King’s Speech

Baroness Finn Excerpts

Thursday 9th November 2023 Lords Chamber

[Baroness Finn (Con)]

My Lords, it has been a pleasure to listen to so many eloquent, insightful and passionate contributions in this debate on the gracious Speech. I rise to speak in favour of the Government’s leasehold and freehold reform Bill, which represents a crucial step in eliminating the opaque management fees, exploitative ground rents and short leases associated with leasehold tenure. Many noble Lords and Members in the other place have campaigned on this for many years. I pay particular tribute to my noble friend Lord Young, the noble Earl, Lord Lytton, and the noble Lord, Lord Kennedy, for their tireless advocacy.

In moving the Motion for an humble Address, my noble friend Lord McInnes pointed out that leasehold reform was first announced in 1952 and that too little has happened in the intervening years. My daughter, who is pretty apolitical, announced that she would vote for any party that finally ended the unfairness of leaseholds; I am pleased that we are possibly giving her a reason to vote Conservative.

We say that an Englishman’s home is his castle, but that is sadly not the case for the owners of more than 5 million homes across England and Wales that languish under leasehold covenants. Some examples of exorbitant charges include: a £60 consent fee for replacing a doorbell; a £360 charge for a new doormat; and, unforgivably, a £250 consent fee to have a pet dog. The leasehold system has been described as feudal, but such mercenary practices would give even the Sheriff of Nottingham a run for his money.

This has been a long debate and several noble Lords have already spoken on these points, so I will restrict my comments to three important reforms in this Bill. The first concerns service charges and management fees. The Bill will bring such opaque fees into the light by requiring transparent, standardised service charges. This will end exploitative practices, such as charging a 50% commission on buildings insurance, and will prevent management companies treating service charges as profit-making schemes.

Secondly, I turn to ground rents. In the past decade, developers of new-build homes have sold leaseholds to unsuspecting customers, promising low ground rents while auctioning the freehold to investors. These investors can then exploit the new home owners with unfair and opaque service charges, as well as charging them a fortune to rectify the situation. This Government have already legislated to cap all new ground rents at a peppercorn rent; this Bill takes the next step. In England and Wales, all new houses will be freehold. This will ultimately sound the death knell for leasehold houses and put an end to sharp practices by predatory developers and investors.

Thirdly, on short leases, ending the creation of leasehold houses is welcome but will do nothing for existing leaseholders. Currently, leaseholders have a right to extend their tenure by 90 years, but that is perilously close to the 80-year cut-off where people face exorbitant marriage value costs to secure their home. This has been tolerated by the housing system for too long, so I welcome confirmation that the Bill will abolish marriage value. This Bill will increase the standard lease extension tenfold, from 90 to 990 years, and will remove the requirement for two years’ ownership from eligibility for lease extensions. These are all welcome changes, but they beg the question as to why the Government do not simply finish the business and abolish the leasehold system entirely.

On that note, I turn to the main area of weakness in the Bill. Of the 5 million leasehold properties in the UK, 70% are flats. I am disappointed that this Bill neither stops the creation of new leasehold flats nor sets out a path out of leaseholding for existing flats. There is an alternative system, as many noble Lords have pointed out, which is commonhold. Unlike leasehold, with commonhold there is no limited tenure and no requirement for a third-party overseer, while the home owners have total control over the management and administration costs. In 2021, the then Secretary of State committed that the legislation was the beginning of even more fundamental change to English property law through the widespread introduction of the commonhold tenure.

Despite the commonhold model being widespread in Scotland—they abolished their feudal rent and feu duties in 2004—we have only 20 commonhold developments. The Law Commission’s 2020 report into commonhold states that it is the preferred alternative to leasehold. I would therefore have welcomed a commitment by the Government, by the Minister, to restate that we are moving towards the commonhold tenure system and to implement the Law Commission’s recommendations in full. Is that indeed the Government’s final intention?

The debate today also encompasses public services. Like many people, I have been dismayed by the accounts of the growing debacle of HS2. It is a sorry story of poor planning, mismanagement and overspending. I read that the Cabinet Secretary had received a request from a senior government adviser for an investigation into the Permanent Secretary at the Department for Transport over the mismanagement of this project. Astonishingly, it is alleged that he forwarded the request directly to the Permanent Secretary for a response. I cannot verify whether such an account is correct, but the root cause of this debacle is a lack of accountability, which is felt through our increasing inability to get the basics of public services right or to build large infrastructure products on time or on budget. My noble friend Lord Maude recently—well, actually, a while ago—completed his review into the governance and accountability of the Civil Service. We look forward to the recommendations with keen anticipation, and I hope that the Government will not delay its publication any longer.