienable. I looked at the world wide web at lunchtime to see just how inalienable things actually are, because as I will explain, I am not sure that is necessarily a correct point on which to rest the case.

What I discovered, among other things, was “Battle over National Trust sale to developer”, which was a question of three acres of a meadow near Bovey Tracey in Devon in 2021. There was another freehold property on the market, and I think it was described as being a former National Trust property. I therefore assume that the National Trust is doing what other charities normally do—namely, that it gets property bequeathed to it, or it acquires property by public subscription, and that may contain bits that it wants and considers rightly inalienable, and other bits that it considers expendable. Any charitable organisation having property is required by the Charity Commissioners to make best use of its assets, and that means not having bits of deadwood floating around. It has to be organised, and that happens in any management process. So to what extent inalienability cuts into this, I am absolutely not sure.

[Lord Berkeley (Lab)]

I am grateful to the noble Lord for giving way. Can he explain what the word “inalienable” actually means?

[The Earl of Lytton (CB)]

I believe it means that it cannot be disposed of away from the purposes of the charity. I am not a lawyer and I am afraid I do not know exactly, but I understood it to be the term contained in the Minister’s letter to the right reverend Prelate, which is why I used it.

I want to make it clear that the organisation of a charity is necessarily of a commercial nature but devoted, ultimately, to its charitable purposes. It cannot be otherwise; it must use its assets optimally, and it is required to do so. I can see no discernible difference between something like the National Trust and an organisation such as the Church of England. Any such charity acquires, disposes and otherwise deals with its land assets as a matter of course. It is required to do so if it is disposing according to a set of rules, with which I am familiar, under the Charity Commission: CC 28, which state that you have to get best value for the asset, or words to that effect.

I am concerned about the potential hybridity aspect of the Bill, to which the right reverend Prelate did not refer, but it is implicit in what he is asking. It is a question that needs to be raised and is a procedural one for this House. I would very much like to know the answer, and if the Minister, who has not had any warning, cannot give it today perhaps she would be kind enough to write and copy in other noble Lords who are listening.

[Baroness Pinnock (LD)]

My Lords, I thank the right reverend Prelate the Bishop of Manchester for drawing our attention to the fact that when you make complex changes, the consequences cannot always be predicted and may not be ones we would wish to support.

The issue is one I hope the Minister will be able to help us resolve. The right reverend Prelate cited the balance between justice and simplicity. He said to always come down on the side of justice, and so would I. However, in this case, we have competing justices. The principle being advocated throughout the Bill is the justice of rebalancing the rights and responsibilities between freeholders and leaseholders to the benefit of leaseholders—a principle most of us support. The difficulty is that the justice we support has a consequence we would not support: reducing the funds available to charities whose income is based on freehold property. So, there is a conundrum for us.

The right reverend Prelate listed the charities that he thought were affected by these changes. I noted they were all London-based, no doubt because of land values in London. It is important for us to know whether this is a more extensive problem, or a London-based one. The first question we need to ask is, what other charities will be affected?

I do not have an answer to the next question: is there a workaround that mitigates the effect of the principal changes the Bill seeks to implement? I am sure the bright young things in the department could come up with a way of mitigating the outcome, so that charities do not lose their income, which is in nobody’s interest. I am confident that somebody will come up with a great way of overcoming this problem, while retaining the other justice: fairness towards leaseholders.

So, there are questions but no answers, and I look forward to hearing what the Government might be able to do.

Leasehold and Freehold Reform Bill

Earl of Lytton Excerpts

Committee stage
Monday 22nd April 2024 Lords Chamber

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I have a number of interests to declare: first, as a leaseholder, secondly, as chair of the Heart of Medway Housing Association and, thirdly, as a non-executive director of MHS Homes Ltd.

I spoke at Second Reading and I am sure that, as we go through these few days in Committee, we will largely agree with each other that there is a major problem. We all want to see leasehold reform and commonhold reform. Everybody backs it. I know that the noble Baroness, Lady Scott, and the noble Lord, Lord Gascoigne, back it. The problem is that we are not doing anything about it. That is the shame here.

The amendment from the noble Baroness, Lady Fox, absolutely takes us forward. She includes a day to end leasehold flats, which would deliver that Tory party manifesto commitment. We should all back her if, as I hope, she divides the House at the next stage. Her amendment would deliver the Tory party manifesto commitment, but will the Government support it? Of course not. We know that. We all agree in these debates, but what we will get from the Government Front Bench is, “When parliamentary time allows”, “The next steps will follow in due course”, “We are keeping it under review”, or “We will get back to you”. That is the problem.

This is a golden opportunity that the Government have completely failed to deal with. We have sat here for years. I have asked question after question. I have been assured, “It is coming” or “Don’t worry, don’t ask questions, we are going to sort it all out”. Yet here we are and what do we get? A Bill that delivers very little. On the point about service charges and transparency, I can assure the Government Front Bench that if a leaseholder has problems with the service charge, they know they have problems. What they want from the Government are the tools to sort them out. The Government have not delivered that. They can give more transparency—great, but we need the tools for the job and they are not doing that for us.

This is very frustrating. I think we will have lots of agreement but very little action. I hope that, when we get to Report, a number of amendments will be passed and many members of the Government will support us in delivering the commitments that their party made to leaseholders at the last general election. The amendments from the noble Baroness, Lady Fox of Buckley, in particular, are really good, giving an absolutely clear cut-off date.

My noble friend Lady Taylor of Stevenage asked the Government to set out their strategy for commonhold. What is it? I hope they can tell us. The current strategy seems to be, “We will get back to you. We know it is important, but we can’t do anything about it at the moment—sorry”. That is just not good enough. There are lots of great amendments here, but we need some action from the Government. I hope that, when we get to the next stage, we will divide the House many times. Where we have got to at the moment is just not good enough.

In 1880 Henry Broadhurst was elected as the Member of Parliament for Stoke-upon-Trent. He was then elected as a Member of Parliament for Nottingham West. He raised the problems of leasehold in the other place. We are still talking about them today. He was elected in 1880, and we have still made only limited progress. It is about time we made some progress here. We want more transparency and we want the Government to deliver their commitments. We want commonhold, and we want it now.

[The Earl of Lytton (CB)]

My Lords, I agree fundamentally with the point made by the noble Baroness, Lady Taylor of Stevenage, and with what other noble Lords have said with regard to the desirability of a transition to commonhold. I say that because, apart from anything else, conventional leasehold has clearly got itself an extremely bad press. Like it or not, that is something we have to take account of. However, although it is poorly regarded among leaseholders, it happens to be the commercial preference and the model on which a great deal of leaseholder and freeholder value rests. We have to be a bit careful about that.

My interest here is very much about consumer protection. I do not want us to enter a brave new world in which the existing leasehold situation is seen as in any way second class. Comments are made about the evils of monetisation of the management process, but I think that is a slightly different issue. I do not see that as intrinsic in the tenure. I see that as an abuse, a lack of transparency and another area in which consumer protection has not operated.

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On ground rents—again, as mentioned at Second Reading—the Competition and Markets Authority said that there was no legal or commercial reason to justify ground rents. I have just had a bill for £300 for my ground rent, for which I receive absolutely no service. Everyone involved knows full well that ground rents provide no service, are purely rent-seeking and are a legalised scam. If pension funds are invested in ground rents, as some are, they should find a better use for their money; for example, by investing in British companies. Our pension companies invest less in our own country’s companies and stock market than any of their international competitors—shame on them.

[The Earl of Lytton (CB)]

My Lords, I will speak to this group, as the noble Lord, Lord Truscott, mentioned my name, although I have not yet spoken. He represents one viewpoint and the noble Lords, Lord Thurlow and Lord Sandhurst, and the right reverend Prelate the Bishop of Manchester represent another. They are often portrayed as being mutually exclusive but, in property terms, that is not necessarily the case. Clearly, there are perfectly good managers who look after not only their residential tenants but their commercial tenants, and there are some are rotten managers. Some are good corporates while others are rotten—some are good resident management operations while others are pretty poor—so it is very difficult to make a standard rule for them all.

If one looks at the large urban estates across London, it is evident that there is a clear sense of purpose in trying to preserve the value, appearance and general amenity represented by the running of that estate. That inevitably comes at a cost, but I hope that that helps not only the commercial activities but the amenity of the residents.

Let us look at what happens if things start going wrong and getting fragmented. First, there becomes a distinction, if one is not very careful, between the purposes of long-term management in the view of the residents and the purposes of long-term management in the view of the commercial operator or landlord. Under the purposes of this Bill, if the enfranchisement of a 50% commercial ownership block goes ahead, there will be an enforced leaseback to the original freehold owner. Straightaway, you have an enforced leaseholder, whose business model was not quite hypothecated on that basis, who is none the less obliged to take it on but does not need to have the primary amenity and visual appeal functions that might be relevant to the residents.

I have seen that happen in historic high streets, where ownership has become fragmented in this way. We tend to find that when a shop becomes vacant, and if there are difficulties in the letting market, it will be let to a charity shop, a slot machine operator, a tanning shop, or some other type of operator, because the person who has it needs to move it on quickly. There is not that fat on the bone associated with having the larger estate, nor is there the fat on the bone to take on some assignee, as I have had to deal with in the past, who really runs a rather low-grade sort of business but is well funded. Therefore, you have to work out whether you can afford to fight an appeal, or fight a case, on an assignment of a lease in order to see off that person and their particular trade. If you cannot, there is a general deterioration of the area. It might be a fast-food takeaway that opens late at night; the police might be around every now and again; there might be people congregating there because it is late at night, and that sort of thing affects residents. If one is not careful, things like emptying bins and delivery of incoming goods to a retail operation can start being operated at times that are not that helpful to the interest of residents, who once might have been part of this overall concern. I can see both sides of this, and we have to be careful not to make standard rules about things where the decision is much more nuanced and difficult. It really depends on where one is starting from, the circumstances, and everything else.

As I said earlier, my interest is in consumer protection. I do not want to see degraded environments; I want to see environments that are lively and looked after and where everybody has confidence in them being managed. Fragmented management very seldom achieves that. The issue is about management being a slightly different issue to ownership. It is a big issue that we need to address, because it will not be dealt with by a local authority. That has no function there. Beyond the planning functions of a change of use, or licensing for some premises that needs it, it has very few powers of control. If overarching control is needed, and there may be an argument that ecclesiastical, heritage or possibly other environments do need it, we should very careful that we are not chucking out that baby with the bathwater and ending up with a slow process of attrition that suits nobody and ends up degrading the value not only of the freeholders, who can look after themselves by and large, but of the area and its appeal, which is ultimately to the detriment of residents. I do not want to go down that road without being clear about what we are doing, and making sure that there is some way we can pick up on processes of deterioration before they take root.

[Baroness Thornhill (LD)]

My Lords, this is my first intervention today—I spoke at Second Reading. I regret that this is yet another Bill that was heralded with robust rhetoric from the Secretary of State which has now come face to face with reality. I regret that some of that reality is from those with vested interests and therefore we are getting a watered-down Bill. We certainly believe on these Benches that it is a missed opportunity.

I turn to the group of amendments on enfranchisement. We on these Benches support the Government in Amendment 16. We need to see as many restrictions as possible on leaseholders’ ability to enfranchise removed by the Bill. After all, they have bought a home and should be able to extend their lease and buy their freeholds in a way that is easy and affordable, to use the Government’s own words.

It is perhaps no surprise that we also support Amendment 17 in the name of the noble Baroness, Lady Taylor, in so far as it would allow the Secretary of State to give more leaseholders rights to collective enfranchisement, and we note the detail of the noble Baroness’s reasons. However, the power cannot and must not be used to narrow the qualifying criteria or to exclude more leaseholders from freehold purchase. We are pleased that it would be subject to the affirmative resolution procedure, as this includes public consultation and the involvement of both Houses.

However, we know that cohorts of leaseholders will still not even qualify to buy their freehold under the Bill. For example, MPs in the Public Bill Committee in January heard from experts and campaigners that there really is a problem with leaseholders in mixed-use buildings—from our debate today, I would say we have a problem with mixed-use buildings that needs to be sorted out. The Government are admirably using the Bill to try to liberate leaseholders in mixed-use blocks by, as we have said, moving the 25% rule on non-residential premises to 50% and introducing mandatory leasebacks on commercial space to slash the cost of collective enfranchisement, but—and I find this strange—they have not lifted the restrictive regulations in the 1993 Act that mean that shared services, such as a plant room, would disqualify leaseholders from buying out their freehold. Apparently, there is even a regulation stipulating that the mere existence of pipes, cables or other fixed installations connecting residential and commercial premises in a mixed-use building would block leaseholders from buying their freedom. That means that many leaseholders who would otherwise stand to benefit from the changes on mixed use will be blocked from securing collective enfranchisement and being in control of their buildings. I ask the Minister whether we can discuss this aspect before Report.

Turning to what I will call the three “tricky” amendments, I noted that the noble Baroness, Lady Taylor, wisely hedged her bets on these. I suspect that it is because, like me, she knows that the intentions of the noble Lords speaking on them are based on good experience and a genuine wish to see the measures agreed, but she worries whether, in fact, they are just another means of putting commercial interests before residential interests and not getting that balance right.

Instinctively, like the noble Lord, Lord Truscott—I was relieved when he made his comments—we oppose these three amendments, because in our view they seek to row back. But I have listened attentively to what has been said and I am completely changing what I was going to say: I genuinely believe that there are some serious areas that need looking at. There is much experience in the Committee, but I am concerned that we have been subject to special pleadings.

Impact of Environmental Regulations on Development (Built Environment Committee Report)

Earl of Lytton Excerpts

Friday 19th April 2024 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I very much welcome the opportunity to debate this hugely important subject. I declare an interest as a resident in the part of Sussex affected by water neutrality. I am also a supporter of the local group Save Rural Southwater—SRS—which focuses on excessive residential development in contravention of a made neighbourhood plan. Noble Lords will know that I am a chartered surveyor by profession and a former member of the Built Environment Committee. I pay tribute to its work in this area, in which I was not involved. I also pay tribute to the noble Lord, Lord Banner, on a most thought-provoking speech. He is no stranger to my profession or the hallowed portals of 12 Great George Street.

My first wider point is to reinforce the report’s implicit query as to how it has come about that damage to ecology, derived in my area from excessive water abstraction by a privatised utility under the noses of the Government’s Environment Agency and nature conservation adviser, has somehow alighted on the development control system rather than dealing with the supply-side mechanics and consumer demand management. That seems quite extraordinary. The report refers to a siloed approach, but it is more serious than that: it is bad public administrative architecture and a basic failure to co-ordinate environmental, economic and social factors.

I will start with a bit of data. A comment has just been made about housing. The report rightly describes the number of out-of-date local plans, but it does not query, at least in that context, the Government’s own data for household formation and thus housing need, which dates from 2013. My case rests on that point, but I question what we are doing about the inventory versus the flows in what we might call the creation of wealth.

In focusing on water neutrality, I acknowledge that this is not the only area of critical provision at issue. Communications, energy supply and distribution, waste and critical social infrastructure sit alongside air, water, light and sound pollution, many of which are difficult to price, but almost none is being planned for on a predictable basis or even consistently and objectively measured, let alone managed effectively. I am all for saving water. We are profligate in our use of it, which must be dealt with, but it is a wider societal issue.

The exemplar used in the report, which is the water off-setting scheme of Crawley Borough Council—14 miles from where I live—is apparently now being accepted by neighbouring local authorities as the model for dealing with this. However, it is a classic example of greenwash and is not fit for purpose. It devises an off-setting arrangement based on an aspirational water consumption metric of 85 litres per person per day. That is slightly more than is allowed in the desert Kingdom of Jordan. Although theoretically achievable, it is ludicrous in terms of current domestic practice. Data from Southern Water, our local utility, shows an average domestic daily per capita consumption of 136 litres per person per day, and the long-term objective of Part C of the building regulations is 110 litres. To see how absurd this is, I recommend that noble Lords visit the SRS website. Crawley’s own pilot scheme showed a consumption of 166 litres per person per day. You could scarcely make this up.

If this is to be the general way in which environmental regulation is to be circumvented or worked around, I am extremely fearful for where we may end up, with no objective metric for evaluating offset equivalence. In the limited circumstances of Crawley borough’s social housing, verifying ongoing compliance is absent, with no enforcement provision, no sanction for failure to perform and no authority possessing the intrusive powers necessary to achieve these. This is a recipe for profligate overconsumption, which will end up in tears.

This is an irresponsible approach and a dereliction of public duty. It will result in critical attrition of essential resources: not only water but nature and other things that are of extraordinary value to us. A holistic process is needed. When the report suggests shifting the balance between ecology and development, I reject that on the basis of the current situation, because it needs to look at the problem in a different way. The noble Lord, Lord Best, referred to balance and engagement. He is absolutely right, although I take that point from a different standpoint from his.

Ultimately, this is an issue for central government, utility companies and their regulators, for pricing into consumption the true costs of environmental compliance. We need a demand-side approach and the sort of thing that has encouraged consumers to save electricity and gas, recycle waste and gain a better understanding of the role that we all have to play as citizens.

Building Safety

Earl of Lytton Excerpts

Wednesday 27th March 2024 Lords Chamber

[Baroness Swinburne (Con)]

I thank my noble friend for that question. To start with the second question first, yes, I shall take that back to the department. Given that transparency is a tool that we are using, it would make sense to make that communication transparent. I shall report back to my noble friend on progress on that.

On whether I personally think that developers taking eight years to fix this is acceptable, absolutely not. These are people’s homes; they need to feel safe. The reason why that new money has become available for regulators is to ensure that enforcement action can happen and to increase the pace of the change that is required, ensuring that remediation takes place as soon as possible. Therefore, I suggest that, if there are specific instances, noble Lords should speak to the department so that we can make sure that pressure is put on.

[The Earl of Lytton (CB)]

In connection with building remediation, has the department any estimate of instances of potential freeholder insolvency? If a freeholder charged with building safety remediation becomes insolvent, what provisions will the Government make to ensure that those costs do not fall on the leaseholders?

[Baroness Swinburne (Con)]

I thank the noble Earl, Lord Lytton, for that question. I shall have to write to him with the answer, on the basis that I do not have the data with me.

Leasehold and Freehold Reform Bill

Earl of Lytton Excerpts

2nd reading
Wednesday 27th March 2024 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I remind your Lordships of my profession as a chartered surveyor and my lifelong involvement with building, survey valuation and property management, for my sins. I thank the Minister for organising a drop-in session last week, and for her suggestion of a further meeting. I thank her particularly for the answers to several questions I raised after that session, which I received this morning. I will look at those with great care. I also thank the many bodies and individuals who have communicated with me about the Bill.

On the face of it, the Bill contains some very welcome measures. For all the reasons the Minister has given, I support its aim of better consumer protection, but it lacks coherence in many areas, particularly its interface with building safety.

We know the problems, and other noble Lords have explained them: the escalating and opaque charges demanded of leaseholders, the building safety crisis that aggravates cost and risk, a mercenary culture among those who control and manage blocks in which anything not expressly forbidden is fair game, mortgage-lending practices which exacerbate the wasting asset problem, and an opaque leasehold system that, while arguably not itself the prime cause, certainly facilitates abusive behaviours.

There are laws and regulations on our statute book relating to misrepresentation, unfair terms, quality of goods, fitness for purpose, and implied warranties and misdescriptions, to name just a few. To my knowledge, few are enforced to the satisfactory protection of leaseholders. Of course, the regulation of property agents is completely absent.

Let me point to progress in the remediation of defects which are plaguing leaseholders. Of the firms which signed a non-binding pledge with the Secretary of State, the best performer is understood to have remediated some 35% of the affected stock for which it was responsible. The worst performer remediated perhaps 8%. This was rather conveniently set out in the Mail on Sunday of 17 March.

The Government’s January statistics on the developer remediation contract also make uncomfortable reading. Developers have accepted responsibility for 5% of some 90,000 residential buildings of 11 metres in height and above. Some 37% of those where a determination had been made—more than a third—needed remediation of some sort. There was not a squeak about the homes in the 11 metre and below category, where residents might arguably be safer from loss of life but just as vulnerable to the remediation and financial loss trap. Building safety continues to foul up other leasehold issues.

The noble Lord, Lord Young of Cookham, referred to a two-tier market; I would describe it as a three-tier market of qualified, partially qualified and non-qualified leaseholders. This overlies a labyrinth of tests and exclusions regarding such matters as freeholder assets, cladding or non-cladding defects, building height and building information, particularly where landlord certificates are required and the landlord is not the managing agent. Leaseholders unable to contract are further let down by a level of complexity with which even professionals are reluctant to engage. There is a particular problem with conveyancers. While this overshadows some 1.6 million unqualified leases, the construction sector appears to have escaped the bulk of its true responsibilities. This Bill does not address the fundamental issue that all innocent owners should be protected from poor construction and management practices as a consumer right.

In the grand political gesture of this Bill—and there is something of that—the Government appear unaware of how interconnected construction, property and financial markets are. The policy on ground rents appears to be unravelling. All parts of this model have to be addressed together if we are to stand any chance of fixing the problem. The Government wag their finger at freehold—fair enough—and seek to remedy some of the leasehold issues by adjusting the tenure balance. Unfortunately, exploitative practices and building remediation do not entirely go away under this model. The same innocent home owners remain imprisoned in their unmortgageable, unsaleable and potentially uninsurable homes—homes that should have been a safe haven and a secure investment, but are consuming lives and livelihoods, and damaging life chances, productivity and health.

These reforms do not seem to be driven by benefit to leaseholders as consumers who need protecting, so much as by political risk management. Otherwise, why does the Bill seek to turn leaseholders into freeholders, while denying freeholders the protection the Government promised to give to leaseholders? This is an example of incoherence in the Bill.

The Government’s policy is to make freeholders, who may be innocent of creating the construction defects themselves, uniquely responsible for ensuring remediation; doing so at their own cost and risk; taking a legal punt on cost recovery from a developer, if one exists; and doing so out of resources to be depleted by the effects of the Bill. Do the Government think that freeholders are willing and able to do this for the primary benefit of leaseholders, or indeed solvent enough to enable them to do so?

It seems to me that the default here simply puts the matter back into the hands of leaseholders and lawyers. As somebody who is interested in property markets, that is something I want to avoid. I have even heard it suggested that insolvent freeholders’ administrators will hand over the freehold to residents, with all the supposed benefits and none of the remediation and other burdens. I regard that as completely naive.

The claim of abolishing marriage value in fact disguises a transfer of an identifiable element of value long recognised in valuation practice and statute. I do not necessarily advocate for or object to that; I merely state it as a matter of fact, but in future this will solely benefit the leaseholder. This has wider consequences for the financial model. I cannot say which way that will pan out, but it has consequences. Furthermore, it is unclear from the Government’s impact assessment whether any real net benefits would fall to leaseholders. In London and the south-east, most benefiting leaseholds seem to be owned by investors, and a significant number of them are non-UK resident. I do not necessarily object to that at all, but is that the object of the policy in transferring the benefit of this gain? By contrast, investors owning three or more units are actually denied the protections of the Building Safety Act. How do the Government explain that dichotomy?

I also point to Schedule 4, where the market value of assets is defined not by a relevant reference to the accepted national and international standards relating to that term—market value—which assumes a willing buyer and a willing seller, but by reference to a willing seller alone. Presumably they are deemed to be willing at whatever low price the buyer suggests, for that is the inevitable consequence. Can the Minister explain that, and does she subscribe to a rules-based approach to property evaluation?

The market is on notice about the direction of travel here. Even without peppercorn rents, the Bill is definitely going to shift the dial. I simply ask the Minister: where is the evaluation of all these direct and indirect effects? We need to know.

The Secretary of State’s views on the problem are well known and have been repeated by noble Lords. I am not sure whether it is the leasehold system as such or the culture and policies which attend it that is most at fault; presumably, it is a combination of the two. I really support the consumer protection measures in the Bill, but I counsel against wanton destruction of value, undermining people’s investment in their homes and the risk of market disruption. Those have to be avoided. I regard the Government’s proposals as a bit piecemeal and lacking in strategic foresight on replacing leasehold, which people generally feel has to be replaced. But in the meantime, it is going to continue for some time for certain people.

This is not good enough. There are around 5 million leasehold homes in England, worth at least £1.25 trillion. Home owners and their lenders need to be assured that there are plans in place for a smooth transition from one system to the other, whatever the regime happens to be, and that they do not lose out in the meantime. Process and cost have to be transparent—and, please, less profiteering.

There are opportunities in this highly complex Bill to deliver better consumer protections and I look forward to working with other noble Lords to progress them. But parts of the Bill are very far from transparent themselves and this is regrettable. I promised the Minister suggestions on ways of further clamping down on exploitative behaviour that has blighted leasehold over the past 20 years. I regret to tell her that I have not yet finalised these. However, drawing on experience from the continent and elsewhere, I shall elaborate on them as the Bill proceeds. I will certainly return to building safety issues in Committee, because things simply cannot continue as they are. The policy needs to be much more joined up.

In conclusion, lest they become a protracted legal battleground with much collateral damage, all these things have to be dealt with together and not considered piecemeal. If they are, great dangers arise from getting it wrong.

--- Later in debate ---

[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.

Local Planning Authorities: Staffing

Earl of Lytton Excerpts

Monday 12th February 2024 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, given the clear impression that local authorities do not have the resources to draw up a robust local plan at the moment—this can be rectified only over time—and, even worse, that they do not have the resources to defend a local plan when it is challenged by speculative proposals on appeal, what does the Minister suggest for current issues around water and nutrient neutrality and biodiversity net gain, referred to by the noble Lord, Lord Crisp, given the existing lack of ability to monitor, let alone take enforcement action against, infractions?

[Baroness Penn (Con)]

My Lords, as noble Lords will know, the Government had a proposed solution on nutrient neutrality that was rejected by this House, including by the Front Bench opposite, holding back the building of thousands of additional homes. The point about more specialist skills is well made. That is why, as part of our planning capacity and capability programme, we are looking to boost specialist skills so that local planning authorities have the skills they need.

Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Report stage
Wednesday 13th September 2023 Lords Chamber

[Lord Carrington (CB)]

My Lords, I declare my interests in landownership as set out in the register.

Somewhat reluctantly, I am retabling the amendment from Committee stage, despite the very helpful response that I received from the Minister. Amendment 246, which I propose with the support of my noble friend Lord Lytton and the noble Earl, Lord Caithness, involves the Secretary of State establishing a statutory duty of care setting out the obligations of the acquiring authority in a compulsory purchase situation. That would strengthen the obligation of the acquirer to consider, and possibly reduce, the impact of a compulsory purchase proposal on the claimant, their property and their business. The intention is to safeguard owners against the excesses of the acquiring authorities, many of which are large companies or government bodies.

The Minister, in her response, pointed to the guidance that is already in place for acquiring authorities to treat claimants with respect by undertaking early negotiations to identify what measures can be taken to mitigate the proposed schemes’ impact on land- owners. However, although the guidance is there, it really needs strengthening due to the lack of resources at acquiring authority level to understand fully and implement that guidance. A duty of care resulting from a statutory instrument will give a greater level of protection to those under threat of compulsory purchase and ensure that the acquiring authority considers it as a matter of first priority.

I cannot emphasize enough the appalling experience that greets the property owner affected by compulsory purchase. Some lose their whole property, while many others lose only a proportion, but the whole property suffers from the impacts of construction, which may go on for many years or decades, with the owner having to maintain a viable business throughout that time.

The acquirers’ responsibility is to compensate the land or business owner for their loss, but this is nearly always paid after the land has been taken, in some cases many years thereafter. This delay only adds to the loss. Anyone who has been affected by HS2, which includes me, knows exactly what I mean.

Property owners who are affected by compulsory purchase feel that their interests are often ignored by acquirers keen to deliver the scheme together with any environmental mitigation but with little consideration for the person or business that occupies that land. The statutory duty of care to consider and mitigate the impact on landowners and businesses impacted by the scheme, on top of government guidance on compulsory purchase, would rebalance the interests of delivering the scheme and reduce the impact. It would not delay or prevent schemes and could assist them by avoiding legal battles on interpretation of the guidance. It would also ensure that impacts on property owners and businesses are considered as a key part of the scheme, rather than being an afterthought considered only when compensation is due sometime later.

I hope the Minister will accept that this is a constructive amendment, designed to take much of the aggravation out of compulsory purchase while enabling sensible schemes to progress with greater consideration of the interests and livelihood of the owner. I beg to move.

[The Earl of Lytton (CB)]

My Lords, I support the noble Lord, Lord Carrington, and am a signatory to this amendment. I commend him for his succinct explanation. I also have land interests and some professional familiarity with compulsory purchase.

I have very little to add, but I simply say that the use of CPO powers, and the number of bodies exercising them directly or indirectly, is expanding. It risks subsuming the interests of the individual owner from whom rights are being compulsorily wrested. Some acquiring bodies have overriding commercial objectives, possibly only indirectly aimed at the promotion of public best interest, and I think we should be aware of that. Moreover, many of the safeguards built into the processes when they were used by what I will call the traditional acquiring authorities—for instance, government agencies, local government and so on—seem no longer to be entirely honoured in spirit. That is very important, particularly as we have an expanded use of CPO powers.

The amendment is thus a natural, logical and necessary safeguard for owners who are subject to these powers. They would, inter alia, deal with the evils of entry and taking of land without concurrent payment of compensation. That arrangement leaves a claimant on the back foot in negotiations, prejudiced financially and reorganising their affairs. Failure to adhere to the principles behind this amendment suggests a material erosion of the protocols that are familiar to us under the Human Rights Act—for the reasonable enjoyment of a citizen’s property not to be deprived without due process and for the rules-based system. That is why I support this amendment.

[Lord Stunell (LD)]

My Lords, on this side we are sympathetic to the intent of the amendment from the noble Lord, Lord Carrington, although somewhat doubtful about the mechanism he has proposed. I think we all want people who are subject to compulsory purchase orders to be treated in a humane and certainly human rights-compliant way. We do not want to return to the days of Crichel Down and everything that emerged from that.

Nevertheless, I think the noble Lord, Lord Carrington, made it clear that he saw the fundamental problem being one of resources and a search for a less mechanistic way of enforcing compulsory purchase regulations. I would be interested to hear the Minister respond and, I hope, confirm that purchasing authorities will be given support to make sure that they take that process through speedily, particularly the payment of compensation, and in a timely fashion.

Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Report stage
Monday 4th September 2023 Lords Chamber

[Lord Lansley (Con)]

My Lords, I put on record my interest as chairman of the Cambridgeshire Development Forum, which of course involves me in a wide range of planning and development-related issues.

I want to say a couple of things at the outset. First, I say a big thank you to my Front Bench colleagues for the time and energy that they and officials have given to discussing many of these amendments. I know they have worked hard, including through the recess, for us to try to reach agreements about some of these things: even if we do not, I want to say how much I appreciate the effort they are putting into it. The other thing I want to mention is that all my amendments, even if I might end up disagreeing with my noble friends on the Front Bench, are intended to make the Bill work better and in the spirit of how it is constructed.

That brings me to this first group of amendments, all in my name. In Committee, we had a very interesting discussion about what constitutes an “up-to-date” local plan. Why is this important? It is important because when we reach that part of the Bill and we have a plan-led system, we need to know whether the plan has full effect. Almost by definition, an up-to-date local plan has full effect and an out-of-date local plan has no effect, some effect or a differing weight. An emerging plan also has weight attached to it, but we also do not know precisely how much weight is to be attached. The Government’s answer to this, of course, is terribly simple and was a very compelling reply to the amendments in Committee. It said that an up-to-date plan is a plan that has been adopted within five years of the preceding plan. That is a cliff edge, they said, and a cliff edge does not do: we need something that is more subtle than that and acknowledges that there are plans that go out of date, but they are not much out of date and they are relevant, and we have emerging plans to which weight should be given.

So, we have constructed a set of amendments that inserts the words “up-to-date” in front of “plan”, because if you have a plan-led system and you just say “local plans” and do not refine what you mean by that, it is rather deficient—and we are intending to have a plan-led system. The Government’s arguments are based, in substance, around the proposition that local authorities need to have up-to-date local plans; otherwise, the system will not work effectively. In so far as they do not, the Bill has, as we shall come on to in the next group, the question of national development management policies which, to a large extent, step in in the determination of planning applications in circumstances where a plan is no longer up to date. So, there are undoubted pressures on local authorities to have a local plan that is up to date, but this is not easy.

Although we have a significant slowdown in the number of local plans being progressed by local authorities—not least because of the uncertainties associated with the revision of the National Planning Policy Framework and the uncertainties, frankly, associated with the passage of this legislation, which is not helping the situation—none the less when the Bill goes through and the NPPF is published we need to give greater certainty, and I think statutory weight behind the expression “an up-to-date local plan” gives certainty.

However, it does not solve the problem of a plan being out of date or there being an emerging plan in relation to the existing one. That is why the most important amendment I have suggested in this group is Amendment 187, which gives the Secretary of State a power in regulations to say what constitutes an up-to-date local plan—enabling that term to be defined—and to specify what weight should be attached to plans that are no longer up to date and to emerging plans. I anticipate that my noble friend may reply, perfectly sensibly, that we can do all that in guidance; my point is that we are creating statute and therefore want to give statutory weight to local plans as such and to up-to-date local plans, and to give a statutory framework for the processes by which Ministers determine how up-to-date plans, out-of-date plans and emerging plans are to be considered in relation to the process of determining applications.

When we come on to national development management policies, the interaction between the regulations saying how much weight should be attached to emerging and out-of-date plans and the Government’s specific provisions in the national development management policies is an important one, which would be assisted by placing all these things into regulations—to which Parliament can have regard, which is, frankly, not an insignificant consideration. As we have encountered a number of times in the planning considerations in this Bill, where the National Planning Policy Framework and guidance to local planning authorities are concerned, Parliament plays, in effect, no role.

We have a chance now to say that we want a role—that we want to see the regulations and, in exceptional circumstances, to dispute them. The key thing is that Parliament should at least have a chance to see and debate them, and to give statutory weight and legislative backing to the meaning of local plans as they appear at the heart of the plan-making process. I beg to move.

[The Earl of Lytton (CB)]

My Lords, as this is the first time I have spoken at this stage of the Bill, I draw your Lordships’ attention to my professional and property interests.

I strongly support what the noble Lord, Lord Lansley, has put forward, for reasons which tangentially affect me to some extent where I live, down in Sussex, where no one could quite work out whether a duly made neighbourhood plan was still extant in the absence of a current local plan. This seems to be one of those things where unforeseen consequences have come about. As the noble Lord, Lord Lansley, has mentioned, making local plans and keeping them up to date is certainly not an unonerous burden; it is a process of constant churn in which at a certain date it becomes law, if you like, and at another date it suddenly drops off the cliff edge, as he referred to it, but the neighbourhood plans do not necessarily coincide with that same cycle.

It is even more of a problem for communities to make their local plans, because they do not have the same sorts of resources. A lot of it is done by voluntary hard work and endeavour. Yet in areas where a neighbourhood plan is still extant but the local plan has gone out of date, the whole thing is left in limbo. I absolutely buy the point that we need greater certainty and that some parliamentary scrutiny of this process is needed, at least to be able to consider a regulation.

Whether it is right that the Secretary of State should have quite such extensive and untrammelled powers to do this is probably a matter that the two sides of the House will never quite agree on. I think there is a valid point about how far one takes that. However, this degree of uncertainty is highly corrosive and is very damaging to confidence in the local plan and to coherence and trust in the process at neighbourhood and local plan level. I warmly support and thank the noble Lord for raising this very important group of amendments.

Building Safety (Leaseholder Protections etc.) (England) (Amendment) Regulations 2023

Earl of Lytton Excerpts

Thursday 20th July 2023 Lords Chamber

Moved by

[The Earl of Lytton]

At end to insert “but this House regrets that they have been laid without provisions to remedy operational defects in the Building Safety (Leaseholder Protections) (England) Regulations 2022 (SI 2022/711) and the Building Safety (Leaseholder Protections) (Information etc) (England) Regulations 2022 (SI 2022/859); and further regrets that His Majesty’s Government have not adequately consulted relevant practitioners prior to the laying of these Regulations.”

[The Earl of Lytton (CB)]

My Lords, before I proceed, I thank the Minister for reaching out. We did not succeed in getting a meeting together, but I hope that the bullet points I submitted to her office yesterday were of some help.

As the Minister explained, these regulations amend two previous sets of regulations, SI 2022/711 and SI 2022/859. It is true that these new regulations streamline some of the aspects in those regulations. My point is that they fail to deal with the fundamentals of those earlier regulations, which, given where we are now and what is known about their operation, should have been a proper matter for consideration in the application of regulatory power. They represent a theoretical approach at best and, from all that I have heard from practitioners, do not accord with the real world of buying and selling leasehold flats nor the technical or practical issues associated with conveyancing in particular.

It leaves one wondering where to start with all this. There are too many unknown issues: the extent of remediation; the responsibility that would arise under the Building Safety Act for defects; the true legal liability for those defects having arisen; the cost of remediation; and the potential for “known unknowns”, to quote Donald Rumsfeld, or indeed currently unknowable remediation requirements and their likely cost.

Professionals tell me that they do not believe that the comments made by the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments have been properly addressed. Why is that? There are too many variables, exclusions and qualifications in the process of leaseholder certificates of registration, the content and accuracy of requests to the landlord, the landlord certificates themselves, and the extent to which the landlord is, in turn, reliant on information from others not within its control. There is an essentially continuous iterative process of company worth evaluation and liability assessments. The time lag where land registration is an essential part of the information package, which I understand might occur, is governed by the fact that the Land Registry has a backlog it is working through of several months’ duration.

There seems to be a disparity between the information prevailing on 14 February 2022, which is the mandatory date when matters have to be assessed—certainly as regards matters of company ownership and so on—and the relevant facts relating to the financial consequences of remediation, which will arise only as a result of the regulations tabled initially last summer and not at some point in February at the whim of the Secretary of State. I am told that the timescales are too tight in many instances, leading to a high risk of default liabilities and perhaps setting in place a liability for something not caused by the person deemed liable. I feel that that is unlikely to procure a beneficial result. The strict application of four weeks—or seven days, as the case may be—is severely inflexible and, I believe, an impediment.

All of the above will lead to uncertainty, risks and pitfalls, including, as I mentioned, default liability for remediation or for contribution in full, in part or not at all. The latest clarification on whether a leaseholder’s certificate of registration is required in an application for a landlord’s certificate is that a failure to provide it means that they fall into the non-qualified category; as I understand it, once something is non-qualified, it is non-qualified for ever. I fail to see how that is the advantage that the Minister appears to claim for it. I would be grateful if she could provide better detail about how leaseholders are supposed to check the accuracy of the information provided in that landlord’s certificate. Do the Government intend to use their powers under Part 11 of the Bill, which is entitled “Information about Interests and Dealings in Land”, to ensure that those certificates are in fact accurate? If not, I do not see how it is possible to verify this.

As for the certificates themselves, paragraph 15.c. of the department’s own guidance says that a landlord’s certificate must be provided

“within 4 weeks of them becoming aware of a relevant defect which was not covered by a previous landlord’s certificate”.

How much of a rolling event might that be? The things that affect that certificate were not crystallised on 14 February 2022 but are on an ongoing continuum. I see that as a real question of a practical nature. It means that a fresh certificate can be issued as and when new relevant facts emerge, which is intrinsically inimical to the concept of a reliable landlord’s certificate even if it could be deemed accurate at the time of its issue. It simply opens the door to more arguments about who knew what and when and whether the information provided could have objectively been deemed accurate, with all the consequences that flow from that in terms of recovery, accuracy and liability for cost, not to mention potential arguments through litigation.

Going on from that, the reason why 14 February is so important is because paragraph 17.b. says that the landlord’s certificate must

“be based on the circumstances of whoever was the relevant landlord on 14 February 2022”.

The circumstances of that person may be one thing but the practical and factual basis of what may be germane to that is, as I say, something that happens in real time—today, not 18 months ago. I assume from this that the legal situation is therefore taken at one date but the circumstances that may be germane to making that calculation in fact accrue at another date; I will leave that to one side for the moment. The facts may create a completely moveable feast in terms of whether you take one subsequent piece of information and then feed it back in. How is this loop ever going to be broken?

Does the Minister dispute this assessment? It seems that there is a disparity between the valuation date in question and the facts that are germane to that. It is essential that the financial information about landlords, particularly landlord groups, is provided in the landlord certificate and is accurate. Any inaccuracy could make the difference between a leaseholder paying nothing or up to the £15,000 cap. Concerns have been raised with me that landlords are, for understandable reasons, using the accounting definition of “a group” when it comes to assessing their net worth, rather than the definition of “associated” in the Building Safety Act.

--- Later in debate ---

I can tell the noble Baroness, Lady Taylor of Stevenage, who spoke on behalf of the noble Lord, Lord Kennedy, that as I have said many times at this Dispatch Box, we will bring further leaseholder reforms. That was in our manifesto and we will bring them forward in this Parliament.

[The Earl of Lytton (CB)]

My Lords, I am grateful for the Minister’s comments, for the support of the noble Lord, Lord Stunell, who has much greater credibility in this area than I will ever have, and for the support and comments of the noble Baroness, Lady Taylor of Stevenage.

In a sense, I shrug my shoulders slightly here, because the cat is already coming out of the bag. Yesterday, my attention was drawn to the case of URS Corporation Ltd v BDW Trading Ltd, which is a defective premises case which looks set to attach liabilities to all sorts of people, not just the developer. I appreciate the Minister’s comments about my building safety remediation scheme, which tries to effect strict liability for defects rather than this rather curious containment process that is neither fish nor fowl. None the less, if the Minister does not accept it, and the Government cannot take it on board, I think interaction with the courts and litigation will probably procure it but in a slower, more painful and more gruesome fashion. That is where I think things are heading.

I want to take a moment to pay tribute to some of the people who have helped me. Alison Hills, Zahrah Aullybocus and Stephen Desmond are practitioners who have been very happy to share their experiences with me—and their experiences seem to be widely shared by other professionals. What the department is saying and what is happening in reality seem to be two quite different things.

I quoted from the UK finance guidelines, which are the ones that people look to at the moment, and commented on the professional indemnity insurance issues. These are not matters of regulation. This is not a case of raising a magic wand and saying, “We have made a regulation and therefore it is all right, is it not?” This is the court of practical application in real life.

It appears to me that, notwithstanding what the Minister says, the department does not seem to have consulted in depth with practitioners, otherwise I would not be getting all this feedback from people who have attended seminars and courses and discoursed with specialists in this area. All sorts of people, from the likes of Falcon Chambers downwards through a number of specialist firms and practitioners, are saying the same thing. I suspect that, whatever consultation and discussion process is going on—noting that they do not have a duty at all to consult on this—the Government do not appear to be getting their information from the sources they need, and the proof of the pudding is what is happening in the market.

The Government do not appear to have acquainted themselves with the actual experience of leaseholders and professionals. Over recent weeks, some 240 individuals have written to me about one thing or another—not necessarily about this particular set of regulations but about the way in which the Building Safety Act provisions and regulations are not working for them. I believe that is simply the tip of the iceberg.

Although I will continue to press for much more significant reform, and I appreciate the support from all round the House on this, it is not my intention to put this to a vote. I end by saying that I am grateful for the positive points of clarification that the Minister has been able to make on landlord certificates and leaseholder extensions. I certainly look forward to the opportunity of having a dialogue with her and her officials as time goes forward, and perhaps bring together some of the experts that have been helping me. With that, this is not the time to press this amendment, and I beg leave to withdraw.

Amendment to the Motion withdrawn.

Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Report stage
Tuesday 18th July 2023 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I add a brief footnote to what the noble Lord, Lord Best, said in speaking to Amendment 71, to which I have added my name, and to what my noble friend Lord Lansley has said about Amendment 311. I endorse what the noble Lord, Lord Best, and my noble friend said about the willingness of Ministers to listen to us throughout the process. The government amendments respond to the concern that we all expressed in Committee about the potential loss of affordable homes.

I shall pick up the point made by the noble Lord, Lord Best, about the so-called viability loophole. What has been happening is that well-resourced developers, half way through a scheme, have turned to the local authority and said, “It’s no longer viable—and, by the way, we cannot build the affordable homes which were due to be built right towards the end of the scheme”. That left the local planning authority with the nuclear option of pulling the plug on the whole scheme or allowing it to go ahead and at least getting the open market houses. At the time, Shelter did some research, which showed that the use of viability assessments in 11 local authorities across England contributed to 79% fewer affordable houses being built in urban areas than would have built if the original agreement had been adhered to. Following that controversy, the Government introduced guidance and tightened up the rules in 2018; the new rules limited the use of viability assessments to reduce affordable housing to exceptional circumstances, such as a recession or similar economic changes. That was a step in the right direction.

My concern, which was echoed by the noble Lord, Lord Best, is that government Amendment 76 seems to go back on the 2018 changes and revert to the position that generated all the criticism about viability. I note in passing that the technical consultation criticised the current Section 106 agreements by saying that the

“planning obligations are uncertain and opaque … they are subject to negotiation (and can be subject to subsequent renegotiation), can create uncertainty for communities over the level of infrastructure and affordable housing that will be delivered”.

Is that not exactly what Amendment 76 does in referring to a development being economically unviable? It seems that what the Government are doing is virtually guaranteeing that no development will ever lose money, while the developer benefits from any gains above expectation. The levelling up Select Committee’s report expressed the same doubts last week.

I want to say a final word on Amendment 311, to which my noble friend Lord Lansley spoke. On 17 March, the Government published their technical consultation. It ran to 91 pages and asked 45 questions; it is not an easy read. The consultation ended on 9 June and the document said:

“Following the closure of this consultation, the government will assess responses. In doing so, a response will be issued that summarises the themes that emerged, before issuing a final consultation on the draft regulations after the Levelling Up and Regeneration Bill achieves Royal Assent”.


This means that we are debating Schedule 12 in a vacuum because we do not know what its structure will be. I am afraid that this is a feature of too much in this Bill.

When it published its report, Reforms to National Planning Policy, the Select Committee in another place picked up the same point. It also said that we are going to have real issues if we run the infrastructure levy and Section 106 in tandem, leading to arguments and complications. I was not wholly reassured by what the Minister in the other place said in response to the Select Committee’s query:

“If they say that it is too complicated and ask to change things, we will consider that”.


I am not sure that that is a great step forward.

So, on both issues—viability and the absence of the structure of Section 12—I hope that my noble friend the Minister will be able to provide the House with some reassurances.

[The Earl of Lytton (CB)]

My Lords, I will intervene briefly. I declare an interest as a chartered surveyor with some involvement in the development process.

I want to speak to the factor that links Amendments 71 and 94 and follows on from what the noble Lord, Lord Young of Cookham, has just said. I have been in the past a technical operator of the dark arts of development appraisal. I would be much less charitable than the noble Lord, Lord Stunell, in my comments about exactly what goes on here; for instance, how land values under option agreements are arrived at and how, with a click of a mouse on a proprietary development appraisal computer package, the matter can then adapt to a viability test for the local authority’s community infrastructure levy or Section 106 contribution purposes. Noble Lords would be astounded at the way in which a yield change here and a cost base there, as well as the adaption of a timeframe or the alteration of a contingency allowance—I mention just a few means—can be used to alter significantly the entire outcome and colouration of what is claimed on the back of it. Further, all this is done by using the same primary data inputs and, unsurprisingly, there are two factors that developers will never reveal to you if they can get away with it. One is the land value that they paid, coloured as it is by all sorts of associated costs before it gets as far as a planning consent; the second is their construction costs, which are entirely opaque.

Alongside all this and of much longer standing is what I describe as the commoditisation of residential property, which started in the 1990s. It has since financed ever more of the items society wishes to have, in terms of affordable housing, infrastructure, schools et cetera. But that policy has created a consistent and ever more bankable asset within an enhanced lending sector. This results in the very unfortunate situation of driving up house prices and creating a model that is less than satisfactory. Core to this is the issue raised by the noble Lord, Lord Stunell—transparency. Without it, none of this will be demonstrable to anybody, at any time.