Leasehold and Freehold Reform Bill (Third sitting)
Barry Gardiner ExcerptsThursday 18th January 2024
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Leasehold and Freehold Reform Act 2024 View all Leasehold and Freehold Reform Act 2024 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 January 2024 - (18 Jan 2024)
The Chair
Does anyone have anything to add? Do not feel that you have to; I am not putting you on the spot.
Ms Paula Higgins: There is one thing I would add. I am so pleased that Sue is here; she has done amazing work on shared ownership. I am not a legal expert, but I wonder whether you will be hearing from people from the retirement housing sector as well. That is a very complicated form of tenure, with exit fees and whatnot. Can they actually have the same rights to challenge fees and things like that? I am not sure if that is covered in some of your evidence sessions, but retirement housing is notoriously known for quite scandalous fees and charges.
Bob Smytherman: Certainly, we have seen a massive increase in shared ownership memberships coming to us for membership of residents’ associations. Obviously, we are helping them through that. In terms of quick wins, I really hope the Government will finally implement an independent statutory regulator for property managers. That would be a really quick win to help leaseholders. It is very disappointing that we have not got there yet, so I really hope there will be an independent regulator for these management companies that hold large amounts of leaseholders’ money.
Barry Gardiner (Brent North) (Lab)
Q
Sue Phillips: One of the things I would want from this Bill is for shared owners to have all the rights that other leaseholders have. Of course, as your question flags up, they face problems over and beyond the problems faced by leaseholders. The problem for shared owners is that if they—I will not speak to the specific technicalities of this—fall behind with payments, they are liable to possession with no reimbursement of the equity they have invested in their property. This is because they sit more as a tenant than as a homeowner. I would certainly like to see that addressed.
Barry Gardiner
Q
Sue Phillips: It is. Housing associations will say that they will do their utmost to prevent this scenario playing out, and that numbers are low. While that may be true, I do not think it is an argument against shared owners having the same protections in law as other leaseholders.
Barry Gardiner
Q
Sue Phillips: Shared owners should have the same right as other leaseholders and they should not be liable to lose their investment in their home due to a relatively small debt—absolutely.
I would add that it is a hugely important issue, but it is probably an issue that affects a fairly small minority of people at the moment and that there are other issues arising from this reform process that affect a great many more shared owners or all shared owners. It is an important issue, but I would not like for it to take up a disproportionate amount of time in this session.
Barry Gardiner
Q
Sue Phillips: My expertise does not lie so much with right-to-manage claims; what I would reiterate is that they should have the same rights as any other leaseholder.
What is more important—what is specific to shared owners—is that they are liable for 100% of the costs of repair and maintenance, and I think there are two separate issues within that. One is the issue relating to the model. In previous sessions—
Barry Gardiner
Sorry, I couldn’t hear what you said there.
Sue Phillips: Sorry. One is to do with the model and one is to do with the transparency around the model. On the model itself, in the previous sessions on Tuesday people talked about the unfairness of generating income streams from leaseholders after the profit made on the sale of the initial share, and I think that the 100% liability for service charges that shared owners have falls within those kinds of questions. It should certainly be looked at to see whether it is proportionate for shared owners to pay 100% of charges. Again, there is a great deal more that I could say, but I am aware of the limits on time.
The second issue is transparency. In evidence submitted to the Levelling Up, Housing and Communities Committee inquiry into shared ownership, one of the themes that has come out of the published responses from shared owners is that people do not seem to be aware at the point of sale of their liabilities in this respect. Therefore, if we cannot tackle that 100% liability in this Bill, given time constraints, at the very least regulators should pay more attention to the nature of marketing and whether it is fair, transparent and compliant with consumer protection regulations.
You asked me earlier for a quick fix. I certainly have a quick fix around transparency and it is that the relevant regulators should look more closely at transparency about the model as it stands, up until we have meaningful reform of the areas that are problematic.
Barry Gardiner
Q
Sue Phillips: I think it is essential, and this relates to the marketing that I have talked about. Shared owners come into shared ownership believing that they are a leaseholder like any other leaseholder; they have no reason to think differently. Often, there is a caveat emptor attitude and I think that is reprehensible, to be honest, when you are talking about provision of social housing to households that by definition are financially vulnerable compared with people who can afford to buy outright. It is not a failure of their due diligence; it is a failure of the Government, the housing sector and their agencies to spell out the difference between assured tenancy and leasehold.
There is a moral compass argument that they should have the statutory right to lease extension, because of the manner in which they have been sold those short leases. I think there are separate debates to be had about whether 99-year leases were mis-sold. A recent ruling by the Advertising Standards Authority outlined that it is likely to be misleading not to provide material information about the costs of lease extension. That suggests that there certainly is an argument that those short leases have been mis-sold.
We cannot change that. Most of those shared owners will be outside any scope of limitations for redress. The least we can do is ensure that lease extension is available not only to future buyers, but current shared owners, who have been left with a lease that does not actually give this right. Can they afford to take up the right? They should have a right to lease extension, but that right should be made affordable. If you are sitting there with a 50, 60 or 70-year lease, even if you have got that right to statutory lease extension, it might not be affordable to take up that right. So there is a basketful of issues to look at here, and I encourage collaboration with other regulators and with the Levelling Up, Housing and Communities Committee to resolve those other issues.
The Chair
Just one last question, Barry, because I want to get other people in. I might have the time to come back to you if you have more, but—
Andy Carter
Q
Ms Paula Higgins: I feel strongly about that. This is really going to be a missed opportunity. These types of Bills will come once every 20 years, so you must finish the job that you start. We saw that in the Commonhold and Leasehold Reform Act 2002, where we had the commonhold and it did not happen. If we cannot get commonhold sorted, why do we not have all flats being built having to be share of freehold—having to be sold share of freehold within five years—and have a sunset clause saying that there will be no new leasehold flats after a certain time? If you do not do it now, the next opportunity is not going to arise. I feel very strongly. We have lots of people who are waiting. We have people coming to us every day saying, “I am waiting for my lease extension. The Government are going to do something about it.” We have been waiting for years; we put out our report in 2017 showing that 43% of leaseholders did not even know how much time was left on their lease. They are not expected to be experts in this; they are buying a flat to live in. So it is a real missed opportunity if we do not do something on this and it will come back to bite us.
Richard Fuller
Q
Ms Paula Higgins: That is a really good point. I know the RoPA stuff—the regulation of property agents working group; in fact, we gave evidence to it. A tick box is probably not the right thing. Perhaps it is more about a proper single place for redress, but as I think Andrew Bulmer mentioned, that is the ambulance at the bottom, and what matters is what is at the top.
What we don’t want is people doing online qualifications and getting a tick, and then they can jump up as an estate agent and come back down again. So I appreciate the complexities and I look forward to seeing what your deliberations will be.
Sue Phillips: I do not have the expertise to speak directly to the regulation of property management, but I would like to pick up on a couple of related issues from a shared-ownership perspective. The first is that the evidence submitted to the Advertising Standards Authority’s inquiry into Black Friday marketing highlighted the fact that industry sector standards for the marketing of shared ownership are lower than other standards that are out there. For example, shared ownership is currently excluded from the New Homes Quality Board’s code of practice. That simultaneously reflects the complexity of shared ownership but also the fact that shared owners do not have access to the same level of protections as other homebuyers in relation to new build codes. That is slightly off to one side.
I also wanted to pick up on the matter of transparency of service charges. Transparency is clearly essential: people should know what they are paying for. However, shared owners and other leaseholders should not have to effectively take on an audit function where it falls upon them to scrutinise accounts. They should be able to place some degree of reliance on the accuracy and proportionality of the accounts that they receive. I cannot speak to how that will be achieved, but I think that the onus should be on the providers of services and service charge accounts to be better, rather than leaseholders and shared owners having more and more obligations to scrutinise and take whatever action is required if problems are identified in those accounts.
Barry Gardiner
Q
Ms Paula Higgins: I fully agree with that. It is a bit like the situation where, if you are getting building work done in your home and the building work is not completed or whatever, you withhold money. That happens in all of the construction industry. The stuff in relation to the forfeiture is very disproportionate, is it not?
Barry Gardiner
Q
In so far as new apartments are going to have a share of freehold, Mr Smytherman, you indicated that you felt that you had got the best of both worlds as a director of a freehold franchise company.
Bob Smytherman: Yes. Ours is a tripartite lease. A ground freeholder owns the land and there is a separate middle lease, which is the limited company—limited by shares—of which we are shareholders.
Barry Gardiner
Q
The Chair
A one-word answer, please, because I have to get to the end.
Bob Smytherman: That is difficult. It depends. If you have a difficult freeholder, then that would clearly be an advantageous thing to do. Then there is a scenario like ours, where you have a democratic limited company with shareholders.
Sorry, I cannot do a one-word answer.
The Chair
Q
Professor Steven: No, I agree with my colleague. From a Scottish perspective, I would be more in favour of commonhold.
Barry Gardiner
Professor Steven, my question is to you. Last week, in the House of Lords, the Government indicated that they were looking at the Scottish system of tenements. Could you perhaps explain that to the Committee? My understanding is that the Scottish Law Commission has been looking to review tenement structure and actually make it more like commonhold. Is it correct that there is a lack of standardisation and no ability to ensure those share costs are split proportionately under the tenement structure, and therefore that would not be a quick cut-and-paste for the Government if they are considering what to move forward to?
Professor Steven: Yes, I absolutely agree. The legislation in Scotland is the Tenements (Scotland) Act 2004, which is 20 years old and is fairly basic. It does not have owners associations, for example, so it is less sophisticated than the commonhold proposals that the Law Commission for England and Wales made. But we have problems in Scotland too. There are always problems, no matter what the law says.
There are two particular problems. The first is where money comes from to make repairs to flatted properties—we typically call them tenements in Scotland. The second, sadly, is apathy. I was watching the earlier session, and I saw how engaged your witness in Worthing was, but sadly in other cases the owners are not so engaged. Even if you have an owners association regime, which the Scottish Law Commission is now looking at, it still depends on people being engaged. There are no easy solutions. I favour commonhold, but it will not be a magic wand.
Barry Gardiner
Q
Professor Steven: As a former law commissioner in Scotland, I am reluctant to disagree with the Law Commission for England and Wales, given the amount of work it has done on this. It is clearly very complicated.
You said that we got rid of our feudal system in one fell swoop in 2004. That is broadly true, but in 1974—50 years ago—we banned new feudal payments, which are like ground rents. There was a system whereby the existing feudal payments had to be paid off when the property was sold, so by 2004 there was not much left. My impression is that in England there is quite a lot left, in terms of ground rents. Because there was not so much left in Scotland, the compensation issues and the European convention on human rights issues that Dr Maxwell spoke about on Tuesday were not so prominent. Although we had the feudal system till 2004, it was a shell of what it originally was. In a certain way, it would be much simpler just to change leasehold into commonhold, but I fear that it would lead to all sorts of unforeseen consequences.
Barry Gardiner
Q
Professor Hodges: Very briefly: modernise, because we are still living in the past; simplify, because we can easily do that on a comprehensive basis; and get it done so that people can plan, retrain and know what they have to do. You then get good behaviour throughout the system. I am very tempted to repeat facetiously the “Get it done” slogan, which crops up a lot.
Richard Fuller
Q
Professor Hodges: As far as the detail of the Bill is concerned, looking technically at what is in there without expressing a view as whether it is a good or a bad idea substantively, it seems to me to be fine. You asked a wider regulatory question earlier on—
Matthew Pennycook
Q
Professor Hodges: Everyone should be in and under the same regime—absolutely everyone in the system.
Professor Steven: I do not have a strong view on this.
Barry Gardiner
Q
“any financial gain for the landlord”—
or freeholder—
“will be at the expense of the leaseholder…Their interests are diametrically opposed, and consensus will be impossible to achieve.”
Professor Hodges: In any consumer or property—certainly social housing—dispute system, there is an obvious imbalance of power. People do not have the money to do things. I have chaired the Post Office Horizon compensation board advising Ministers in the past few weeks. The whole reason why Parliament needs to step in is to correct a massive imbalance of power. Private litigation did not work, or it only half worked. There have been many stories about people being traumatised, and not just unable to enforce their rights. That is why we have invented things like legal aid, Citizens Advice and an ombudsman, and we are still moving—we are still improving that one—because of the ongoing imbalance of power between the little people and larger organisations.
Barry Gardiner
Q
I want to ask you about introducing insurance commission. I do not know whether you heard what the witnesses said on Tuesday, but you may know of the Canary Riverside case, in which £1.6 million in commission was given to a freeholder by the insurer—in a kickback—which was deemed to be inadmissible, and that is what the tribunal, mercifully, found. Although the Bill is outlawing commission, it is introducing fees for insurance services. In the Canary Riverside case, that is precisely what that £1.6 million was called. Do you fear that the Bill appears to dispense with commission, but actually reintroduces it by the back door?
Professor Hodges: Possibly, but that is why you need regulation. That is an obvious example of an imbalance of power and lack of transparency, for which you need external people to get involved. Exactly what the final result ought to be, I would leave to a regulator—for them to say that so much commission is either allowable or not allowable, or indeed not at all. It depends on the circumstances.
The Chair
Can I just interject and ask whether Professor Steven has anything to add to what you have asked so far?
Professor Steven: Very briefly, insurance law is UK-wide, but in Scotland insurance of blocks would normally be handled by managing agents because we do not have the freeholder. Since 2011, we have had legislation in Scotland that regulates managing agents. I know that that is being considered in England as well, but that might be of interest.
Barry Gardiner
Q
Turning to the value of the building and property rights, we heard from an eminent lawyer on Tuesday about property rights in relation to ground rent. Looking at enfranchisement, I think it was the Residential Freehold Association, which is charged with guarding the property rights of freeholders, that said that their share in the value of the building was only 2.5%. The corollary of that, of course, is that the leaseholders’ share in the value of the building is 97.5%. Do you feel that the way in which the costs of enfranchisement look at the total value of the building is therefore unjust?
The Chair
We have less than a minute left.
Professor Hodges: I would need to know an awful lot more to be able to answer that question, as a non-property expert. It is a very interesting question, and my answer would be that it is one for Parliament and the regulatory system to engage with.
Barry Gardiner
Thank you very much. Professor Steven?
Professor Steven: I have nothing to add.
The Chair
I thank the two witnesses for taking the time to give evidence to us today. Thank you for beaming in, Professor Steven, and thank you for attending, Professor Hodges. We will now move to our next witness—Paul Broadhead, come on down.
Examination of Witness
Paul Broadhead gave evidence.
Matthew Pennycook
They can be far more punitive.
Paul Broadhead: They can be, absolutely, with where RPI is. It is really difficult to predict. Some ground rents can grow very rapidly, which puts people in financial difficulty. From the lenders’ perspective, when underwriting a mortgage, they need to consider whether the mortgage is affordable on the face of it not only today, but in the future, and to take account of any foreseeable increases in expenditure. That is one of the areas they will take into account.
In terms of the peppercorn ground rent, yes, I do believe that that will resolve this going forward. The important thing to consider is that there is still a separate consultation, which just closed yesterday, on capping ground rent for existing leaseholders. It is really important that that is brought forward to prevent this two-tier system from developing.
Barry Gardiner
Q
Paul Broadhead: You are absolutely right. We have been advocating for the reform of leasehold since 1984. As you kindly point out, it was not me that made that comment at the time.
Barry Gardiner
That elegant comment.
Paul Broadhead: Absolutely—I wish I could be as elegant, and I will try to be throughout this questioning. Our position is that leasehold does require reform. If you were going to design the property tenure today, it is not what you would come up with. However, there are 4 million-plus leasehold properties in this country. Undoing that and replacing it overnight with a new, perhaps more just, system will take time.
The first thing we need to concentrate on is reform, to make the system fair, predictable and equitable, so that people have the security of owner-occupation. In a sense, yes, they do not own the land on which their home sits, but they have the security of tenure that they would not have in other sectors. But it is important that we ensure that that is fair.
Barry Gardiner
Q
Paul Broadhead: Are you talking particularly about shared equity or shared ownership?
Barry Gardiner
Sorry, shared ownership—where you have shared ownership in the property.
Paul Broadhead: I have not got those figures to hand, but we can certainly send those through to the Committee. From speaking to our membership, I think it is fairly comparable. Our sector punches above its weight in shared ownership because it is very keen on affordable housing, and we have some big shared-ownership lenders. One thing I would say about shared ownership is that underwriting and managing those cases are slightly different from managing a traditional mortgage, because you have the housing association interest and some potential staircasing—although, of course, many do not. The arrears levels tend to be higher, but the default levels, I think, are comparable. We can confirm that in writing.
Barry Gardiner
Q
Paul Broadhead: There are two things. One is the housing association rent aspect. Affordability tends to be more stretched by people owning shared ownership properties in any event, as most people land in shared ownership as an intermediate tenure because they are not able to buy their whole home. That, therefore, means their incomes are often less predictable. They do not necessarily always understand—
Barry Gardiner
Or that property prices are too high, of course.
Paul Broadhead: Well, property prices are too high irrespective of tenure, even if you are buying as a freeholder.
Barry Gardiner
Their income may be stable and reasonable—being in shared ownership does not mean that your income is unstable in any way.
Paul Broadhead: No, not at all.
Andy Carter
Q
Paul Broadhead: Certainly. The first thing to remember is that mortgage lenders are experts in mortgage lending, not in property law—it is down to the conveyancer to advise the borrower of the requirements of the lease and the purchase of the property they are buying. The way I would describe it is that the conveyancer and the surveyor, to an extent, are the lender’s eyes and ears on the ground to ensure all of that is clear to the borrower, and that they are entering into that transaction with their eyes open.
What we have seen from a mortgage lender’s perspective, particularly when the escalating ground rent issue started to come to a head, was lenders taking a much more proactive approach on new developments to understand the terms of some of those leases, and actually refusing to lend on those new developments. Of course, there are a whole range of mortgage lenders that will lend on a new development, but the fact is that a new development without some of those large lenders—because they will not lend against that leasehold—drives change. That is what we have seen. We have seen the effect of that with the escalating ground rent—with the reduction of that.
Lee Rowley
I am not sure that I would accept that, but I will take that up with you and your members separately.
Barry Gardiner
Q
Paul Broadhead: Parliamentary privilege notwithstanding, no, we do not have individual organisations I could point to. I certainly do not get reports from my members.
Barry Gardiner
Q
Paul Broadhead: In terms of coming back to me as an association, that is a level of detail that is about individual organisations. It is not really part of my role to represent that. That does not mean they ignore that, just to be clear.
Barry Gardiner
Q
Paul Broadhead: Our members will not advise; they will refuse that mortgage, because it does not meet with their policy. In terms of other service charges, they all have a panel of conveyancers that they approve to act for them, and that is for the consumer purchasing that property. The terms of those panels change as some of these practices have come to light, and they will be nipped in the bud at that point.
The Chair
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions and, indeed, for this morning’s sitting. I thank all our witnesses on behalf of the Committee for their evidence. The Committee will meet again at 2 pm this afternoon here in the Boothroyd Room to continue taking oral evidence.
Leasehold and Freehold Reform Bill (Fourth sitting)
Barry Gardiner ExcerptsThursday 18th January 2024
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Leasehold and Freehold Reform Act 2024 View all Leasehold and Freehold Reform Act 2024 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 January 2024 - (18 Jan 2024)
The Chair
Thank you. A very quick question with a very quick answer, please. Barry Gardiner.
Barry Gardiner (Brent North) (Lab)
Q
“It is a real concern that homeowners who have entered into a lease are captive consumers with very little influence over the costs incurred by landlords or their managing agents that will in due course be passed on to them.”
Do you believe that the Bill will give them control or simply greater transparency and access to understand their own exploitation, and has the CMA come across any comparable part of the economy where those paying the bills have no control over the bill or the standard of service?
George Lusty: It is worth saying at the outset that we approached our leasehold investigation primarily from the framework of consumer protection law, looking at instances of mis-selling and unfair contract terms. We cannot use consumer law—
Barry Gardiner
Q
Simon Jones: You are absolutely right. We think the captive consumer problem is a real problem. We spoke to a lot of people about what the solution might be. There was not an obvious solution, but we did think that if there were better redress mechanisms, that would at least help.
Barry Gardiner
Q
Simon Jones: You have choice about the property you buy, but if you buy a leasehold property—
The Chair
Order. I do apologise, but that brings us to the end of the time allotted for the Committee to ask questions. I thank our witnesses very much on behalf of the Committee.
Examination of Witness
James Vitali gave evidence.
Andy Carter
Could you expand on that?
James Vitali: Of course. There are a couple of things in particular. One has been raised already by Mr Gardiner in the evidence sessions and concerns mixed-use buildings. I think it is great that the threshold is being increased to 50%. That will bring a lot of leaseholders into the scope of potential enfranchisement. But as it stands, there is a provision in the Leasehold Reform, Housing and Urban Development Act 1993 concerning structural dependency rules—shared plant rooms and things like that.
Effectively, as it stands, the provisions in that Act disqualify people who get to the threshold but share service and plant rooms with a commercial unit in the building. That section in the 1993 Act should just be removed. There is already a framework for co-operation between commercial units and residential units in mixed buildings when it comes to services. It should be relatively straightforward to create a framework for co-operation with the Bill.
Barry Gardiner
Q
James Vitali: Yes, I quite agree. One of the cases I make in the paper I mentioned is that not only is ownership becoming more concentrated in a narrow stratum of society, but the type of ownership we are offering the aspirant is being thinned out. You were just listening to the suggestion that leasehold is almost mis-sold to consumers. I think aspirant property owners are being mis-sold when it comes to leasehold. They think they are buying into a genuine form of property ownership, but in many ways, as I said at the start, they lack the rights and responsibilities that should come with an ownership tenure, so I completely agree.
Barry Gardiner
Q
James Vitali: Yes, charges should be connected to the provision of a service, so I think ground rents should be reduced to a peppercorn. Charges should be made through this new and very sensible regime that is being proposed in the Bill for how charges are requested and demanded.
Barry Gardiner
Q
James Vitali: I think the key here is whether the leaseholder has a choice in who is providing the service and what service they are providing. Any functioning free market is based on strong property rights and competition. The key here is giving existing leaseholders greater choice over who is managing their building and how it is being maintained, and increasingly giving them the chance to take on those responsibilities themselves.
Barry Gardiner
Thank you very much. In order to preserve both our reputations, I will not say that you agreed with me and I trust that you will not say that I agreed with you.
Richard Fuller
Q
James Vitali: I think a lot of the reforms proposed in this Bill are an attempt to reflect better the fact that when the leaseholder purchases the leasehold, they are acquiring the majority value of the asset. In market terms, sure, I suppose marriage value is significant and substantive, but as it stands it seems to me that a leaseholder acquires the majority of the value of an asset when they acquire the leasehold, and that is slowly eroded. I think that is the thing that is wrong in the process.
Barry Gardiner
Q
James Vitali indicated assent.
Barry Gardiner
Q
James Vitali: I will deflect and answer a slightly different question. It is interesting that the leaseholder enfranchisement process is kind of redolent of and similar to right to buy, in that it is a no-fault compulsory purchase of an asset. The difference with right to buy is that compensating the state is a different consideration from private citizens who have property rights. All I would say is I think it is important that the compensation mechanisms in the Bill are such that it does not feel like the things we are trying to spread more equitably—property rights—are being diluted by the state.
Andy Carter
Q
James Vitali: Delighted to. That is probably the thing that I have been thinking about the most in terms of the implications of the Bill. I understand that there is an intention for a ban on leasehold houses to come forward on Report. One thing that I am really worried about is that what will effectively be created is a two-tier system of housing or tenure types in this country, between the countryside and our cities. It is very possible, if we deal with houses and not the tenures for flats, that we will create secure, authentic property rights outside of our urban areas and create in our urban areas a slightly more precarious, maybe outdated type of tenure.
As it stands, that has not been given enough consideration, because it also does not conform with the Government’s wider strategy on housing, which, broadly speaking, is to densify our urban areas and increase housing supply in our cities. There are political considerations around why they are doing that—it is a lot more deliverable to focus on the densification of cities—but there are very good economic reasons for that too: the agglomeration effects of building housing supply in a city are greater than elsewhere. We need to incentivise people living in flats in dense cities, and if we deal with leasehold as it pertains to houses, not flats, it will work against the Government’s quite legitimate and justified broader housing strategy.
Barry Gardiner
Q
James Vitali: I have not given that too much thought, I must say; 50% seems absolutely reasonable. I think there are some practical issues in getting to that 50% threshold in itself. I have heard stories about the process by which leaseholders whip around the building trying to get together enough—
Barry Gardiner
Q
James Vitali: I must say that I have not given that a lot of thought. I think increasing it to 50% will have a significant effect itself, but you may wish to go further.
The Chair
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions. I thank the witness very much on the Committee’s behalf.
Examination of Witnesses
Philip Freedman CBE KC (Hon) and Philip Rainey KC gave evidence.
Richard Fuller
You are a lawyer.
Philip Rainey: Yes, and one tends to avoid the philosophical points. Clearly, from a legal perspective the Bill interferes in an extremely significant way with property rights. Whether that is the right thing to do is a value judgment.
One thing that is sometimes overlooked—I am not defending the leasehold system; I am on record as being in favour of commonhold, which is inherently a more satisfactory system for holding flats—is that a lot of people will be disappointed when commonhold comes in. They will still find that they are not allowed to remove the supporting walls in their flat or to have a noisy party on a Friday night, because their neighbours do not want that. A lot of the things you find in leases and the restrictions when living in flats are because, if you live communally in a block of flats, you owe duties to your neighbours. There are responsibilities, in communal living, that do not apply if you live in a small house in a field, 500 yards from your neighbours. The restrictions in the leasehold system are not as unique to leasehold as you might think; I would suggest otherwise. To go back to your basic point, clearly the Bill alters property rights. It is a value judgment as to whether that is the right thing to do.
Philip Freedman: I have heard a number of cases where the property industry is concerned about the transfer of value that will be effected by capping ground rents, removing marriage value and so on, in relation not just to the benefit to leaseholders but to the burden on those landlords that are pension funds and other organisations that will find that they are deprived of rental income that they have banked on and have thought will be reliable income over many years. They bought leases that were perfectly lawful, were not, so far as one can tell, entered into under any mis-selling, and the provisions for the ground rent are not necessarily unconscionable; the ground rents were invested in in good faith.
We must not lose sight of the fact that if there are winners, there are always losers. Some provisions of the Bill, which are fine, are to say that if the tenants are enfranchising, they do not have to buy the commercial bits of the building. Those can be left with the landlord under a leaseback, and therefore the value remains with the landlord. Both parties win: the landlord keeps the value and the tenants do not have to pay as much money. But where you are transferring value, there is always a loser, and there are lots of investors who appear to have bought in good faith and were not expecting retrospective legislation. Lawyers always do not like retrospective legislation. It is up to Parliament to decide whether the social benefit is sufficient to outweigh the concern about pension funds, and so on, that have invested in ground rents. The Law Society does not take sides between landlords and tenants, or different types of clients. We just want to make sure that Parliament focuses on the issue and makes the decision in the public interest.
Barry Gardiner
Q
Philip Rainey: Yes. In a sense, that is the downside. It is possible to create what you might call commonhold-lite. It is a leasehold system—it is so encrusted with restrictions and requirements, although you own the freehold, that it is very similar. It would be only a staging post, because one of the problems with the current system is that it creates a “them and us” situation. You see it even when tenants own the freehold. Somehow they still think, “Well, it’s ‘my’ lease and it’s ‘them’”, which is them under another hat as the freeholder. Commonhold should eliminate that.
Barry Gardiner
Q
Philip Rainey: If you go to Australia and look at the websites, you find “I hate my strata” websites. Neighbours will be neighbours.
Barry Gardiner
Unfortunately, legislation cannot make your neighbours more considerate. I often wish it could.
Philip Rainey: I think I would be inclined to agree that it would be a reasonable step forward to say that there should be a share of freehold with—
Barry Gardiner
Any new build.
Philip Rainey: With new build. You would have to have rules.
Barry Gardiner
Q
That is something that I hope we very much want to protect, because these leaseholders really require the protection of a court-appointed manager. However, the Building Safety Act 2022 bars the court-appointed manager from being an accountable person and from taking full responsibility for the necessary safety remediation works. That responsibility under the BSA ’22 regulations is now being given, in effect, to the one person whose track record shows that they are incapable and not to be trusted to perform the obligations of managing that building—namely, the freeholder who let it go to rack and ruin in the first place. The leaseholders, whom the courts sort to protect, will have that former, negligent freeholder back in charge. I do not know, but I am looking to you to tell us, how one might draft an amendment to the Bill to preserve the protection for leaseholders who find themselves in an incredibly invidious position.
Philip Rainey: The first thing to say is that—as you may know—there is an ongoing piece of litigation, in which I am involved, where that question of whether a manager can be an accountable person is yet to be finally decided. The current position is that the first-tier tribunal has decided that the manager cannot be an accountable person. I therefore cannot comment on that outcome.
Barry Gardiner
I was aware that you were involved in the case, but I did not want to drag you into the specific—I wanted to keep you at the general.
Philip Rainey: If, hypothetically speaking, the law is that a manager cannot be an accountable person; if, hypothetically speaking, that restricts what a manager can do; and if you, as Parliament, wished to alter that position, then you would amend the definition of a relevant repairing obligation in section 72 of the Building Safety Act 2022. That amendment would make it clear that a relevant repairing obligation includes an obligation under a manager order under section 24 of the Landlord and Tenant Act 1987.
Barry Gardiner
Q
Philip Rainey: The obvious answer is that you are Parliament—you can change any law.
Barry Gardiner
Q
Philip Rainey: I could, if asked. As I say, you can amend section 72 to change a particular definition. Arguably at least, subject to the regulations, it is not actually necessary for Parliament to do it, because section 72 has a power for the Secretary of State to amend it—it is a Henry VIII clause, which I am not very much in favour of, but that probably could be done by secondary legislation.
Barry Gardiner
I have no doubt that the Secretary of State could do that, but I always feel more comfortable if things are on the face of the Bill.
Philip Rainey: I respectfully agree.
Barry Gardiner
Q
Philip Rainey: The just and convenient test is effectively an equitable test. It is a very flexible test intended to allow the first-tier tribunal to take into account all of the circumstances and, in layman’s terms, to decide whether something is just, fair, convenient and going to work—the rights and wrongs and the practicalities of it. Because of the ongoing case, I do not think I can answer the second part of the question, as to how the Building Safety Act 2022 might have affected that.
Barry Gardiner
I am sure hon. Members can ponder on your words and work it out from there. Thank you; that is really helpful.
Eddie Hughes (Walsall North) (Con)
Q
Philip Freedman: I am afraid that I cannot give you the answer to that. because I am not directly acting for those particular clients. I am afraid I know no more—
Barry Gardiner
Q
Jack Spearman: Yes, I know where that came from.
Barry Gardiner
Well, it came from the Pensions and Lifetime Savings Association.
Jack Spearman: I would advise you to go and ask them again, because the pension funds we are talking about have made representations directly to the Government.
Barry Gardiner
Q
“We do not think it is fair that many leaseholders face unregulated ground rents for no guaranteed service in return.”
So the idea that you seemed to put out—“My goodness, the housing market was going to collapse because pension funds were not going to invest in property any more because they weren’t going to be able to extract the ground rents”—is a nonsense, is it not? You talked about £100 ground rent, but you know what is being done here. Your members are not limiting to £25 or £100 ground rents or peppercorn rents. Over the past 15 years, they have created a rentier structure wherein they can extract revenues from the ground rent that are exorbitant—in some cases, £8,000 a year for no service. Is that not true?
Jack Spearman: You make a couple of points there. First, you seem to be suggesting that it is okay to steal the chocolate bar from the shop because it is only 1% or 2% of the stock—it is still not okay. The second thing I would say is that—
Barry Gardiner
Q
Jack Spearman: I can come on to the service provided. Ground rent is a consideration as part of the lease and the premium. You are right to say that, technically—legally—the ground rent does not afford service. But we would say that, through our members, a huge amount of work gets done as a result of that ground rent and as a result of pension funds having invested in it. Take the Building Safety Act 2022, for example—remediation, fire safety audits and building safety audits are all undertaken at no cost.
Barry Gardiner
Q
Jack Spearman: I disagree with that.
Barry Gardiner
Q
Richard Fuller
On a point of order, Dame Caroline. I am wondering whether my colleague, Mr Gardiner, is getting to a question rather than just expressing a view.
The Chair
We do have very limited time, Barry, and other people want to ask questions, so can you bring it to a question swiftly?
Barry Gardiner
Indeed. Mr Spearman, you have misled people in the polling surveys and the conclusions you have drawn from them, have you not? Your own members—Consensus Business, Long Harbour and Wallace Estates—did surveying in which they found that 67% of residential leaseholders said that they would wish to take control of their building and get out from under you, but you suppressed that, did you not?
Jack Spearman: We have never said that people are incapable of managing their building—absolutely not. The desire to do so diminishes with the complexity of the building. I am sure you have seen the Government’s own survey on living in shared buildings. You heard from Professor Steven this morning in Scotland about the issues with the system in Scotland—
Barry Gardiner
A manager who works for a freeholder can be no different from a manager who works for an enfranchised set of leaseholders, can it? So the idea that the complexity is beyond the leaseholders is simply not a fair comparison.
The Chair
Order. We have time for only one more question, Barry. Can I move on to Richard Fuller, please?
Matthew Pennycook
Q
Mike and I tabled new clauses 27 and 28 to address some of the “in principle” issues we have been pushing for a long time on—qualifying and non-qualifying leaseholders and building height. Specifically, in terms of what the Government might feasibly bring forward, what is your experience from cases across the country of the operational elements of the Building Safety Act that are not working effectively? I am just trying to get from you a more realistic sense of what you might expect the Government to bring forward, in terms of extending this Bill to ensure the Building Safety Act operates as intended. What tweaks to the Building Safety Act are required, in as much detail as you can in the time you have?
Giles Grover: One of the major tweaks is on an issue we were first made aware of in November 2022 due to the residents of a building in Greater Manchester being forced to pay for interim measures. The council is now paying for those interim measures but it has been told that it cannot recover them through the Building Safety Act because the legislation is not in place. That is a simple one that could help.
You could ensure that resident management companies and right to manage companies can raise the legal costs where they might be needed in respect of building safety and relevant defects. There are some wider elements that are already in the Bill, in terms of stopping freeholders re-charging their legal fees. Our concern is whether that will protect non-qualifying leaseholders who are still being forced to pay fees.
This is where I can get into the specifics. I am no lawyer as such—you have had a lot of very intelligent people on before me—but I say this from the campaigning aspect of it. We need to see a fair bit more detail about exactly what happens when a freeholder is avoiding their liabilities and not giving a landlord certificate within the stated time period. The Government may tell us, “Oh, don’t worry. That means they can’t pass the costs on,” but theoretically I cannot sell my flat without that certificate because the conveyancer is asking for it, so why not have an express duty for them to provide it? To be completely frank, the whole landlord certificate/leaseholder certificate process is an absolute quagmire and a nightmare on the ground. I would personally prefer it if the Government did away with that.
There are lots of issues like that. There are points about court-appointed managers, which cannot be the accountable person, which seems quite strange to me. We have been told that there is another route through the Building Safety Regulator, but that would require the special measures manager legislation to be enforced. There are issues with shared owners in complex tenures where you have a housing association as the head leaseholder. Will they be protected from all costs? Will they have the same rights as all leaseholders?
Philosophically, the simplistic approach should be that you have the full protection. New clauses 27 and 28 would be a massive relief. It is then a case of whether legislation is needed or whether you can use the current measures. With the developer scheme, where it is for over 11-metre buildings—could that be extended to under 11-metre buildings? The cladding safety scheme is now for mid-rise buildings; could that be extended for low-rise buildings? Could the cladding safety scheme be extended to become a building safety scheme?
For a lot of this the pushback will be, “There is not enough money,” but there is money out there. There is money that can be got from industry. There are further parties, such as construction product manufacturers and providers, and the Secretary of State said they would make them pay two years ago; they have not paid yet. There are a lot more parties that could be brought into the pool. So operationally there is more they could do by saying, “We’ve got seven different funding schemes;” —or however many it is—“where is the oversight of all of them? Who is talking to each other? Are these regulators? How does DLUHC talk to the recovery strategy unit? Are they talking to the Building Safety Regulator? Is Homes England involved? The local regulators now have new money to take action; are they taking action?”
So, arguably, a lot of it is already in place; but what is needed is the comprehensive oversight and the proper grip to say, “Right: all these buildings—10,000 of them—are going to get fixed. This is how—this is where the money is coming from. Cladding costs are here. Non-cladding costs will come from there.” What you really need to do is put the money up front, recover it. The Government say that their leaseholder protections mean that the majority of leaseholders won’t have to pay. If they have got the confidence in their legislation then they can take over the burden from leaseholders.
Barry Gardiner
Q
You raised the issue, in response to Matthew Pennycook’s questions, of section 24 of the Landlord and Tenant Act 1987 and applying for an officer of the court to be installed to do the works and turn around a building. Clearly, it would be something much to be wished, for many people who found themselves involved a building safety issue, if they were able to do that. Related to that, I know you are aware of the Building Safety Act 2022 ban on section 24 managers being the accountable person.
This is a matter we have discussed with a number of witnesses such as yourself. Are you aware that at one development, the management control regarding safety and remediation was given back to a freeholder who was the one who took, the tribunal found, £1.6 million in insurance commissions unreasonably? They will now be handed £20 million because of that BSA anomaly, by the Government. So the very people who could not be trusted with money are now being given £20 million to remedy the defects that they were responsible for in that building.
Giles Grover: I am very aware of it. I have watched some of the sessions, and I was made aware of it last year by one of the leaseholders at that building. I have looked into this. I have had various conversations with various lawyers. It still just seems bizarre that the manager who has been appointed by the court cannot be the accountable person. I am just a simple man: I do not understand why that cannot happen—why the Government, or the judge, based upon the legislation that is out there, think it is a reasonable or positive outcome for that money to go back to that rogue landlord, shall we say. I do not get it, to be honest.
Barry Gardiner
Q
Giles Grover: Yes. I only have 20 minutes, so I will try to be brief. I could spend all day talking about that. I have had personal experience of that in my building. Our developer sold the freehold out from under us to an offshore freeholder who, one year before the building safety crisis took effect, said they did not want to sell the freehold because they were long-term investors. A year or so later they said, “Okay. We are transferring it to another company. Do you want to buy the freehold off us?” Because they saw—
The Chair
Order. I am afraid that brings us to the end of the allotted time for the Committee to ask questions, and indeed for this afternoon’s sitting. I do apologise to the witness, but I thank him very much on behalf of the Committee. The Committee will meet again on Tuesday to begin line-by-line scrutiny of the Bill.
Ordered, That further consideration be now adjourned. —(Mr Mohindra.)
Leasehold and Freehold Reform Bill
Barry Gardiner ExcerptsMonday 11th December 2023
(1 year, 6 months ago)
Commons ChamberRead Full debate Leasehold and Freehold Reform Act 2024 View all Leasehold and Freehold Reform Act 2024 Debates Read Hansard Text Read Debate Ministerial Extracts
Mr Betts
There are real issues with that, which I was going to address later, but I will do so now. It is important to strengthen the right to manage, both for leaseholders and for freeholders in these estates who own the freehold of their house but not of the communal areas. I said earlier that in all property purchases where common areas remain in private ownership, there should be, at the point of purchase, a clear understanding of the agreement between the local authority and the developer about who is responsible for those common areas. In many circumstances it is simply opaque. Often, purchasers do not know who is responsible and are sent on a wild goose chase to find out once they have bought their property.
Returning to onerous ground rents, the Select Committee took counsel’s opinion, which was quite interesting, and made recommendations in paragraphs 114 to 116 of our report. There were two clear arguments why removing onerous ground rents from leases retrospectively was completely compatible with the European convention on human rights. The first, which most of us may not have thought about, is that controlling or changing rent is not confiscation of property but control of its use, so it does not conflict with the article on removing people’s property rights. Secondly, the convention includes a justification where the proposal has a wider beneficial impact on society, which can be offset against any impact on the property owner. Counsel’s opinion was that it was therefore perfectly justifiable under the European convention to remove onerous ground rents on existing properties.
Barry Gardiner (Brent North) (Lab)
My hon. Friend will remember that when the Labour Government overturned the case of Custins v. Hearts of Oak in 1967, they used exactly those grounds to justify doing so.
Mr Betts
I do remember that far back. Many will not remember the Labour Government’s ’67 reforms, but they were quite important on those grounds—absolutely.
Other good aspects of the Bill include its reducing the price of enfranchisement and trying to make it simpler. Now, I am not sure that it makes it simpler; it is still a bit complicated. In the end, it partly depends on the capitalisation rates that the Government introduce, which will determine the price. But a lot of my constituents who are leaseholders live in houses, and they often face enormous barriers to carry through the enfranchisement process. I have referred to Coppen Estates in my constituency, which is notorious for simply not replying to letters. I once got it to reply to a recorded letter at the third time of asking. Normally, it ignores everything. That is just its way of trying to hang on to its ground rents and its income from leases. How will we deal with those sorts of individuals and companies, and the fact that they transfer ownership around from one company to another?
Why is there no right of first refusal for leaseholders in the Bill? I was pleased that, some years ago, Sheffield Council agreed that when it sold freeholds, the right of first refusal would go to the leaseholder. That would be a simple reform, and I hope the Secretary of State will consider it. The improvement of the enfranchisement process to make it simpler and reduce the cost is right, but I would like further improvements to ensure that it will work.
I welcome the standardisation of service charges. One big complaint to the Committee was that leaseholders often simply do not know what they are paying and why. They cannot work out which services are supposed to be provided and which are not. That is an important step forward.
On commission fees, we heard about the £150 to change a doorbell and the £3,000 to put up a conservatory—complete rip-offs. There is no justification for them in houses in particular, and very little justification in flats. I am pleased that freeholders will now have to provide a schedule of rates that will be charged. We called for a cap on rates, which might have taken reform a little further, but at least there now has to be clarity and transparency. I also welcome the clause that means leaseholders will not end up paying for the legal and other costs of freeholders where there is any conflict or dispute.
A number of other measures have been omitted from the Bill, but they could be included very easily. The Secretary of State mentioned forfeiture. If leasehold is a feudal tenure, then forfeiture is prehistoric—it really is. If a leaseholder in a very small way fails to comply with an element of their lease, they could have the property taken off them. That is just unacceptable and unjustifiable. The Secretary of State was right in what he said. Forfeiture is not necessarily something that gets used, but the threat of its being used puts the onus on leaseholders to “behave” or do what the freeholder wants them to do. The removal of that with a simple clause would be really welcome.
Rachel Maclean
That is an excellent suggestion from my hon. Friend the Father of the House, with which I strongly agree—as I do with everything he says about this issue.
Despite the theatrics we heard from the right hon. Member for Ashton-under-Lyne (Angela Rayner), who spoke for the Opposition, it is the Conservatives who are finally bringing in sweeping reforms. It is right that we note that Labour ducked the issue while they were in office. They could have fixed it then. They could have saved millions from misery—nearly 5 million homes, accounting for 20% of the entire housing market, are owned on a leasehold basis across the UK—but it appears they bowed to pressure from freeholders. We will never know why, but thankfully things will now change.
Barry Gardiner
The hon. Lady may not remember—but I do—that before the Commonhold and Leasehold Reform Act 2002 was passed, a great deal of pressure had been applied since 1999. At that stage, however, their lordships down at the other end of the building threatened to block all of Labour’s legislation if we insisted on putting through some of the measures that were ultimately taken out of that Bill. The hon. Lady is right; those measures should have been included. I lobbied and campaigned for them to be included, and made my speech in the House accordingly, but their lordships were in the majority—and, at the time, 66% of their lordships had declared in the Register of Interests that they derived most of their income from the management of land.
Rachel Maclean
I thank the hon. Member for the history lesson but, regardless, we are determined to fix this now.
Sir Stephen Timms (East Ham) (Lab)
I am pleased to follow the hon. Member for Redditch (Rachel Maclean), the former Housing Minister, and I congratulate her on her work in this regard. I was disappointed that she chose to adopt a rather partisan tone in some of her remarks—unnecessarily, I thought—but I was grateful for the more generous tone taken by the Secretary of State. I especially welcomed his generous and appropriate tribute to our former colleague, Jim Fitzpatrick, for his work in the all-party parliamentary group—I am glad that he was mentioned.
Let me begin by identifying a specific concern that the Bill has raised. I am aware of it because of the work that the Work and Pensions Committee has done on asbestos. Under the Control of Asbestos Regulations 2012, premises can be sold while containing asbestos; ownership can be transferred. Asbestos management is regulated in relation to workplaces, where it is the responsibility of the Health and Safety Executive, but not in domestic properties. In a lot of shared dwellings, such as flats and conversions, the landlord or freeholder has regulated duties under the existing regulations to manage asbestos in the shared areas in those developments. This legislation, as I understand it, may well give rise to the transfer of those obligations to domestic owners.
The existence and extent of asbestos in a building might not be known, leaving homeowners taking on these responsibilities with a hidden liability and, potentially, a life-threatening risk to handle as well. Homeowners are unlikely to have the wherewithal to manage asbestos in situ effectively, and this could leave a complex set of responsibilities and liabilities between owners in shared properties or where the nominal landlord no longer exists. At the moment, there is tax relief for businesses removing asbestos from a workplace—they can offset it against corporation tax—but there is no support for homeowners to remove or manage asbestos.
It has been suggested to me—this is something I am looking at—that there should be an amendment proposing that change in ownership of a property in the circumstances envisaged in the Bill, or a change in the extent of landlord control, should be a trigger for removing asbestos. Otherwise, more asbestos will move outside effective control under this legislation, meaning that nobody will be responsible for managing it and potentially creating a significant public health risk.
I will focus the rest of my remarks on part 3 of the Bill and draw attention to some particular instances that have arisen in my constituency. My right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), in opening the debate, rightly expressed the disappointment of many that the more radical ambitions for the Bill have been dropped, at least for the time being, but there are lots of practical problems for our constituents that need addressing and that the Bill can potentially help with.
The Minister for Housing, Planning and Building Safety, who is in his place, is aware of Barrier Point in my constituency, which comprises eight towers and 257 apartments. Tower 8, the largest of the towers, has 50 apartments and a flammable cladding problem. In 2017, buildings insurance for the whole of Barrier Point cost £104,000. Last year, Aviva, which insured the block previously, refused to quote, so this year residents have ended up paying £443,547 for insurance, and Tower 8 residents have shouldered that huge increase at a cost of between £6,000 and £12,000 each. I am grateful both to Aviva and to Barratt, which built the development, for meeting residents to try to find a way forward. I am also grateful to the Minister for the interest he has shown in this and for his agreeing to visit—I hope we will have a date for that soon.
I can see that the Bill could go some way towards tackling those problems. I particularly welcome clauses 27, 28 and 29, which increase transparency around service charges and give occupants the right to obtain information about service charges and costs on request. Clauses 30, 34 and 35 will help tenants to enforce those rights and rebalance the costs of litigation in their favour. The Financial Conduct Authority’s 2020 report on insurance for multi-occupancy buildings found that commission was often at least 30% on a transaction, and it found one case where it was over 60%. The FCA was worried that insurance commissions lacked transparency and it feared the conflict of interest that stemmed from brokers regularly sharing half their commission with the freeholder or managing agent. Replacing commission with transparent handling fees, as clauses 31 and 32 envisage, should certainly help.
Barry Gardiner
I appreciate everything that my right hon. Friend is saying. He will be aware, though, that many companies holding freeholds will also set up an arm’s-length company that is the broker, thus taking a double take in terms of the commission. It is not just that they get cut from the broker; they are the broker.
Sir Stephen Timms
My hon. Friend makes an important point and I welcome his work in this area over a long period.
The changes in the Bill are not likely to do much to help the residents of Barrier Point who have exercised their right to manage. The FCA has argued that
“the intervention most likely to reduce prices for the minority of multi-occupancy buildings with the most substantial price increases would be cross-industry risk pooling”.
I was pleased to hear from the Secretary of State, in answer to my intervention, that he will be meeting representatives of the Association of British Insurers this week. The ABI initiative on this issue appears, up to now, to have stalled. The FCA recommended that the ABI should work with it and with the Government to introduce a risk pooling scheme in 2022. The scheme was expected to come forward last summer, but we are still waiting. I am hoping that, as a result of the meeting this week that the Secretary of State has told us about, things will get moving.
I checked with the FCA last week about this. It said that the ABI plan is
“credible and capable of delivering savings to those worst affected buildings”,
but it went on to add that the plan is delayed with “no firm launch date” because the ABI is struggling to secure “the reinsurance capacity required”. That seems to be the obstacle. I very much hope that the Secretary of State can find a way to push this forward at his meeting. The ABI urged the Government to increase capacity by backing catastrophic losses in the scheme. It did that most recently in June. Can the Minister tell us whether that appeal has been considered by the Department and whether that might be taken forward at the meeting with the Secretary of State later this week? When does he think risk pooling will commence?
On remediation, there is a power imbalance between leaseholders and freeholders. That has been highlighted to me by Barrier Point residents. The Bill does not really address that. Section 72 of the Building Safety Act 2022 makes a right-to-manage company the “accountable person” for a high-risk multi-occupancy building, making the directors criminally liable if negligence can be proved. The same Act, however, requires only that freeholders “co-operate” with accountable persons, without any enforcement mechanism in place at all. The freeholder at Barrier Point has held up remediation works for several months and is refusing to sign off on them. The directors of the right-to-manage company desperately want to fulfil their legal obligations but they are left liable because of the refusal of the freeholder to say okay, and there is no comparable liability on the freeholder. That seems wrong, and I wonder whether that imbalance can be addressed in the course of the Bill’s passage through the House.
The Minister said in oral questions just last week that the Government plan to make changes to the Bill as it goes through Parliament, and I hope he will consider how that imbalance can be addressed to ensure that remediation work can go ahead in a case such as that, which I suspect is by no means unique. The residents of Barrier Point want to purchase their freehold. To do so, they need to get at least 50% of all the leaseholders to agree to, and be able to afford, a freehold purchase. That is very difficult in a building with 257 households. I do not think the Bill does anything to make that process easier, so I very much hope that Ministers will be open to further improvements as it progresses through the House.
Gareth Johnson
The right hon. Gentleman makes an excellent point, and it highlights how management fees undermine the whole housing sector. We will end up in a situation where people do not want to buy nice homes because of the management companies that operate on these estates.
It undermines freehold, because people living on these estates have to go to the management company to get an information pack in order to sell their home. Of course, the information pack does not come free. On most estates in my constituency, people have to pay the management company £350 effectively to ask for permission to sell their house.
A lady contacted me and, apart from the cost, some of the information in her information pack was wrong. When she contacted the management company to ask some questions about the information it had provided, she was told that each question would be charged at £60 plus VAT, but this was the management company’s fault, not hers. That is just one example—I could give thousands—of just how horrifically some management companies behave. The Bill needs to deal with these organisations.
Barry Gardiner
The hon. Gentleman is making some excellent points. Is he aware that some companies managing residential properties for the elderly charge 10% of the property’s sale price, which they take to themselves for the privilege of allowing it to be sold?
Gareth Johnson
I have heard of those kinds of things. The same happens with park homes, and we are also trying to tackle that. It is only right that we tackle this issue with management companies, because it totally undermines the concept of freehold. The Secretary of State rightly says that he supports home ownership, yet we have a system that undermines the principle of home ownership.
People bought these houses in my constituency because they are nice homes in a nice area, and they often bought them in a seller’s market. They were literally standing in a queue, with other people waiting behind them to buy the same property. If they had not signed on the dotted line there and then, there were plenty of people behind them who would have. They signed without a full appreciation of the terms of the contract, which effectively said that the management company can put up its management fees way beyond inflation, and there is nothing that can be done about it.
I echo the Father of the House. As we consider the Bill throughout its passage, Members have to decide which side we are on. Are we on the side of the management companies, or are we on the side of local residents? It should be a no-brainer for every Member of the House, and I hope we will come together. After the Bill gets its Second Reading, I am sure we would all like to see some amendments in Committee.
Bob Blackman (Harrow East) (Con)
It is a pleasure to follow the hon. Member for Battersea (Marsha De Cordova). Let me start by paying tribute to the Father of the House, my hon. Friend the Member for Worthing West (Sir Peter Bottomley), who has been campaigning on this issue for many years, to great success, eventually. I also pay tribute to my hon. Friend the Member for Redditch (Rachel Maclean), who is no longer in her place, for all the work she has done in the preparation of this Bill. I welcome the principle of the Bill. Some Opposition Members may say it is too timid, but with 58 pages of detailed legislation and equations, which remind me of my time studying physics and maths at university, it can hardly be said to be less than complex. The key issue is: have the Government gone far enough in what they intended to do?
Our manifesto commitment was clear: to promote fairness and transparency for leaseholders, and ensure that consumers are protected from abuse and poor service. Clearly, that is a fundamental requirement. The Law Commission’s 2017 review of leasehold law represented it, and it is has taken us six years to get to this point in dealing with some of the abuses. We have to remember that 94% of people who have bought leasehold properties regret buying them and 70% of leaseholders are worried that they will not be able to sell their homes because they are leasehold. That is one fundamental thing we need to answer. We also need this leasehold reform to reform and support the housing market, because almost half of leaseholders are first-time buyers and 28% are under 35. At a time when fewer and fewer people are buying their first home at such an age, it is vital that we not only encourage people to buy their first home, but simplify the system.
So I welcome the overarching aims of the Bill to modernise this complex system, but clearly there is still a lot of work to do. Obviously, making it cheaper and easier for existing leaseholders in houses and flats to extend their lease and buy their freehold is a key point. The so-called “marriage rates” make it almost impossible for leaseholders to buy properties with fewer than 80 years left on the lease and to extend that lease to 990 years, which is what we are now going to be looking at. Having that as the standard position for houses and flats has to be the right thing to do. We should remember that the original position on extensions was 90 years for flats and 50 years for houses, so we are introducing a massive change and it is extremely welcome.
Barry Gardiner
I thank my constituency neighbour for giving way; if he is fortunate at the next election, he may inherit some more leasehold flats. As he will know, in this country a freeholder holds their freehold for a period of 999 years from the Crown and that may run out before any new leasehold is able to conclude its 999 years. Does he understand what the Government propose to do in that situation?
Bob Blackman
Longevity may run in my family, but not to the extent of 1,000 years. The hon. Gentleman makes a good point and I am sure the Minister will seek to answer it in his summing up.
Introducing new rights for long leaseholders to buy out the ground rent without needing to extend the term of the lease is another extremely welcome move, as is removing the requirement for a new leaseholder to have owned their house for two years before they can benefit from the changes. The new right to require the freeholder to take a leaseback of non-participating units when a collective enfranchisement claim is made is also vital. We do not want to get to a position where people are deterred from enfranchisement because they cannot take on those who do not take on enfranchisement.
A new costs regime for enfranchisement and right-to-manage claims so that each party bears their own costs is vital. Far too often, the freeholder has sought to obtain their costs from the purchaser, which is clearly unfair and unjust. Moving jurisdiction for enfranchisement and right-to-manage disputes to the first tier tribunal and the leasehold valuation tribunal in Wales makes it much easier for parties to identify how they can bring about a dispute. I note the point the Chair of the Levelling Up, Housing and Communities Committee, the hon. Member for Sheffield South East (Mr Betts), raised when he said that freeholders often make it as difficult as possible for enfranchisement to take place.
The issue of transparency of service charges is vital. One of the benefits of serving on a Select Committee for a long time is being able to remember the reports the Committee was involved in, and I well remember an inquiry into this issue. We wanted all service charges to be transparent and fixed to the cost of providing that service, as opposed to a figure plucked out of the air and then passed on to the person supposedly receiving the service. It is welcome to see that the Bill contains measures for minimum key financial and non-financial information to be supplied to those receiving the service on a regular basis, including through a standardised service charge and an annual report. That means leaseholders can scrutinise and better challenge costs if they are unreasonable.
Equally, replacing buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees stops leaseholders from being charged exorbitant, opaque commissions on top of their premiums, an issue that has already been raised in the debate. I welcome scrapping the presumption for leaseholders to pay their freeholders’ legal costs, which in my opinion is outrageous, as well as granting freehold owners on private and mixed-tenure estates the same rights of redress as leaseholders, by extending their equivalent rights to transparency over their estate charges and to challenge the charges they pay by taking a case to a tribunal.
All these measures are welcome, but there are many other areas where we need to go further. The promise to do away with leasehold—or fleecehold—completely was clear in the manifesto; in my view, that promise should be honoured, particularly on the sale of new-build flats. In London, they are now the most common property type; almost all flats are sold on leasehold basis, compared to just 6% of houses.
On the individual building firms, we have heard about Persimmon, but we should also remember Bellway, whose chief executive came in front of our Select Committee and told us—I repeat what they said almost word for word—that it was the company’s policy not to offer the freehold to leaseholders at the first opportunity. Instead, six months after building the properties and selling the leaseholds, it would transfer them to a finance company, which would go through the detail of all the charges it could make and then really leverage up those charges, and the finance company would refuse to allow the leaseholder to even consider buying the freehold. That was the policy of that company. I think Permission admitted that that was its policy too, and other building companies do exactly the same. That is a scandal and it should be stopped, and we should legislate for that.
Clearly, we all want to see the promotion of commonhold. However, as the Chairman of the Committee said, we need more education for individuals, so they understand not only their rights but the responsibilities they would take on with commonhold.
One concern that has been raised with me on several occasions is about what will happen, once this welcome Bill is on the statute book—we look forward to the amendments that are made—to existing leaseholders who bought their leaseholds in good faith but are not being dealt with properly or effectively. We need to ensure that squeezing out the bad practices of freeholders and managing agents, which are unfair to individuals, is part and parcel of the legislation.
There is also the issue of conveyancing. Most people who buy their first property pay the minimum legal costs they can get away with. As a result, they often are not given proper advice about the consequences of their decisions. We need to ensure that individuals are given the opportunity to understand the responsibilities they are taking on and, more importantly, what will happen to them in the future if there are service charges involved.
Local authorities hold a huge number of properties under lease conditions and, if they want to sell the freehold to leaseholders, they are often among the worst sets of people to deal with across the country. I agree that a leaseholder should have the right of first refusal if a freehold is being offered. Will my hon. Friend the Minister give a commitment that, after we have engaged in consultations on service charges, the results of those consultations will be reflected in Committee so that we can strengthen the Bill?
Finally, I want to refer to a particular building in a constituency that neighbours mine. It has 13 floors and still has the old, Grenfell-style cladding. We all know the tragedy of Grenfell, but the owners of the building are refusing point blank to remove the cladding unless and until they are given planning permission to build on top of the building, so that they can sell more property to pay for the cost of remediating the cladding. The self-same company, Ballymore, although it has yet to submit a planning application, wants to build 29 blocks of flats, the tallest of which will be 29 storeys and the majority of which will be more than 20 storeys, at a density greater than Manhattan, Singapore or any other place in the world. That is a scandal. When the Secretary of State named certain building companies, he promised that if they refused to carry out the work that they should do, they would not be given planning permission to enable the development of more leasehold flats. I call on him to ensure that they are not given planning permission until such time as they are putting right what they have put wrong.
I pay tribute to all those who have fought for so long and so hard to achieve this limited reform. I will support the Bill, and I look forward to us taking forward further measures so that we can end the feudal system of leasehold once and for all.
Draft Building Safety (Leaseholder Protections etc.) (England) (Amendment) Regulations 2023
Barry Gardiner Excerpts(1 year, 11 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister of State, Department for Levelling Up, Housing and Communities (Rachel Maclean)
I beg to move,
That the Committee has considered the draft Building Safety (Leaseholder Protections etc.) (England) (Amendment) Regulations 2023.
It is a pleasure to serve under your chairmanship, Mrs Murray. The draft regulations amend the existing leaseholder protection regulations made under the Building Safety Act 2022 to clarify and simplify some provisions in the light of experience and to address points made by the Joint Committee on Statutory Instruments and in the two stayed judicial review applications. I will start by providing some context and background to the draft regulations.
As hon. Members know, the Government introduced the leaseholder protections to protect many leaseholders from the cost of remedying historical safety defects in their building, either entirely or with liability firmly capped. The Joint Committee on Statutory Instruments reported the 2022 affirmative regulations for cases of suspected defective drafting and doubtful vires. Notwithstanding the Committee’s concerns, the Government were satisfied that no issues with the regulations would prevent the process from operating successfully.
My predecessor, my right hon. Friend the Member for Nuneaton (Mr Jones), committed to introduce changes if it became apparent that they were necessary. I therefore laid the regulations before us to address the issues that I have mentioned, and they were engaged in two rounds of correspondence with the Joint Committee, culminating in a memorandum of response set out in the appendix to the Joint Committee’s 44th report of the 2023 Session, published last Friday.
To summarise, the Joint Committee reported the regulations for one case of defective drafting in relation to a lack of consequence for failure to notify the landlord associated with the developer of their liability. The Government are grateful to the Joint Committee for its careful scrutiny of the regulations and have considered the issue carefully. As set out in the memorandum published by the Committee, the Government are satisfied that no issue with the regulations will prevent the process from operating successfully.
It is imperative that the regulations come into force before the summer recess so as to alleviate the issues facing named managers and landlords. We will of course monitor closely the progress of future cases and, if it becomes apparent that further changes are necessary, we will come back to Parliament with proposals.
The regulations can be considered in three parts. First, they address points made in the Joint Committee’s report of July 2022. They make it clear that to recover the remediation amount, L—the body responsible for managing the building—must issue a notice to the landlord with the liability to pay. The notice must include the prescribed information on both the amount to be recovered and the appeals process. The regulations clarify the powers of the first-tier tribunal in determining the outcome of an appeal: if the appeal is unsuccessful, the appellant has to pay the amount set out in the notice; if the appeal is successful, the appellant has to pay either nothing or an alternative amount determined by the tribunal.
The Joint Committee considered regulation 6(1) of SI 2022/859, which purports to allow a leaseholder voluntarily to provide a leaseholder deed of certificate to their landlord, to be ultra vires, so the draft regulations remove that provision. I should make it clear, however, that nothing prevents a leaseholder from providing a certificate to their landlord at a time of their choosing. The regulations clarify that the prescribed evidence is required as part of the leaseholder deed of certificate and that failure to provide a completed leaseholder deed of certificate and the required evidence will result in the lease being treated as if it were not a qualifying lease. The regulations also provide that “shared ownership lease” has the same meaning as that used in schedule 8 to the 2022 Act.
Secondly, the regulations address points made in the two stayed judicial review applications. They provide for named managers to recover the cost of relevant measures in relation to relevant defects from landlords in the same way as resident management companies and right-to-manage companies. They also provide for L to be able to recover notified amounts from landlords as a civil debt and for L to be able to pursue a remediation contribution order against the landlord to recover costs. The regulations also provide that a landlord who is associated with the developer must be notified of its liability to pay for relevant measures or relevant defects. However, nothing in the regulations prevents L from instead pursuing another liable landlord if, for example, they feel that funds are more likely to be recovered in that way.
Thirdly, the regulations deliver additional detail to clarify and simplify some of the provisions in the 2022 regulations. They enable Homes England—the Department’s delivery partner for remediation work outside London—to apply for a remediation order or a remediation contribution order. They provide that a landlord may apply to the first-tier tribunal for a 30-day extension to the appeal process, to give time for out-of-court engagement. They also provide that the landlord must update the landlord certificate to reflect a lease’s qualifying status within four weeks of receiving a leaseholder deed of certificate.
Finally, amendments are made to the 2022 regulations so that the current landlord does not need to provide certain evidence where they accept liability for a relevant defect, and the existing landlord certificate is replaced by the schedule to these regulations to reflect that. This change reduces the information-sharing requirement to that which is essential for a leaseholder and L to determine liability. The regulations also provide that current landlords must provide L with copies of the landlord and leaseholder certificates within a week of completion or receipt, to enable L to apportion costs in line with the 2022 regulations. Where the current landlord fails to comply, the regulations provide that their share of costs cannot be passed on to leaseholders.
Barry Gardiner (Brent North) (Lab)
The Minister will be aware that many landlords have sold or gone into liquidation and referred on, and the current landlord may now be in a very different jurisdiction and may often be difficult to get at. Has the Minister considered the effect of that on these regulations, and how the notifications and periods she has set out will impact on leaseholders if, as she has just said, it will be possible for the cost to be passed on to them in this situation?
Rachel Maclean
I thank the hon. Gentleman for his contribution. He will be aware that this is a very specific provision in the regulations, which serve the specific purpose of providing the detail needed to clarify and simplify some of the provisions in the existing leaseholder protection regulations.
To continue—
Rachel Maclean
No, I am not going to give way again, if that is okay, Mrs Murray.
The regulations also address concerns raised by the Joint Committee last July and the two stayed judicial review applications. That will enable landlords to complete a shortened landlord certificate and enable L to take civil action against non-compliant landlords.
I hope hon. Members will join me in supporting the draft regulations, which I commend to the Committee.
Economic Activity of Public Bodies (Overseas Matters) Bill
Barry Gardiner ExcerptsMonday 3rd July 2023
(1 year, 11 months ago)
Commons ChamberRead Full debate Economic Activity of Public Bodies (Overseas Matters) Bill 2022-23 View all Economic Activity of Public Bodies (Overseas Matters) Bill 2022-23 Debates Read Hansard Text Read Debate Ministerial Extracts
Barry Gardiner (Brent North) (Lab)
I think I agree with everything my hon. Friend has said this afternoon. She will remember, as I do, how many of us on the Opposition Benches, and indeed in all of the House, spent years of our lives campaigning against the apartheid regime. That was a very strong policy within local authorities and it had real impact at the time, so much so that when Nelson Mandela came to this country to thank people, he included them in those thanks. Does she believe that, had this legislation been enacted at the time, it would have prevented those authorities from taking the action they did to oppose apartheid?
Lisa Nandy
South Africa is obviously a different case, but the point my hon. Friend makes remains and is well founded, because this Bill concentrates the decision making and judgment of hundreds of public bodies in the hands of just one person.
Leaseholders and Managing Agents
Barry Gardiner Excerpts(2 years, 3 months ago)
Westminster HallRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Sir George Howarth (in the Chair)
We are expecting a Division at any moment. When it is called, there will be a 15-minute suspension to enable Members to go and vote, but if there are two votes, there will be a 25-minute suspension, so do the maths.
Barry Gardiner (Brent North) (Lab)
I beg to move,
That this House has considered leaseholders and managing agents.
I am grateful to present this debate under your chairmanship, Sir George, because I know that you have significant involvement with your local leaseholders in Knowsley, for which they are very grateful. Saying the word “leasehold” to any Member of Parliament is likely to begin a long conversation on one of two things: fire safety or service charges. I could have phrased that better: it would be more accurate to say “unsafe homes caused by fire safety defects” and “rip-off service charges by unscrupulous managing agents”.
For many people, the issue of leasehold crystalised after the tragedy of the Grenfell Tower fire and the subsequent purgatory that hundreds of thousands of residents throughout the country found themselves living through as they waited to have their own buildings’ fire safety defects remediated. They are still waiting. It was about much more than cladding and EWS1 forms. Residents who found that their homes had been constructed without internal fire stopping, or with inappropriate materials or inadequate fire doors, were unable to sell their property and move on with their lives because construction companies, project managers, surveyors, developers, freeholders, building control, the National House Building Council and managing agents all sought to pass responsibility among themselves. Nobody wanted to pick up the bill for remediation.
In truth, the debate about a wholesale reform of leasehold goes back much further. In the modern era, it starts almost exactly 50 years before 14 June 2017, with the Leasehold Reform Act 1967, which gave qualifying long leaseholders of houses the statutory right to buy the freehold of their homes. In 1969, a problem arose: the Lands Tribunal ruling in Custins v. Hearts of Oak Benefit Society noted that the 1967 Act treated the open market for the reversion of the lease as including marriage value. That is why the Government promptly and rightly reversed that decision with section 82 of the Housing Act 1969. They did not wish to artificially increase the cost for people wishing to buy the freehold of their own home.
To see the injustice of marriage value, one need only to consider the price difference on the open market between a leasehold flat with a 125-year lease and the same flat with a share of freehold. The difference is nil, yet the first is on a yo-yo tender, whereby an owner, such as the Duke of Westminster, sells for the full market value, only to receive the entire property back at the end of the lease, allowing him to sell it all over again or, more often, to receive a large payment to extend the lease when the reduction in the term risks being so short that no lender will advance a mortgage on it and the property becomes unsaleable by the leaseholder, who sees the value of their asset diminishing to zero.
Sir Peter Bottomley (Worthing West) (Con)
I am grateful to the hon. Gentleman for introducing this debate. May I, through him, point out that it is not just the traditional landlords, but some great charities? Wellcome went to the first-tier tribunal to get a judgment, but that decision should have been made by Parliament, not highly expensive lawyers arguing in court, given that it risked a knock-on effect on every other residential leaseholder who wants to extend their lease.
Barry Gardiner
I am most grateful to the Father of the House, who is also co-chair of the all-party parliamentary group on leasehold and commonhold reform, for his knowledge, his campaigning over many years and his intervention.
In the Housing Act 1974, which still related only to houses, and the Leasehold Reform, Housing and Urban Development Act 1993, which gave leaseholders the right, if more than 50% of them wished to, to purchase the freehold interest in their block, the concept of marriage value was sadly reintroduced. Marriage value has been at the heart of many of leaseholders’ problems for more than half a century, simply because the freehold title of the property is worth more to them than to anyone else by virtue of the fact that they live in it. The law allows the freeholder to benefit from that asymmetry and impose considerable extra costs on any leaseholder who wishes to purchase or extend the lease on their home. When the Government come to legislate for leasehold reform—they have promised to do so and I look forward to that—I trust that they will understand that it is that fundamental injustice that has kept leaseholders prisoner to the vagaries of their freeholder and, often, the outrageous services charges imposed by their managing agents.
Mike Amesbury (Weaver Vale) (Lab)
I thank my hon. Friend for securing such a vital debate. Here we are again. The National Leasehold Campaign—
Sir George Howarth (in the Chair)
Order. I think most people have now returned, so we can restart if people are ready to do so. Barry Gardiner was about to deal with an intervention from Mike Amesbury.
Barry Gardiner
Indeed, Sir George. My hon. Friend the Member for Weaver Vale (Mike Amesbury) is no stranger to witty epithets, and his suggestion that we should stop polishing and start abolishing was absolutely right.
Before I turn to some egregious instances of service charges and call out by name some of the managing agents that have played fast and loose with the Landlord and Tenant Act 1985, which provides that service charges must be “reasonable” and that services and works must be carried out to “a reasonable standard”, I wish to acknowledge some of the individuals who have championed the cause of leasehold reform over many years.
Tom Hunt (Ipswich) (Con)
Does the hon. Member agree that part of the problem is that rogue agents and freeholders believe they can act with impunity, and that it is incumbent on us to ensure that the regulations are in place to hold them to account and penalise them when they behave in an immoral way? They include Block Management, an agent in Ipswich, and Railpen, which is a freeholder that has behaved in a gross fashion and let down in a most egregious way almost 100 of my constituents.
Barry Gardiner
I am delighted that the hon. Gentleman has managed to get those condemnations on the record. I am sure that his constituents will be most grateful, as I am, for his doing so. He is right. The trouble is that the law is there: it is the Landlord and Tenant Act 1985, which makes it clear that unreasonable charges should not be levied, and that services and works have to be done to “a reasonable standard”. It is all there in statute; the trouble is that it is not enforced and that the mechanism for enforcement has gone awry, as I will come on to.
I already paid tribute to the Father of the House, whose long-standing campaign on this issue is an inspiration to us all. He co-chairs the all-party parliamentary group with my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders), who has also done so much on this issue. Not with us at the moment is my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Levelling Up, Housing and Communities Committee, who has done a huge amount over the years.
It is about not just those in this House; outside of the House there are many more. I pay special tribute to Charlotte Martin, who founded, with Nigel Wilkins, who is sadly no longer with us, the campaign against residential leaseholds, and who did so much, with Neil Mulcock, to usher in the Commonhold and Leasehold Reform Act 2002.
Stephen McPartland (Stevenage) (Con)
While the hon. Gentleman has a glass of water, I want to ask whether he agrees with the comments that my hon. Friend the Member for Ipswich (Tom Hunt) made about Railpen and the terrible impact it is having on leaseholders’ mental health up and down the country, including in the constituency of Stevenage. There have also been issues with the building that started the original campaign, as highlighted by my hon. Friend the Member for Southampton, Itchen (Royston Smith).
Barry Gardiner
I am grateful to the hon. Gentleman for that intervention. He highlights something that is really important to us all: the mental health problems that this issue causes. It is not just a financial issue; it has both physical and mental health implications.
There was one more person to whom I was going to pay tribute. If I left her out, I would be in deep trouble, because it is my own head of office, Jackie George, who keeps a database of more than 7,000 leaseholders in my constituency and who keeps in touch with them regularly.
In 2017, the then Secretary of State, the right hon. Member for Bromsgrove (Sajid Javid), committed the Government to act on leasehold abuses. Specifically, he committed them to legislate to prohibit the creation of new residential long leases on newly built or existing freehold houses, other than in exceptional circumstances; to restrict ground rents in newly established leases of houses and flats to a peppercorn; to address loopholes in order to improve transparency and fairness for leaseholders and freeholders; and to work with the Law Commission to support existing leaseholders. The Government said that would include making buying a freehold or extending a lease
“easier, faster, fairer and cheaper”.
In April 2018, the Government announced that managing agents in the sector would be subject to regulation by an independent body and that a code of practice would set out minimum standards for key areas of activity, including service charges. In October 2019, the then Minister for Housing, the right hon. Member for Tatton (Esther McVey), confirmed in a written statement the Government’s intention to take forward those measures. In 2020, the Law Commission published its report and recommendations.
It is not good enough to say that the Government have been busy with other priorities. Since 2017, we have had seven Secretaries of State and nine Housing Ministers, yet leaseholders are still being ripped off.
Jim Shannon (Strangford) (DUP)
I hope to give the hon. Gentleman a chance to clear the frog in his throat, and I congratulate him on securing the debate. Does he agree that the current arrangements, whereby there is no limit on the amount paid in service charges, insurance, ground rent and forfeiture charges, have left leaseholders at the mercy of the unscrupulous? Although we must allow the free market to prevail, that does not preclude the House and the Minister introducing and implementing fit-for-purpose regulation to protect the average leaseholder, who wants a fair bill for a fair service. That is not too much to ask for.
Barry Gardiner
The hon. Gentleman is absolutely right. Leaseholders are not asking for special favours; they simply want equity and justice.
The Government’s survey reported that more than 70% of leaseholders regretted buying a leasehold property. In London, and in my constituency of Brent North, the leasehold model accounts for more than 90% of properties sold. I do not believe that my constituents should have to wait a moment longer for basic rights over their own homes, the right to manage, and the right not to be subjected to unreasonable and sometimes fabricated service charges and then bullied into submission by managing agents who threaten legal proceedings and, ultimately, forfeiture.
For my constituents and millions like them throughout the country, the delay is imposing financial penury and severe impacts on their mental and physical health, as the right hon. Member for Stevenage (Stephen McPartland) said. The impacts include those on the residents of Williams Way in my constituency of Brent North, from where one resident wrote to me saying:
“My wife cried last night when I shared a few things about all of this. Management fees have increased: £5,600 in 2020 to £8,400 in 2022—I cannot afford to pay this significant increase. That is a 50% increase. Water storage has increased from £564 in 2020 to £1068—an 89% increase. The insurance premium charged at £5,820.76 in 2021 increased to £20,726.23 in 2022—a staggering 256% increase. A detailed explanation has not been provided.”
Hallmark Premier Estates is the managing agent there, but it is not providing a premier service—just as it is failing to do in Parkside Place in Barham village, where the insurance premium, which was £22,738 in 2021, has risen 108% to £47,415. No wonder I was told yesterday that the landlord would be replacing Hallmark as the managing agents for “unspecified reasons”.
One leaseholder in Lawns Court said:
“I have lived in my flat for 39 years, but I find I can no longer struggle to keep it - the service charges for my one-bedroom flat have risen from £1600 per annum to over £5000 per annum. That is a 212% increase.”
The managing agents there are Aldermartin, Baines & Cuthbert.
At the Living City development in Colindale in my constituency, leaseholders were advised in March last year that after the constant failure of the communal hot water supply to the building over three successive winters, they would receive a rebate on their service charge, only for that offer to be countermanded in October last year. Residents noted that their insurance cover appeared to be paying for associated commercial units, and found that the premium had been increased by 100%. Lift maintenance is also charged, conveniently, on a day rate rather than a job rate: the lift fails, and a day rate is charged to fix it. Strangely, it fails again the following day, and another day rate is charged to fix it again—and so on, day after day, until astronomical charges have been incurred, with the managing agents able to take a management fee every time, of course.
I have written to all these managing agents, challenging them to justify their service charges and other fees, and to none have I been writing longer than Freshwater and its associated companies—at the last count more than 150 linked under the same beneficial ownership. It is because of Freshwater that in 1999 I launched my original campaign for what became the 2002 Act. One of its leaseholders wrote to me from Barons Court in my constituency, saying:
“Dear Barry, every double bed apartment now costs £6000 up from £2600 per year a 130% increase in service charge and we had to pay for the Waking Watch. The management company will not tell us how much commission they receive from the insurance premiums. We arranged our own fire tests and paid for critical remediation work.”
The name of the company FirstPort is well known to many Members. Since 2013, my constituents in Chamberlayne Walk have been challenging unreasonable service charges by FirstPort management services. I say unreasonable but, in fact, the word “fraudulent” is closer to the truth: it even charged for the management of surrounding land that it did not own and was not its to manage. One resident wrote to me about a typical example of its practice, saying:
“I was charged £1725.88 for internal and external decorations (painting of the windows). My windows are UPVC - no redecoration was required.”
Another wrote to tell me:
“The back fill of the stack pipe which causes water to come up into my kitchen sink and has flooded my kitchen on many occasions is still an issue after 15 years of reporting it.”
Yet another person explained:
“My flat is a one-bedroom flat, one of the smallest on the estate and I was charged £2861 for redecorations - almost double the costs levied on the larger 2-bedroom flats this matter remains unresolved.”
FirstPort’s response to those and the more than 500 more complaints like them that I have received is to make no response and ignore things for as long as possible—for months and years, not days and weeks. There is a lack of accountability and transparency over what the residents are charged for and whether the costs are reasonably incurred and reasonable in amount. There is a total failure to provide leaseholders with a breakdown of service charges. Many of my constituents can wait more than 20 months for accounts to be finalised.
Even when FirstPort admits that refunds are owed to the leaseholder because of double counting, overcharging or charging for services not provided, the requests for the return of the overpayments are often ignored, or the returns can take many months to be made. FirstPort also charged multiple administration penalty charges of £60 each when someone queried the costs. One resident ended up being billed for more than £400 of admin charges and was then browbeaten into paying because of the threat of legal action.
In 2019, Nigel Howell, the then chief executive, conceded to me that it was unlawful for his company to impose late penalty fees on leaseholders who had disputed their charges—but not all leaseholders have been refunded. Nigel Howell also confirmed to me that his company had charged costs for areas not under FirstPort’s management and promised that a 20% refund would be given in the following year’s accounts. Strangely, Nigel Howell was removed from his post as chief executive.
After years of suffering, one brave, resilient resident finally took FirstPort to the tribunal. FirstPort sought to rely in its defence on two factors: it tried to rely on the payments made by leaseholders—in other words, by paying up they had intimated consent; and, especially ironic given the FirstPort practice of delay, it tried to rely on the length of time the leaseholder had taken in bringing the challenge to the tribunal.
On Friday 13 January, the last working day before the hearing, I received the following email in my office from my constituent at 5 pm:
“They are settling all of the claim. Their lawyers harassed me all week and made the offer on Friday afternoon, just hours before the hearing this Monday. They did not want this case heard as they have been lying to Barry. They owe money to 202 families.”
Of course FirstPort did not want the case heard in public: section 27A(5) of the Landlord and Tenant Act 1985 states that
“the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.”
Tenants often pay expressly disputed service charges to avoid the risk of forfeiture and preserve their home and the value of their lease.
Of course FirstPort did not want that in the public domain, but it now is, and 200 other families have now been given heart that it is possible to take FirstPort on and beat it. Already, 42 other leaseholders on the estate have signed up to a class action. But the point is that this should not be happening. A code of conduct for managing agents will not do any good. The 1985 Act already provides that service charges must be reasonable and services and works must be carried out to a reasonable standard. The problem is the whole imbalance of power between the leaseholder and the freeholder.
Leasehold tribunals were intended to be a cheap, efficient way of resolving normal disputes between reasonable people without enormous legal costs, but landlords have intimidated leaseholders by engaging vast arrays of lawyers and threatening them with forfeiture and bankruptcy. There is a way to end this misery, but it is not with a new code of practice. Companies do not obey the existing primary legislation; they will not abide by a new code of practice. The way to end this misery is not with the safety regulator. Company law allows companies to avoid their obligations, go into administration while the directors set up new companies and repeat their scams all over again. This misery will end only when we have an end to leasehold. Our country has put up with a feudal system of land tenure for almost 2,000 years. It is time it stopped.
Several hon. Members rose—
Barry Gardiner
I am very grateful to all hon. and right hon. Members who have spoken in this debate. It is clear that there is a compelling case for wholesale reform in this area. The hon. Member for Warrington South (Andy Carter) has done himself no harm in Steinbeck Grange today, I am quite sure, but the point that he made is one that we all share. It was ably made by the right hon. Member for Stevenage (Stephen McPartland) as well. He said that that resident had said that he had to reassess his life.
For so many people, that is what is happening. Millions of people in this country are having to reassess their lives and the possibilities that they thought were open to them—even on changing jobs—trapped in their own homes, unable to sell, unable to move to a new job, or trapped in a one-bedroom home, unable to have any more children. Their plans are on hold. Their lives are on hold.
It is really interesting to hear the case that my hon. Friend the Member for Vauxhall (Florence Eshalomi) made about a 3,000% increase in service charges. I am glad that the Minister has agreed to take up that case and look into it further, because it is astonishing.
There are two key points that I want to follow up. The first is the point made by my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders), who talked about the scandal of managing agents often being at the centre of a web of companies all linked to the same beneficial owners.
In Wembley Central Apartments in my constituency—I am not sure that I will get this entirely right—St Modwens and Sowcrest were the joint developers. Sowcrest sold to a Canadian company, which then sold to Wembley Central Ltd, which is established in Jersey. They claim that it is for them to do the remediation work on the building, yet Sowcrest was the original freeholder and the developer itself. Those are the sorts of entangled webs that we are dealing with here.
With that, I look to the Minister to do all that he can in government to bring forward the legislation. I hope that it conforms to the four points—the four challenges—that my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook), speaking from our Front Bench, mentioned. We all look forward, ultimately, to seeing an end to this appalling practice.
Question put and agreed to.
Resolved,
That this House has considered leaseholders and managing agents.
Draft Higher-Risk Buildings (Key Building Information etc.) (England) Regulations 2023
Barry Gardiner Excerpts(2 years, 3 months ago)
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The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Dehenna Davison)
I beg to move,
That the Committee has considered the draft Higher-Risk Buildings (Key Building Information etc.) (England) Regulations 2023.
The regulations set out the high-level information to be provided to the Building Safety Regulator and clarify for which parts of a building individual accountable persons are responsible. The regulations are part of the new building safety regime created by the Building Safety Act 2022. They are a fundamental part of our ongoing reforms to ensure that all residents’ homes are places where they are safe and can feel safe.
I will provide some context and background to these important regulations. After the Grenfell Tower tragedy, the Government appointed Dame Judith Hackitt to conduct an expert review of the building safety regime. Her review showed that there are significant issues in the industry. She identified that cultural and regulatory change was needed in order for the industry to be fit for purpose.
Dame Judith recommended a new approach to managing fire and structural safety risks in higher-risk buildings. She advised that a new, strengthened regulatory regime should be brought forward to improve accountability, risk management and assurance for higher-risk buildings. She also identified the lack of information about higher-risk buildings as an issue. In her report, she set out that access to up-to-date information is crucial for higher-risk buildings. Her report sets out that the new regulatory regime needs to provide closer, more robust and more expert scrutiny of higher-risk buildings. To do that, the regulator will need accurate and up-to-date information about such buildings.
The Government accepted Dame Judith’s recommendations and brought forward the Building Safety Act, which received Royal Assent in April 2022. The Act establishes the new regime, which creates stronger oversight of higher-risk buildings and puts stronger legal duties on those responsible for the safety of higher-risk buildings throughout their lifecycle. It also brings forward stronger enforcement and sanctions to deter and rectify non-compliance.
The regulations set out requirements for occupied higher-risk buildings. In particular, they set out the high-level building information—that is, the key building information—that will need to be provided to the Building Safety Regulator. This key building information will help the regulator to fulfil its duties under the 2022 Act.
The Building Safety Act sets out that all occupied higher-risk buildings will have at least one clearly identifiable accountable person. The accountable person will be responsible for assessing, managing and mitigating building safety risks. If an occupied higher-risk building has only one accountable person, they will automatically become the principal accountable person. Where the building has two or more accountable persons, the one responsible for the repair of the structure and exterior of the building will be the principal accountable person. The regulations clarify which accountable person is responsible for different parts of a building in cases when there is more than one accountable person.
The regulations are split into two parts. First, they establish the key building information that must be provided to the Building Safety Regulator by the principal accountable person.
Barry Gardiner (Brent North) (Lab)
Before the Minister moves on from the business of accountable persons, does she share the concern of many of my constituents that, by appointing the accountable person, the Government are doing one important thing and setting out that someone is actually responsible? The problem has been that the buck has been passed all around. But in doing that, the Government are passing to the residents—the commonhold association itself—the responsibility that should properly lie with the developer of the building, whose responsibility it was to ensure that the building was constructed properly in the first place. In many cases, it was not.
Dehenna Davison
The hon. Gentleman is absolutely right that one of the key issues is the clear line of accountability. That is something that the regulations and the Building Safety Act seek to rectify. I am happy to write to him with further clarity on the role of developers, if that would be helpful, but the key point is to ensure that a person in the building now is responsible for the building now and has that clear line of accountability. However, I will follow up in writing to provide more clarity.
Dehenna Davison
I am grateful to my hon. Friend. I will of course ask the Department to identify said information and pass it on to him, if that is something he wants specifically for his constituency. May I say what a great way that was to garner information?
I have outlined a few of the things that the regulator must be informed of. It must also be provided with information about the materials used in the building—that is, the materials used in the external walls, the external wall insulation, the roof, and any fixtures attached to the external walls and roof. Information will also have to be provided about the type of evacuation strategy for the building, such as “stay put” or simultaneous evacuation, and the fire and smoke control equipment in the building. All that information will be pivotal in helping the Building Safety Regulator to go about its day-to-day functions and duties, understand typical features and trends in the existing stock of buildings, and identify safety concerns in the future. Guidance will make clear exactly what information is required to meet the legal obligation.
Barry Gardiner
Clearly, the building regulator will accrue a huge amount of information. Will the Minister set out how many building regulators there will be? Will there be only one? If so, what facilities and resources will be made available to the regulator to enable it to cope with the influx of information and sift it so that the safety end is achieved?
Barry Gardiner (Brent North) (Lab)
It is a pleasure to serve under your rigorous chairmanship, Mr Robertson.
I share the concerns of my hon. Friend the Member for Greenwich and Woolwich. Here we have huge responsibilities being placed on individuals or commonhold associations without the necessary power to do what is being obligated. Those who have engaged with leaseholders over many years know that communications between residents in a large tower block often take huge lengths of time. They are not instantaneous. The idea that within 28 days the appropriate person will be able to ensure that they have all the information from other residents is fanciful. Communications just do not work like that in tower blocks.
That will discourage leaseholders from taking over the management of their building. Many of them are labouring under problems with their existing managing agents, such as huge increases in their service charges or often completely inappropriate items billed to them erroneously. They therefore want to be enfranchised and to take on the responsibility as managing agents themselves. With that, however, will come the new responsibilities, which are incredibly onerous.
My hon. Friend was absolutely right to ask about penalties. Those who exercise those responsibilities, or try to, have to know what will happen to them if they fail to do so—not wilfully or through negligence, but because it is simply not possible to secure all the appropriate information in the timeframe. There is then the question of what happens if they cannot access the information. As my hon. Friend said, this is about not just fire doors, which are at least there physically and can be seen, but internal fire stopping, which may not have been put in during construction. That is one of the things that makes a building most susceptible to fire, yet it is not mentioned in regulation 8. That is essential if people are to fulfil the duties that the Government are placing them.
Ultimately, this issue goes back to where responsibility lies. It is great that we are trying to nail that down, and I appreciate what the Government are trying to do, but there are real, practical constraints. We need to know what the penalties are and how the regulations will be enforced.
Dehenna Davison
I will follow up on that point in writing after the Committee rises, if that is acceptable.
Barry Gardiner
I am grateful to the Minister for giving way again; she is being generous in engaging in debate. In answering the question that my hon. Friend the Member for Greenwich and Woolwich asked about fire doors, she referred to regulation 18, which talks about
“fire and smoke control equipment”
and specifically excludes that which is
“provided by a resident for their own use.”
“Equipment” does not sound as if it includes fire stopping. Will the Minister please clarify where responsibility lies for fire stopping in a building?
Dehenna Davison
As I have highlighted, guidance will be provided, and we hope that it will provide the clarity that is needed. Again, though, if we have more information, I will follow up in writing to provide the hon. Gentleman with further assurances.
I am grateful to hon. Members for their engagement, and I am particularly grateful to the shadow Minister, the hon. Member for Greenwich and Woolwich, for his constructive approach. Right across the House, we recognise how crucial this issue is, and I am grateful that we are moving forward to tackle it together. I commend the regulations to the Committee.
Question put and agreed to.
Building Safety
Barry Gardiner Excerpts(2 years, 4 months ago)
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Michael Gove
I will work with all the devolved Administrations to ensure that we work together on this. I do not know whether Laing O’Rourke has yet signed, but if it does not, it will face consequences. I look forward to working with the hon. Gentleman and of course the Welsh Government.
Barry Gardiner (Brent North) (Lab)
The Secretary of State said that those who built these buildings did not always build them safely, “at times knowingly”. What sanctions will be faced by those who knowingly took shortcuts on safety, endangering and blighting residents’ lives, and who will bring them? As for the companies that he says must either sign or get out and find another business, what happens when they simply go out of business and pop up under another name?
Michael Gove
The hon. Gentleman makes some very good points. We have found that one particular company— I will not name it at the Dispatch Box at this time but I am more than happy to name it in private conversation—has tried to do just that and shift responsibility, and it was directly involved in construction at Grenfell. As a result, we have said that it cannot have access to Government funds through Help to Buy or any other schemes. The whole question of what further action may be taken against companies that knowingly put people’s lives at risk will be a matter for the police and the Crown Prosecution Service, following on from the conclusion of the Grenfell inquiry. I know that people have had to wait a long time for justice. I do sympathise with them, but, obviously, I cannot interfere with the independent operation of the justice system.
Holocaust Memorial Day
Barry Gardiner Excerpts(3 years, 4 months ago)
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Robert Jenrick
I will, and I thought the images of those survivors and their families with the Prince of Wales—just yesterday, I believe—seeing the unveiling of their portraits at the Royal Gallery was extremely moving.
Those are some of the reasons why, as Secretary of State, I worked to gain approval for the National Holocaust Memorial and Learning Centre, so that, when the time when the last living survivors leave us does come, there will be another permanent centre to reflect, honour and remember those who suffered and died, and to educate future generations. I am grateful to Members on all sides of this House who continue to support that initiative.
Our debate in Parliament also matters. I have come year after year to share my own or my constituents’ experiences of the holocaust. I have talked about my own family, many of whom perished in death camps in what today is Ukraine, but two of whom miraculously survived—my children are their great-grandchildren. Had the right hon. Member for Barking been present, she would have shared with us the experience of her brother-in-law, who is gravely ill.
Herbert was born in Germany in 1930 into a successful middle-class Jewish family. One of his earliest memories is Kristallnacht in November 1938, when his grandfather was assaulted and had all his teeth knocked out. His father had already lost his job as a judge because he was a Jew. Herbert and his little sister were among the very few children who escaped on the Kindertransport. He still has the passport with the Nazi swastika imprinted on it. He remembers little of the journey he took to Liverpool Street—he was only eight. From London he went to Wales, where the children were joined by their mother, who managed to escape. His father did get to Switzerland, but the family were never reunited. Although a refugee, Herbert served in the RAF and has enjoyed a full and fulfilling life in Britain.
The right hon. Lady and I both know how powerful it is to have heard these stories from our own family members, to feel their impact and to have had a personal relationship with those who were victims of the holocaust. It is—I think I speak for all of us in this House who have met them—one of the greatest privileges to meet survivors. It was a huge privilege for me to meet Sir Ben Helfgott, Lily Ebert and Susan Pollack in July, when together we marked the granting of planning permission for the memorial in Victoria Gardens. All were very emotional that day. One said to me, as we walked away, that she could die easier knowing that they had contributed to that project and to educating future generations.
Barry Gardiner (Brent North) (Lab)
The right hon. Gentleman is making a very important and powerful speech. I had the privilege of meeting Gena Turgel, the bride of Belsen, when she spoke to schoolchildren in my constituency. Does he welcome the work of the trust, which is propagating those memories to the next generation and how important it is that that continuous word-of-mouth is passed on?
Robert Jenrick
I certainly do and the hon. Gentleman makes the point very powerfully. The way we remember is changing. For example, Dov, the great-grandson of Lily, whom I met in Victoria Gardens, is now using his 1.3 million TikTok followers to educate the next generation with her stories. I strongly encourage those who have not seen them to do so. The importance of remembrance remains as strong as ever.
Leasehold Reform (Ground Rent) Bill [Lords]
Barry Gardiner ExcerptsMonday 24th January 2022
(3 years, 4 months ago)
Commons ChamberRead Full debate Leasehold Reform (Ground Rent) Act 2022 View all Leasehold Reform (Ground Rent) Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 24 January 2022 - large print - (24 Jan 2022)
Eddie Hughes
I strongly suspect that my right hon. Friend will be catching up with the Secretary of State next time they walk through the Lobby together, and will be making exactly that point to him.
Barry Gardiner (Brent North) (Lab)
May I take up the point made by the right hon. Member for Hemel Hempstead (Sir Mike Penning)? When the Minister conducts that far-reaching review, will it return to the case of Custins v. Hearts of Oak Benefit Society back in 1969? Will it consider the abolition of leasehold, and the full ability of leaseholders to take on the franchise and ultimately the freehold of their buildings?
Eddie Hughes
I think it is too early for me to be able to predict exactly what will be in the Bill, and what its reach and remit might be, but I am sure I will be open to conversations with the hon. Member to discuss his thoughts on what could go into it.
It would be remiss of me to not mention that in fact only two weeks ago we launched a public consultation to seek views on proposals to allow more leaseholders in mixed-use buildings to take control and ownership of their building. That consultation will play an important role in shaping the next stage of our reforms to create a fairer leasehold system in England and Wales.
I thank the Competition and Markets Authority for the vital role it is playing in improving the sector for existing leaseholders. The CMA has already helped thousands of leaseholders to gain access to justice since opening its investigation, and I welcome its dedication in the ongoing fight against abuse in the sector. Let me repeat that the CMA’s action against industry players serves as a warning to others, and we expect those who continue to permit such poor practices to heed the example set by the investigation.