Leasehold Reform and New Homes

Lee Rowley Excerpts

Wednesday 28th February 2024 Westminster Hall

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

It is a pleasure to serve under your chairmanship, Mrs Harris. I thank all the Members who have contributed to the debate and those who are listening to it. The fact that we are talking about this issue for the second time in two days shows how important it is. It is clear, as we discussed yesterday, that Members on both sides of the House recognise that this area badly needs attention and reform. Thankfully, the general consensus across the House is that we have to move in that direction, so I hope the Bill, which went to the other place yesterday, will make fast progress there.

To be clear, the Government absolutely acknowledge this issue. We did so on Report yesterday, in Committee, on Second Reading and before that. Hon. Members have made very important points today, and have raised similar issues previously, about the iniquities in the system. They have spoken about the historical problems on the leasehold side and, more recently, but just as iniquitously, on the estate management side. Even those of us who believe that the Government should be very temperate in intervening in markets know it is right that when markets are not working, we should take action to straighten them out and remove the distortions within them. That is exactly why we introduced the Bill and are trying to ensure that it makes progress in the months ahead. We welcome the Opposition’s commitment to getting it on to the statute book at the earliest opportunity.

There are problems within the leasehold part of the discussion. The estate management issues have come into much sharper relief over the past couple of decades, particularly for those of us who have had significant amounts of new building in our areas. We can see, on a day-to-day basis, that a set of issues with individual estates clearly needs to be resolved.

As my hon. Friend the Member for Harborough (Neil O’Brien) and the hon. Member for Selby and Ainsty (Keir Mather) outlined, there is a particular issue with new homes, which I will talk about in a moment. Without rehearsing some of the previous arguments and discussions, I want to read into the record, for about a minute, the real progress that the Bill makes. It is important that the House and the other place do not forget that, as a baseline, we are making the biggest and most significant change to property law in this country in a generation; we absolutely need to acknowledge that.

We are making it cheaper and easier for leaseholders in houses and flats to extend their lease or buy their freehold. That is a significant intervention. We are increasing the standard lease extension term from just 90 years to 990 years, with ground rent reduced to zero. That is an extremely significant intervention. We are removing the requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from these changes. We are changing the thresholds and non-residential limits within properties, and for the first time allowing leaseholders in buildings with up to 50% non-residential floor space to buy their freehold and take over its management.

Yesterday on Report, we added protections on top of the Building Safety Act 2022 to make the purchase and sale of leasehold and freehold estate properties quicker and easier by proving a maximum time and fee for the provision of information. Vitally, we are requiring transparency over leasehold service charges, which hon. Members talked about a moment ago. We are replacing building insurance commissions for managing agents, landlords and freeholders so that we get away from the frankly outrageous situation whereby there is little clarity about what is being paid for, who pays for it and whether there are kickbacks in the background.

We are scrapping the presumption that leaseholders will pay the freeholder’s legal costs when challenging poor practice. That is another absolutely outrageous historical iniquity that needs resolution. We are rightly extending redress schemes to managed estates. I know that some hon. Members would prefer them to be abolished, but it is absolutely right that there is a redress scheme in place.

As hon. Members know, yesterday we banned the creation of new leasehold houses. I do not like to ban anything at all because I think we have banned far too much in the United Kingdom over the past generation, but sadly, I am absolutely convinced of the necessity of a preclusion on leasehold houses, given the horror stories that have been outlined during the passage of the Bill and in the years leading up to it.

[Matthew Pennycook]

Will the Minister give way?

[Lee Rowley]

I will happily give way to the hon. Gentleman; I hope he is about to agree with me about the necessity of banning only very proportionately.

[Matthew Pennycook]

I am afraid that I am going to have to disappoint the Minister, because I disagree that the Government banned new leasehold houses yesterday. He did not address this in his wind-up speech yesterday, because he did not have a huge amount of time, but I want him to respond to my concerns about new schedule 2 providing for exemptions that are potentially so wide that they could allow for the creation of significant numbers of new leasehold homes over the coming years. Will the Government review their position on new schedule 2? Are they convinced that it provides for only very limited exceptions in unusual circumstances, as the Minister said yesterday?

[Lee Rowley]

I am grateful for the hon. Gentleman’s intervention. He and I have an active discussion about this, and possibly a slight difference of opinion about the potential impact of what we introduced. I do not wish to misrepresent him, but I think he accepts that some elements of what we brought forward yesterday, possibly those regarding the National Trust, are not controversial or contentious. There is a question about whether the measures should apply if, historically, organisations, entities or companies have agreements in certain ways. It is clear that this will be swept away; we are effectively discussing whether existing permissions on a particular type of prospectus, other than the small number of things such as the National Trust, should be swept away as well. I am sure that we will continue to talk about that, but we think that this proposition is a major intervention that honours the spirit of banning leasehold houses. Others may take a different view, but the Government’s view is that this is a significant step forward that adheres to the spirit of a ban or preclusion, and that will allow us to move forward.

I have highlighted the progress that has been and is being made, subject to what the other place does. I know, however, that hon. Members are very keen that we go further in certain areas, so I want to spend a few moments going through some of their suggestions. My hon. Friend the Member for Harborough made a powerful speech—again, he is the reason why we are speaking about this matter today, and it is important that we continue to have this conversation. We have heard some of the examples, both named and referred to, of the realities created by the system. No system is perfect—we can never design it such that there will not be some attempt to prang it in some way, shape or form—but large holes in the system have clearly built up and been exploited. Those have resulted in, for instance, the removal of trees from a tree-lined street. Unless there is some other reality behind that, there is absolutely no reason for it to happen. We have to move to a place where that does not occur, and we hope that that will be achieved in part by the changes made by the Bill. We recognise that there are further concerns, and we are considering those, but we all agree that some of the examples mentioned are not where we want to be. I hope that we may be able to say more on that going forward.

As I mentioned briefly yesterday, I also recognise this issue personally. I am not speaking today as a constituency MP, but only in the last month I have been in meetings with constituents who raised concerns about a Persimmon development and the clarity of information about service charges. So in my part of the world, I see issues similar to those raised by hon. Members, including my hon. Friend.

My hon. Friend also raised an important point about GP provision. I have been in this job for only four months, but I recognise the importance of this issue. My hon. Friend the Member for South West Bedfordshire (Andrew Selous) is particularly concerned about that, and I have spoken about it with my hon. Friend the Member for Hertford and Stortford (Julie Marson). It is another clear iniquity. As my hon. Friend the Member for Harborough says, people are doing the right thing, have worked hard all their lives and are buying properties, and although the sales particulars of those properties state that new GP provision will be on or near the site, suddenly that provision disappears into thin air between the point when the ink goes on the contract and the point when they move in, or within a few years.

We have already held a meeting on that issue with my right hon. Friend the Member for South Northamptonshire (Dame Andrea Leadsom), who is a Minister in the Department of Health and Social Care, and we are committed to trying to make further progress. A detailed discussion is needed, because a number of different issues on GP provision need to be unpacked.

First, there is the physical ability to provide bricks—places for people to operate out of—which is obviously the responsibility of the planning system or associated with it. The second issue is whether there could be some provision, but for whatever reason, the configurations, the preferred designs and so on make that cost higher than it otherwise should be. If that is the case, that needs to be looked into again, because there is no reason for making perfect the enemy of the good. Thirdly, we may have the bricks or provisions to provide the bricks, but if we do not have the people to provide the services, it does not help in any instance the people who have been sold the promise in the first place. A number of different issues will need to be unpicked, and I am working with my right hon. Friend from the Department of Health and Social Care on that.

My hon. Friend the Member for Harborough talked passionately and importantly about new homes and the related issues. As he indicated, when someone has done the right thing, it is absolutely incredible and unacceptable that there are the kind of problems that he has highlighted around sewage, snagging and the amount of time people have to take to get their homes up to the standard they thought they were buying in the first place, or to solve the problems they did not think there would be. It is also fair to say that, as MPs, we only hear about the difficult issues, and there are many thousands of homeowners who move into homes on a monthly and annual basis who do not have those issues. That is absolutely great, but we can all see in our postbags that there are significant challenges with regards to new homes. As my hon. Friend indicates, I hope that the new homes ombudsman will make progress, and the New Homes Quality Board is currently seeking to do that.

My hon. Friend the Member for Gravesham (Adam Holloway) is no longer in his place, but he raises an important point about conveyancing. The hon. Member for Selby and Ainsty made a similar point about people being encouraged to use a particular conveyancer, or a particular set of solicitors, and it may be that the output of that process, however it happened, meant they did not get all the information or certain things were not as clear as they could be. That is unacceptable. I recognise that we have to work through that issue. There is a very complicated interaction between standards, regulation and whether people are doing the right thing, even within a regulated industry. I think I should pick that up with my Ministry of Justice colleagues to see whether there is anything that we may be able to take forward.

The hon. Member for Selby and Ainsty made an important and eloquent case relating to some challenges that he and his constituents have experienced. I was campaigning on one of his new estates just a few months ago, possibly for a different candidate. I will make two points. He raised an issue with regards to Harron Homes. I say this not to make any particular point, other than that I had a similar personal and constituency issue with Harron Homes on the Regents Green estate in Grassmoor in my constituency a number of years ago. It took quite a bit of pushing, but in the end, Harron Homes moved and we got hundreds of snags unsnagged. I hope he has similar success on that.

I know the hon. Member’s point was not about seeking advice on how to approach Harron Homes; it was more broadly about the reality that this should not happen in the first place, and he is absolutely right. I hope that some of the work in the Leasehold and Freehold Reform Bill, and some of the things that the New Homes Quality Board is doing on a voluntary basis and the new homes ombudsman will do in the coming years will help to address some of those problems.

My hon. Friend the Member for Worthing West (Sir Peter Bottomley) is not just the Father of the House but the father of many of the innovations and suggestions in the Bill, given how long he has campaigned on this issue. He raised the specific issue of rentcharges, and I would say to him that I am always happy to hold roundtables, but we must make sure they have utility. We are clearly making progress with the Bill, and I hope hon. Members accept that that includes progress on rentcharges. Both I and the Secretary of State continue to be keen to have the discussion around rentcharges to see what might be possible in the future.

It is important to note that there is a complicated interaction, as there always is in such difficult areas of law, between the clear problems we see with rentcharges and the overall structure of how rentcharges are used on a broader basis—rentcharges are, for example, part of the estate management system. That is something we have to try and work through in the round, but I am always happy to talk more and to hold roundtables. We do understand that there continues to be a challenge there.

[Sir Peter Bottomley]

I should have said that I am a leaseholder. Let us say that one of my grandchildren was buying a freehold property where there was a requirement to pay charges. The idea that the rentcharge holder can, if there is a slip in paying the charge, turn a freehold property into a 99-year lease, which may knock hundreds of thousands of pounds off the value of a London property, is absurd. The sooner we can please have the roundtable, followed by action, the better.

[Lee Rowley]

My hon. Friend makes an important point about the current system, and I look forward to continuing to discuss that with him and those who are interested in this area and who wish to see further progress.

My hon. Friend the Member for Hertford and Stortford made a clear point about the importance of clarity of information for leaseholders. Given the preclusion that we are bringing forward, I hope she has seen that we have added clauses to the Bill to make it imperative that there is explicit clarity about whether leasehold houses are still being sold, in the limited instances where we think it is proportionate to do so. From a house perspective, there will be no ability for people not to know what they are buying because others choose not to make that clear.

The hon. Member for Greenwich and Woolwich—we have rehearsed many of these points already, so I will not seek to detain hon. Members—raised the issue of forfeiture. As I have said, and as I will happily repeat here again, we are working through the detail of that issue. We are very serious, and we recognise that it is an important issue and one on which the House has already indicated that it has a very strong view. We hope to be able to say something more on it shortly.

After we had had a number of Divisions yesterday, I saw on Twitter—I do read Twitter—that there was quite a lot of disappointment about the choice on forfeiture. I want to assure people who may be reading the Hansard of this debate or watching online that the Government are absolutely serious about this issue. We have been clear that we are looking at it seriously, and I hope we will be able to say something more. Many of us who have been in this place for a number of years now will know that there is some arcanity—if that is a word—or an arcaneness to some of the procedures. Sometimes things do not appear in exactly the linear sequence or sequential order that people would like, but I can assure those who are interested in this issue that the Government are looking at it seriously, and I hope to be able to report back to the House on it shortly.

Finally, I thank the hon. Member for Battersea (Marsha De Cordova), who is no longer in her place, but who raised important points about leasehold. I also thank, as ever, the hon. Member for Strangford (Jim Shannon), who highlighted the importance of reform in general. That is one of the reasons why we are bringing the Bill forward and seeking to make as strong progress as possible.

I recognise the useful contributions today, which build on Report stage yesterday and on the progress that the Bill has made in the House already. I hope that hon. Members who have been in today’s debate or been part of the process so far recognise that this is a strong proposition that the Government have brought forward. It is the biggest change to property law in a generation.

The Government and I recognise the desire of Members here, and of the House in general, to go further. We have said very clearly that we are looking at a number of areas, and my Secretary of State—my boss and the person who ultimately makes the choice—has indicated very clearly that he is keen to improve the Bill further. As I said in Committee, we will not be able to do everything, and there is always a discussion and a decision about how we prioritise the limited time of this House and the other place. However, we think that the Bill is a strong start, and we hope we will be able to improve it further. We look forward to being able to make real progress in this important area, which has needed reform for so long. Finally, after 20 years, we will be able to deliver that as part of this Bill.

Leasehold and Freehold Reform Bill

Lee Rowley Excerpts

Report stage
Tuesday 27th February 2024 Commons Chamber

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

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

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Government new clause 27—Part 4: Crown application.

Government new clause 28—Redress schemes: no Crown status.

Government new clause 29—Part 5: amendments to other Acts.

Government new clause 30—Steps relating to remediation of defects.

Government new clause 31—Remediation orders.

Government new clause 32—Remediation contribution orders.

Government new clause 33—Recovery of legal costs etc through service charge.

Government new clause 34—Repeal of section 125 of the BSA 2022.

Government new clause 35—Higher-risk and relevant buildings: notifications in connection with insolvency.

Government new clause 42—Ban on grant or assignment of certain long residential leases of houses.

Government new clause 43—Long residential leases of houses.

Government new clause 44—Leases which have a long term.

Government new clause 45—Series of leases whose term would extend beyond 21 years.

Government new clause 46—Houses.

Government new clause 47—Residential leases.

Government new clause 48—Permitted leases.

Government new clause 49—Permitted leases: certification by the appropriate tribunal.

Government new clause 50—Permitted leases: marketing restrictions.

Government new clause 51—Permitted leases: transaction warning conditions.

Government new clause 52—Prescribed statements in new long leases.

Government new clause 53—Restriction on title.

Government new clause 54—Redress: right to acquire a freehold or superior leasehold estate.

Government new clause 55—Redress: application of the right to acquire.

Government new clause 56—Redress: general provision.

Government new clause 57—Redress regulations: exercising and giving effect to the right to acquire.

Government new clause 58—Enforcement by trading standards authorities.

Government new clause 59—Financial penalties.

Government new clause 60—Financial penalties: cross-border enforcement.

Government new clause 61—Lead enforcement authority.

Government new clause 62—General duties of lead enforcement authority.

Government new clause 63—Enforcement by lead enforcement authority.

Government new clause 64—Further powers and duties of enforcement authorities.

Government new clause 65—Power to amend: permitted leases and definitions.

Government new clause 66—Interpretation of Part A1.

New clause 1—Estate management services—

“(1) Within three months of the passage of this Act, the Secretary of State must by regulation provide for residents of managed dwellings to take ownership, at nominal cost, of—

(a) an estate management company, or

(b) the assets of an estate management company, or other company or business connected with the development or management of the dwellings, which are used to provide services to managed dwellings

if the estate management company or connected company or business does not—

(i) provide the residents of the managed dwellings with a copy of its budget for the forthcoming year and accounts for the past year;

(ii) give sufficient notice to enable residents to attend its annual meeting;

(iii) acknowledge correspondence sent by registered post to its registered office within a reasonable length of time.

(2) Regulations under subsection (1) may amend primary legislation.”

New clause 2—Estate management: compensation—

“(1) This section applies where the first and second condition are met.

(2) The first condition is that it would not be reasonable for the residents of a property to continue to occupy that property as their primary residence due to a defect which the estate manager—

(a) is responsible for remedying, or

(b) could reasonably have foreseen would arise.

(3) The second condition is that—

(a) the defect is the direct result of actions taken or not taken by the estate manager, or

(b) the estate manager has failed to remedy the defect within a reasonable period of time.

(4) The estate manager must—

(a) provide compensation to the residents of the property equal to any reasonable financial loss they incurred as a result of the defect, or

(b) provide suitable alternative accommodation for the duration of the period for which this section applies.

(5) No cost incurred by an estate manager as a consequence of this section may be recouped from the estate in question through an estate management charge.”

This new clause would allow estate residents to claim compensation or alternative accommodation where it is not reasonable for them to remain in their homes due to defects caused, or left unremedied for an unreasonable length of time, by an estate manager.

New clause 3—Prohibition on landlords claiming litigation costs from tenants—

“(1) Any term of a long lease of a dwelling which provides a right for a landlord to demand litigation costs from a leaseholder (whether as a service charge, administration charge or otherwise) is of no effect.

(2) The Secretary of State may, by regulations, specify classes of landlord to which or prescribed circumstances in which subsection (1) does not apply.

(3) In this section—

“administration charge” has the meaning given by Schedule 11 of the Commonhold and Leasehold Reform Act 2022;

“dwelling” means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, or outhouses and appurtenances belonging to it or usually enjoyed with it;

“long lease” has the meaning given by sections 76 and 77 of the Commonhold and Leasehold Reform Act 2002;

“service charge” has the meaning given by section 18 of the Landlord and Tenant Act 1985;

“landlord” has the meaning given by section 30 of the Landlord and Tenant Act 1985.”

This new clause would prohibit landlords from claiming litigation costs from tenants other than under limited circumstances determined by the Secretary of State.

New clause 4—Remedies for the recovery of annual sums charged on land—

“(1) Section 121 of the Law of Property Act 1925 is omitted.

(2) The amendment made by subsection (1) has effect in relation to arrears arising before or after the coming into force of this section.”

This new clause, which is intended to replace clause 59, would remove the provision of existing law which, among other things, allows a rentcharge owner to take possession of a freehold property in instances where a freehold homeowner failed to pay a rentcharge.

New clause 5—Abolition of forfeiture of a long lease—

“(1) This section applies to any right of forfeiture or re-entry in relation to a dwelling held on a long lease which arises either—

(a) under the terms of that lease; or

(b) under or in consequence of section 146(1) of the Law of Property Act 1925.

(2) The rights referred to in subsection (1) are abolished.

(3) In this section—

“dwelling” means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, or outhouses and appurtenances belonging to it or usually enjoyed with it;

“lease” means a lease at law or in equity and includes a sub-lease, but does not include a mortgage term;

“long lease” has the meaning given by sections 76 and 77 of the Commonhold and Leasehold Reform Act 2002.”

This new clause would abolish the right of forfeiture in relation to residential long leases in instances where the leaseholder is in breach of covenant.

New clause 6—Requirement to establish and operate a management company under leaseholder control—

“(1) The Secretary of State may by regulations make provision—

(a) requiring any long lease of a dwelling to include a residents management company (“RMC”) as a party to that lease, and

(b) for that company to discharge under the long lease such management functions as may be prescribed by the regulations.

(2) Regulations under subsection (1) must provide—

(a) for the RMC to be a company limited by share (with each share to have a value not to exceed £1), and

(b) for such shares to be allocated (for no consideration) to the leaseholder of the dwelling for the time being.

(3) Regulations under subsection (1) must prescribe the content and form of the articles of association of an RMC.

(4) The content and form of articles prescribed in accordance with subsection (3) have effect in relation to an RMC whether or not such articles are adopted by the company.

(5) A provision of the articles of an RMC has no effect to the extent that it is inconsistent with the content or form of articles prescribed in accordance with subsection (3).

(6) Section 20 of the Companies Act 2006 (default application of model articles) does not apply to an RMC.

(7) The Secretary of State may by regulations make such provision as the Secretary of State sees fit for the enforcement of regulations made under subsection (1), and such provision may (among other things) include provision—

(a) conferring power on the First-Tier Tribunal to order that leases be varied to give effect to this section;

(b) providing for terms to be implied into leases without the need for any order of any court or tribunal.

(8) The Secretary of State may by regulations prescribe descriptions of buildings in respect of which regulations may be made under subsection (1).

(9) In this section—

“dwelling” means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, or outhouses and appurtenances belonging to it or usually enjoyed with it;

“long lease” has the meaning given by sections 76 and 77 of the Commonhold and Leasehold Reform Act 2002;

“management function” has the meaning given by section 96(5) of the Commonhold and Leasehold Reform Act 2002.

(10) The Secretary of State may by regulations amend the definition of “management function” for the purposes of this section.”

This new clause would ensure that leases on new flats include a requirement to establish and operate a residents’ management company responsible for all service charge matters, with each leaseholder given a share.

New clause 7—Power to establish a Right to Manage regime for freeholders on private or mixed-use estates—

“In Section 71 of the Commonhold and Leasehold Reform Act 2002, after subsection (2) insert—

“(3) The Secretary of State may by regulations make provision to enable freeholder owners of dwellings to exercise a right to manage in a way which corresponds with or is similar to this Part.

(4) A statutory instrument containing regulations under subsection (3) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.””

This new clause would permit the Secretary of State to establish a Right to Manage regime for freeholders of residential property on private or mixed-use estates.

New clause 8—Regulation of property agents—

“(1) The Secretary of State must by regulations make provision for implementing the proposals of the Regulation of Property Agents Working Group final report of July 2019 as far as they relate to—

(a) estate management;

(b) sale of leasehold properties; and

(c) sale of freehold properties subject to estate management or service charges.

(2) Regulations under this section—

(a) must be laid within 24 months of the date of Royal Assent to this Act,

(b) shall be made by statutory instrument, and

(c) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.

(3) If, at the end of the period of 12 months beginning with the day on which this Act is passed, the power in subsection (1) is yet to be exercised, the Secretary of State must publish a report setting out the progress that has been made towards doing so.”

This new clause would require the Secretary of State to make regulations to implement the proposals of the Regulation of Property Agents Working Group final report within 24 months of the Act coming into force and to report on progress to that end at the end of the period of 12 months.

New clause 9—Qualifying leases for the purposes of the remediation of building defects—

“Section 119 of the Building Safety Act 2022 is amended by the insertion after subsection (4) of the following —

“(5) The Secretary of State may, by regulations, amend subsection (2) so as to bring additional descriptions of lease within the definition of “qualifying lease”.””

This new clause would give the Secretary of State the power to bring “non qualifying” leaseholders within the scope of the protections of the Building Safety Act 2022.

New clause 10—Meaning of “relevant building” for the purposes of the remediation of building defects—

“Section 117 of the Building Safety Act 2022 is amended by the insertion after subsection (6) of the following—

“(7) The Secretary of State may, by regulations, amend subsection (2) so as to bring additional descriptions of building within the definition of “relevant building”.””

This new clause would give the Secretary of State the power to bring buildings which are under 11m in height or have fewer than four storeys within the scope of the protections of the Building Safety Act 2022.

New clause 11—Report on providing leaseholders in flats with a share of the freehold—

“(1) The Secretary of State must publish a report outlining legislative options to ensure that all qualifying tenants in newly-constructed residential properties containing two or more flats have a proportionate share of the freehold of their property.

(2) The report must be laid before Parliament within three months of the commencement of this Act.”

This new clause would require the Secretary of State to publish a report outlining legislative options to provide leaseholders in flats with a share of the freehold.

New clause 12—Proportion of qualifying tenants required for a notice of claim to acquire right to manage—

“Section 79 of the CLRA 2002 is amended, in subsection (5), by leaving out “one-half” and inserting “35%”.”

This new clause would reduce the proportion of qualifying tenants who must be members of a proposed Right to Manage company for a claim to be made from one-half to 35%.

New clause 13—Prohibition on new leasehold homes—

“(1) Within three months of the passage of this Act, the Secretary of State must by regulations prohibit the sale of any new leasehold home.

(2) Regulations under this section—

(a) shall be made by statutory instrument,

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament; and

(c) may amend primary legislation.”

New clause 14—Premises to which leasehold right to manage applies—

“Section 72 of the CLRA 2002 is amended in subsection (1)(a), by the addition at the end of the words “or of any other building or part of a building which is reasonably capable of being managed independently.””

This new clause which is an amendment to the Commonhold and Leasehold Reform Act 2002 adopts the Law Commission’s Recommendation 5 in its Right to Manage report which would allow leaseholders in mixed-use buildings with shared services or underground car park to exercise the Right to Manage.

New clause 15—Meaning of “accountable person” for the purposes of the Building Safety Act 2022—

“(1) Section 72 of the Building Safety Act 2022 is amended in accordance with subsections (2) and (3).

(2) After subsection (2)(b), insert—

“(c) all repairing obligations relating to the relevant common parts which would otherwise be obligations of the estate owner are functions of a manager appointed under section 24 of the Landlord and Tenant Act 1987 in relation to the building or any part of the building.”

(3) In subsection (6), in the definition of “relevant repairing obligation”, after “enactment”, insert “or by virtue of an order appointing a manager made under section 24 of the Landlord and Tenant Act 1987”.

(4) Section 24 of the Landlord and Tenant Act 1987 is amended in accordance with subsection (5).

(5) Omit subsection (2E).”

This new clause would provide for a manager appointed under section 24 of the Landlord and Tenant Act 1987 to be the “accountable person” for a higher-risk building.

New clause 16—Commencement of section 156 of the CLRA 2002—

“(1) Section 181 of the CLRA 2002 is amended as follows.

(2) In subsection (1), after “104” insert “, section 156”.

(3) After subsection (1) insert—

“(1A) Section 156 comes into force at the end of the period of two months beginning with the day on which the Leasehold and Freehold Reform Act 2024 is passed.””

This new clause would bring into force a requirement of the Leasehold and Freehold Reform Act 2024 that service charge contributions be held in designated accounts.

New clause 17—Eligibility for enfranchisement—

“(1) The LHRUDA 1993 is amended as follows.

(2) In section 3—

(a) in subsection (2)(a), after third “building”, insert “, or could be separated out by way of the granting of a mandatory leaseback on the non-residential premises to the outgoing freeholder”;

(b) after sub-paragraph (2)(b)(ii), insert “or

(iii) are reasonably capable of being managed independently or are already subject to separate management arrangements;”

(3) In section 4(1)(a)(ii), after “premises;”, insert “nor

(iii) reasonably capable of being separated out by way of the granting of a mandatory leaseback and reasonably capable of being managed independently from the residential premises;””

This new clause would ensure that leaseholders in mixed-use blocks with shared services with commercial occupiers would qualify to buy their freehold.

New clause 18—Right to manage: procedure following an application to the appropriate tribunal—

“(1) The CLRA 2002 is amended as follows.

(2) After section 84, insert—

“84A Procedure following an application to the appropriate tribunal

(1) Where an application is made to the appropriate tribunal under section 84(3) for a determination that an RTM company was on the relevant date entitled to acquire the right to manage the premises, the Tribunal may, if satisfied that it is reasonable to do so, dispense with—

(a) service of any notice inviting participation;

(b) service of any notice of claim;

(c) any of the requirements in the provisions set out in subsection (2); or

(d) any requirement of any regulations made under this part of this Act.

(2) Subsection (1)(c) applies to the following provisions of this Act—

(a) section 73;

(b) section 74;

(c) section 78;

(d) section 79;

(e) section 80;

(f) section 81.””

This new clause would provide the appropriate tribunal with the discretion to dispense with certain procedural requirements where it is satisfied that it is reasonable to do so. It is designed to deal with cases where a landlord attempts to frustrate an RTM claim by procedural means.

New clause 19—Service charges: consultation requirements—

“(1) The Landlord and Tenant Act 1985 is amended as follows.

(2) In section 20ZA, after subsection (1), insert—

“(1A) “Reasonable” for the purpose of subsection (1) is a matter of fact for the tribunal, which—

(a) may or may not consider the matter of relevant prejudice to the tenant. If prejudice is to be considered the burden is on the landlord to demonstrate a lack of prejudice or to prove the degree of prejudice;

(b) must include consideration of the objectives of increasing transparency and accountability, and the promotion of professional estate management, as well as of ensuring that leaseholders are protected from paying for inappropriate works or paying more than would be appropriate;

(c) must consider the dignity and investment of the tenant, who should be treated as a core participant in the process of service charge decisions;

(d) must have regard to the tenant’s legitimate interest in a meaningful consultation process, bearing in mind that minor or technical breaches may not impinge on the tenant’s interest, nor prejudice the tenant;

(e) at its discretion may or may not consider a reconstruction of the ‘what if’ situation, analysing what would have happened had the consultation been followed properly. The landlord is liable for the costs of such a reconstruction.””

This new clause would set matters for the tribunal to consider when deciding whether to dispense with all or any of the requirements for landlords to consult tenants in relation to any major works.

New clause 20—Building insurance and section 39 of the Financial Services and Markets Act 2000—

“A landlord may not manage or arrange insurance for their building under the protections of section 39 of the Financial Services and Markets Act 2000.”

This new clause precludes a landlord from operating as an appointed representative under the licence of Broker, where the landlord has no such licence themselves.

New clause 21—Collective enfranchisement: removal of prohibition on participation—

“(1) Section 5 of the LRHUDA 1993 is amended in accordance with subsection (2).

(2) Omit subsections (5) and (6).”

This new clause would implement recommendation 41 of the Law Commission’s report on enfranchisement, that the prohibition on leaseholders of three or more flats in a building being qualifying tenants for the purposes of a collective enfranchisement claim should be abolished.

New clause 22—Leases for new dwellings: default length—

“(1) Where a lease is a regulated lease, it must be issued with a lease term of at least 990 years.

(2) In this section—

“regulated lease” means a lease which meets the following conditions—

(a) it is a long lease of a single dwelling;

(b) it is granted for a premium;

(c) it is granted on or after the relevant commencement day but not in pursuance of a contract made before that day; and

(d) when it is granted, it is not an excepted lease.

the “relevant commencement day” is 1 January 2025.”

This new clause would ensure that all leases created for new flats following 1 January 2025 come with a default length of 990-years, bringing the position of future private sector leases into line with the existing requirements under Home England’s new model shared ownership lease

New clause 23—Report on disadvantage suffered by existing leaseholders—

“(1) Within 12 months of this Act receiving Royal Assent, the Secretary of State must commission an independent evaluation of the matter set out in subsection (2) and must lay the report of the evaluation before Parliament.

(2) The matter is the extent to which a tenant who has extended their lease or purchased the freehold of their property after 27 November 2023 but prior to this Act receiving Royal Assent (Tenant A) is disadvantaged in comparison to a tenant who has extended their lease or purchased the freehold of their property after this Act received Royal Assent (Tenant B).

(3) The report must take account of the following factors—

(a) marriage value;

(b) the legal costs likely to be incurred by the freeholder; and

(c) any charge for which Tenant A would be liable but Tenant B would not.

(4) The report must make recommendations to redress any significant disparities between the costs for which Tenant A would be liable but Tenant B would not.

(5) The Secretary of State may by regulations give effect to any recommendations made in the evaluation.

(6) Regulations under this section—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.”

This new clause would require the Secretary of State to commission an independent evaluation of any disadvantages faced by a tenant who has extended their lease or purchased the freehold of their property after the introduction of this Bill but prior to it receiving Royal Assent.

New clause 24—Asbestos remediation—

“(1) The Leasehold Reform, Housing and Urban Development Act 1993 is amended as follows.

(2) After section 37B, insert—

“37C Asbestos remediation

(1) This section applies where a claim to exercise the right to collective enfranchisement in respect of any premises is made by tenants of dwellings contained in the premises and the claim is effective.

(2) Not less than 3 months before the effective date of the enfranchisement, the landlord must cause a structural survey of the premises to be undertaken by an accredited professional to ascertain whether asbestos is, or is liable to be, present in those parts of the premises which the landlord is responsible for maintaining.

(3) Where the survey required by subsection (2) reveals the presence of asbestos, the landlord must, at the landlord’s cost, arrange for its safe removal.

(4) If the removal of asbestos required by subsection (3) is not carried out before the responsibility for maintaining the affected parts transfers to another person under the claim to exercise the right of collective enfranchisement, the landlord is liable for the costs of its removal.””

New clause 25—Right to statutory compensation when landlord alters premises—

“(1) This section applies when both of the following conditions are satisfied—

(a) the first condition is that there are premises in which at least one dwelling is let on a long lease to a person (“T”); and

(b) the second condition is that the landlord or any superior landlord (“L”) under T’s long lease undertakes substantial development to the premises containing T’s dwelling.

(2) When both of the conditions mentioned in subsection (1) are satisfied, L must pay to T compensation reflecting the disruption caused by the substantial development.

(3) The compensation due from L to T under subsection (2) is to be calculated and paid by L to T at a time and in a manner according to regulations made by the Secretary of State.

(4) Notwithstanding any term of any agreement to the contrary, whether the agreement is made before or after the coming into force of this section—

(a) T may set-off any part of any compensation due from L but not paid by L in accordance with this section against any service charges demanded by L; and

(b) L may not exercise or omit to exercise any right, or otherwise take any step, to prejudice T as a result of any set-off exercised by T in accordance with this section.

(5) The County Court has jurisdiction to determine any dispute regarding compensation payable under this section.

(6) Regulations under this section—

(a) are to be made by statutory instrument;

(b) may make provision generally or only in relation to specific cases;

(c) may make different provision for different purposes;

(d) may include supplementary, incidental, transitional or saving provision.

(7) A statutory instrument containing regulations under this section is subject to the negative procedure.

(8) In this section—

“long lease” has the same meaning has the same meaning as in Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (see sections 76 and 77 of that Act);

“service charge” has the same meaning as in section 18 of the Landlord and Tenant Act 1985 (as amended by this Act);

“substantial development” means demolishing, reconstructing or carrying out substantial works of construction on, the whole or a substantial part of the premises.”

This new clause is proposed after clause 21. It would require landlords who extend or alter buildings to pay statutory compensation to residential leaseholders in that building, for example when adding new storeys under permitted development rights. Residential leaseholders would have the right to set-off this compensation against service charges if landlords did not pay.

New clause 36—Codes of management practice: requirement to adhere—

“In section 87 of the LRHUDA 1993 (codes of management practice)—

(a) after subsection (1) insert—

“(1A) If—

(a) the Secretary of State has not approved a code or codes of practice which appear to him to promote desirable practices in relation to all necessary matters concerned with the management of residential property by relevant persons within three months of the passage of the Leasehold and Freehold Reform Act 2024, or

(b) as a consequence of the withdrawal of his approval of a code or modifications under subsection (1)(c) it appears to him that codes of practice in relation to all necessary matters are no longer in place,

he must draw up a code or modifications in relation to such matters as he considers necessary and treat that code, or those modifications, as if submitted to him under subsection (1)(a)(ii).”

(b) in subsection (7)—

(i) omit the words “not of itself”, and

(ii) for “but”, substitute “and”.”

This new clause would amend section 87 of the Leasehold Reform, Housing and Urban Development Act 1993 so as to make the codes of practice allowed for under that section mandatory (paragraph (b)), and to require the Secretary of State to ensure that such codes of practice are in place (paragraph (a)).

New clause 37—Qualification in property management—

“In section 87 of the LRHUDA 1993 (codes of management practice), after subsection (6), insert—

“(6A) A code of practice approved under this section must require a person who discharges management functions in respect of residential property to hold a relevant qualification in property management.””

This new clause, together with NC36, would require any person who discharges management functions in respect of residential property to hold a relevant qualification in property management.

New clause 38—Information to be given to prospective purchasers of leasehold residential property—

“In the LTA 1985, after section 30P (as inserted by section 40) insert—

“Information to be given to prospective purchasers of leasehold residential property

30Q Information to be given to prospective purchasers of leasehold residential property

(1) The landlord must ensure that any person purchasing the lease of a dwelling is provided at the point of purchase with a copy of the Government guidance entitled “How to Lease”, as it may be updated from time to time.

(2) For the purposes of this section, “landlord” has the same meaning as in sections 30K to 30N (see section 30P).””

New clause 39—Rights of first refusal on disposal of freehold homes—

“(1) Within three months of the passage of this Act, the Secretary of State must by regulations provide for the rights of first refusal granted to qualifying tenants of flats by Part 1 of the Landlord and Tenant Act 1987 to be extended to tenants of freehold houses.

(2) Regulations under subsection (1)—

(a) may amend primary legislation;

(b) are subject to the affirmative procedure (but see subsection (3)).

(3) If before approving a draft of regulations under subsection (1) both Houses of Parliament have agreed amendments to that draft, the Secretary of State must make the regulations in the form of the draft as so amended.”

New clause 40—Failure of landlords to respond to requests for enfranchisement—

“(1) Within three months of the passage of this Act, the Secretary of State must conduct a review of the problems faced by tenants wishing to exercise their right to enfranchisement whose landlords do not respond to enfranchisement requests.

(2) A report of the review must be laid before Parliament as soon as it has been completed.

(3) The Secretary of State may by regulations implement any recommendation of the review.

(4) Regulations under subsection (3) may amend primary legislation.”

New clause 41—Report on disadvantage due to payment of marriage value—

“(1) Within 12 months of the passage of this Act, the Secretary of State must commission an independent evaluation of the matter set out in subsection (2) and must lay the report of the evaluation before Parliament.

(2) The matter is the extent to which a tenant who has been required to pay marriage value when extending their lease (Tenant A) is disadvantaged in comparison to a tenant who has extended their lease after the passage of this Act (Tenant B).

(3) The report must—

(a) make recommendations to redress any significant disparities between the marriage value costs for which Tenant A would be liable but Tenant B would not; and

(b) recommend the date after which Tenant A must have extended their lease in order to be eligible for any financial redress.

(4) The Secretary of State may by regulations give effect to any recommendations made in the evaluation.

(5) Regulations under this section—

(a) are to be made by statutory instrument; and

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.”

This new clause would require the Secretary of State to commission an independent evaluation of any disadvantages faced by a tenant who has been required to pay marriage value when extending their lease in comparison to a tenant who has extended their lease after the passage of this Act and therefore not been required to pay marriage value.

New clause 67—Liability of freeholders for central heating failures—

“(1) Within 12 months of the passage of this Act, the Secretary of State must commission an independent evaluation of the matters set out in subsection (2) and must lay the report of the evaluation before Parliament.

(2) The matters are, where there is a failure of a communal central heating system for which a freeholder is responsible which lasts for a minimum of 24 hours—

(a) the extent to which a freeholder should be liable; and

(b) whether, if the freeholder is considered to some extent to be liable, financial penalties should be imposed on the freeholder.

(3) The Secretary of State may by regulations give effect to any recommendations made in the evaluation.

(4) Regulations under this section—

(a) are to be made by statutory instrument; and

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.”

This new clause would require the Secretary of State to commission an independent evaluation of the matter of holding freeholders financially liable for long-lasting central communal heating failures where the freeholder has a responsibility for upkeep.

“New clause 68—Shared ownership—

(1) Within three months of the passage of this Act, the Secretary of State must by regulations create certain rights and obligations for leaseholders and freeholders on all leasehold properties which are subject to a shared ownership model created after 1967.

(2) The rights referred to in subsection (1) are that any leaseholder has the right to increase their share of the freehold in the property in increments of either ten percent or 25 percent on giving formal notice in writing to the freeholder.

(3) The obligation referred to in subsection (1) is that the freeholder may not charge a rent on their freehold share of the property which is greater than 2.75% of the market value of the share of the property which they hold.

(4) Rights and obligations created by regulations under this section are to apply notwithstanding any legal agreement previously entered into between the leaseholder and the freeholder.”

Amendment 3, in clause 3, page 2, line 19, at end insert—

“(2) After section 4(5) of the LRHUDA 1993, insert—

“(6) The Secretary of State or the Welsh Ministers may by regulations amend this section to provide for a different description of premises falling within section 3(1) to which this Chapter does not apply.

(7) Regulations may not be made under subsection (6) unless a draft of the regulations has been laid before, and approved by resolution of—

(a) in the case of regulations made by the Secretary of State, both Houses of Parliament;

(b) in the case of regulations made by the Welsh Ministers, Senedd Cymru.”

(3) In section 100 of the LRHUDA 1993—

(a) in subsection (2), after “making”, insert “provision under section 4(6) or”;

(b) in subsection (3), after “making”, insert “provision under section 4(6) or”.”

This amendment would enable the Secretary of State or (in the case of Wales) the Welsh Ministers to change the description of premises which are excluded from collective enfranchisement rights. Such a change would be subject to the affirmative resolution procedure.

Government amendments 24 to 31.

Amendment 6, in clause 12, page 16, leave out from line 27 to line 20 on page 17.

This amendment would leave out the proposed new section 19C of the Leasehold Reform Act 1967, and so ensure that leaseholders are not liable to pay their landlord’s non-litigation costs in cases where a low value enfranchisement or extension claim is successful.

Government amendments 32 to 34.

Amendment 7, in clause 13, page 22, leave out lines 1 to 29.

This amendment would leave out the proposed new section 89C of the Leasehold Reform, Housing and Urban Development Act 1993, and so ensure that leaseholders are not liable to pay their landlord’s non-litigation costs in cases where a low value enfranchisement or extension claim is successful.

Amendment 2, in clause 14, page 26, line 40, at end insert—

“(ja) any matter arising under Clause [Estate management: compensation] of the Leasehold and Freehold Reform Act 2024.”

This is a paving amendment for NC2.

Amendment 1, page 28, line 11, at end insert—

“(8A) When considering any matter under this section, the appropriate tribunal must have regard to previous decisions made by an appropriate tribunal in matters which appear, to it, to be materially similar to the matter under consideration under this section.”

This amendment would require tribunals considering cases related to leasehold to have regard to precedent set by previous decisions of tribunals in similar cases.

Government amendments 35 and 36.

Amendment 17, in clause 22, page 39, line 14, leave out “50%” and insert “75%”.

This amendment would allow leaseholders with a higher proportion of commercial or non-residential space in their building to claim the Right to Manage.

Amendment 9, in clause 23, page 40, leave out from the beginning of line 27 to the end of line 27 on page 41.

This amendment would leave out the proposed new section 87B of the Commonhold and Leasehold Reform Act 2002 and so ensure that RTM companies cannot incur costs in instances where claims cease.

Amendment 19, in clause 29, page 46, line 26, at end insert—

“(iii) a statement of all transactions relating to any sinking fund or reserve fund.”

This amendment would require the written statement of account which the landlord will be required to provide to a tenant to include a statement of all transactions relating to any sinking fund or reserve fund in which their monies are held.

Amendment 12, page 47, line 16, at end insert—

“(8) Where a landlord of any such premises fails to comply with the terms implied into a lease by subsection (2), any rent, service charge or administration charge otherwise due from the tenant to the landlord shall be treated for all purposes as not being due from the tenant to the landlord at any time before the landlord does comply with those subsections.”

This amendment would require courts and tribunals to treat the landlord’s compliance with the implied term requirement for annual accounts and certification as a condition precedent to the lessee’s obligation to pay their service charges.

Amendment 13, page 48, line 11, at end insert—

“(9) Where a landlord fails to comply with subsection (1), any rent, service charge or administration charge otherwise due from the tenant to the landlord shall be treated for all purposes as not being due from the tenant to the landlord at any time before the landlord does comply with that subsection.”

This amendment would require courts and tribunals to treat the landlord’s compliance with the implied term requirement for annual accounts and certification as a condition precedent to the lessee’s obligation to pay their service charges.

Amendment 14, in clause 30, page 50, leave out lines 12 to 19 and insert—

“(4) P may not charge R any sum in excess of the prescribed amount in respect of the costs incurred by P in doing anything required under section 21F or this section.

(5) The prescribed amount means an amount specified in regulations by the appropriate authority; and such regulations may prescribe different amounts for different activities.

(6) If P is a landlord, P may not charge the tenant for the costs of allowing the tenant access to premises to inspect information (but may charge for the making of copies).”

This amendment would make the appropriate authority (i.e. the Secretary of State or the Welsh Ministers) responsible for setting a prescribed amount for the costs of providing information to leaseholders. That prescribed amount would be the maximum amount that freeholders and managing agents employed by them could seek to recover through a service charge.

Amendment 15, in clause 31, page 51, line 35, leave out “£5,000” and insert “£30,000”.

This amendment would raise the cap on damages under this section for a failure to comply with duties relating to service charges to £30,000.

Amendment 16, page 51, line 35, at end insert—

“(5A) Damages under this section must be at least £1,000.”

This amendment would insert a floor on damages under this section of £1,000.

Amendment 20, in clause 32, page 52, line 32, leave out from beginning to end of line 33 and insert—

“(a) exceed the net rate charged by the insurance underwriter for the insurance cover, and”.

This amendment would define an excluded insurance cost as any cost in excess of the actual charge made by the underwriter for placing the risk, where such cost is not a permitted insurance payment.

Amendment 21, page 52, line 35, leave out from beginning to end of line 6 on page 53.

This amendment, to leave out subsection (3) of the proposed new section 20G of the Landlord and Tenant Act 1985, is consequential on Amendment 20.

Amendment 22, page 53, line 18, at end insert—

“(5A) The regulations must specify a broker’s reasonable remuneration at market rates as a permitted insurance payment.

(5B) The regulations must exclude any payment which arises, directly or indirectly, from any breach of trust, fiduciary obligation or failure to act in the best interests of the tenant.”

This amendment would require “permitted insurance payment” to include payment of a reasonable sum to a broker at market rates for placing the cover, and to exclude any payments which have arisen from wrongdoing.

Amendment 10, page 60, line 2, leave out clause 35.

Government amendments 37 to 41.

Amendment 18, in clause 46, page 75, line 23, at end insert—

“(c) only where they are incurred in the provision of services or the carrying out of works that would not ordinarily be provided by local authorities.”

This amendment would mean that services or works that would ordinarily be provided by local authorities are not relevant costs for the purposes of estate management charges.

Government amendment 42.

Amendment 83, in clause 74, page 97, line 37, at end insert—

“(2) Within three months of the passage of this Act, the Secretary of State must publish guidance on the circumstances in which the Secretary of State will give financial assistance or make other payments under this section.”

This amendment would require the Secretary of State to publish guidance on the circumstances in which financial assistance would be made available for the establishment or maintenance of estate management redress schemes.

Government amendments 43 to 48.

Amendment 11, in page 104, line 30, leave out clause 83.

See explanatory statement to NC4.

Government amendments 85 and 49.

Government new schedule 1—Part 5: Amendments to other Acts.

Government new schedule 2—Categories of permitted lease.

Government new schedule 3—Leasehold houses: financial penalties.

Government amendments 50 to 53.

Amendment 4, in schedule 2, page 136, line 40, at end insert—

“(9) In setting the deferment rate the Secretary of State must have regard to the desirability of encouraging leaseholders to acquire their freehold at the lowest possible cost.”

This amendment would ensure that when determining the applicable deferment rate, the Secretary of State would have to have regard to the desirability of encouraging leaseholders to acquire their freehold at the lowest possible cost.

Amendment 5, page 138, line 6, at end insert—

“(7A) In setting the deferment rate the Secretary of State must have regard to the desirability of encouraging leaseholders to extend their lease at the lowest possible cost.”

This amendment would ensure that when determining the applicable deferment rate, the Secretary of State would have to have regard to the desirability of encouraging leaseholders to extend their lease at the lowest possible cost.

Government amendments 54 to 67.

Amendment 8, in schedule 7, page 168, line 15, leave out sub-sub-paragraph (a).

This amendment would ensure that all leaseholders, not just those with residential leases of 150 years or over, have the right to vary their lease to replace rent with peppercorn rent.

Government amendments 68 to 82, 84 and 23.

[Lee Rowley]

Let me begin by thanking Members in all parts of the House for their valuable contributions to the Bill. It is good to see that so many who have been involved so far are present; a number of them have been campaigning for these changes for years. I will not be able to name everyone, but I pay tribute to, in particular, my right hon. Friends the Members for Bromsgrove (Sir Sajid Javid), and for Newark (Robert Jenrick), my late right hon. Friend the former Member for Old Bexley and Sidcup, James Brokenshire, and my hon. Friend the Member for Redditch (Rachel Maclean), all of whom have played such important roles in preparing the ground for many of the measures before us today. They have all been invaluable in helping us to reach the point at which we deliver on the commitment that we made to reform a system that clearly needs change, and give millions the freedom, security and control over their life that comes with home ownership in its truest, fullest sense.

At a stroke, the Bill will provide that greater control for young people and many others. It will help to reduce unnecessary stress, uncertainty and wasted time by reforming a labyrinthine system and making it better. Buying a home, especially a first home, must be a moment of pride and celebration—a just reward for years of hard work, careful saving, sacrifices made, and doing the right thing. For some, however, the dream of home ownership is realised in soaring service charges, rip-off insurance commissions and escalating ground rents. Overall, and most infuriatingly, there is a sense of being left in the dark, and of a system that is working against, rather than for, the homeowner. That is bad for everyone, but it is notable that first-time buyers constitute nearly 50% of leaseholders; 15% of owner-occupiers are aged under 35. They are the future of our property-owning democracy, and they rightly expect and deserve to put down roots and have the same stake in society as previous generations.

[Priti Patel (Witham) (Con)]

I would welcome my hon. Friend’s views on that point. What he has said is entirely correct. I have met so many first-time buyers in my constituency who are trapped, because they are stuck in a cycle of increasing service charges. Even worse, facilities companies are not maintaining properties when there are serious problems. I am meeting representatives of one of them, FirstPort, at the weekend, but a great many other examples have been cited in the House. We are deeply concerned, because our constituents have sacrificed so much. They have put all their investments and savings into their property, but there is clearly no accountability or transparency, and we hope that the Bill will change that.

[Hon. Members]

Hear, Hear.

[Lee Rowley]

My right hon. Friend is absolutely right, and the support that has just been expressed for her comments demonstrates that many of us see these issues in our constituency. As she says, it is vital that we give people who have made such sacrifices in order to achieve first-time home ownership the right to, and the greatest control over, that ownership.

[Eddie Hughes (Walsall North) (Con)]

In my constituency, Victoria Avenue (Harvest Grove) Management Company seems to be extorting money from leaseholders and not providing any of the works that it says it is providing. It is taking them to court and charging them for the benefit of having letters sent to them with invoices. Through this Bill, we desperately need to redress the balance between freeholders and leaseholders. Will the Minister see that that is the case?

[Lee Rowley]

My hon. Friend is absolutely right. He makes a very important point about transparency, which is at the heart of the service charge changes in the Bill. He makes an extremely important point about fairness. Not all companies will be doing things that are incorrect, but where they have been found to be incorrect, it is important that they shoulder their own costs.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I thank the Minister for his generosity with his time. It is not only companies that are exploiting leaseholders; the St Mary Magdalene and Holy Jesus Trust in my constituency refuses to allow its leaseholders to extend their lease or buy their freehold. The charitable exception is very complex, and nobody wants historic houses to be sold, but these are ordinary terraced houses and the charity used to sell the freehold and, indeed, extend leaseholds in the past. Is it possible for the Minister to meet me or my constituents to look at how this issue can be addressed in the future?

[Lee Rowley]

I am grateful to the hon. Lady for outlining that issue; I know she has raised it in this place before. As she indicates, this is a complex area of law, but I am happy to talk with her separately on that matter in the coming weeks, if it is helpful.

How are we doing this? We are giving leaseholders more security over the future of their homes by increasing the standard lease extension term to 990 years, by making it cheaper and easier for leaseholders to buy their freehold, and by tackling unfair charges, exploitative practices and poor management. In doing so, we are overturning centuries of iniquity.

The Bill will also give leaseholders the control they deserve over the buildings they live in. At present, management companies are too often unaccountable to those who pay for them, meaning that they are able to charge excessive fees for poor-quality service. The Bill gives more leaseholders the opportunity to manage the buildings themselves, so that works get done properly and they have more of a say.

[Mr Clive Betts (Sheffield South East) (Lab)]

The Minister might anticipate the question I am going to ask, because I have asked it before. It is fine giving leaseholders easier ways to buy their freehold, until we come across companies such as Coppen Estates, which we have debated before. It just does not reply to letters. I think that we are now on our third recorded delivery letter to the company about the residents on the Flockton estate, who have just been sent enhanced bills for their ground rent charges, with no justification. They face threats if they do not comply. Where in the Bill is there any measure to make sure that Coppen Estates and the like respond properly in future or face consequences if they do not?

[Lee Rowley]

I am grateful to the hon. Gentleman. As he knows, we have debated the iniquities of Coppen Estates extensively, and I repeat that it is treating my constituents in a way that is inappropriate, in the same way that it is doing with his constituents over the border. Given that we are extending the opportunity for charges to go to tribunal, I hope that the hon. Gentleman’s constituents in Flockton will be able to go to tribunal and hold that company or other companies to account, should that be helpful.

Through the reforms, we will scrap the presumption that leaseholders must pay their freeholder’s legal costs, even when they win at tribunal, correcting another historical and unfair imbalance. Someone would not be expected to pay legal costs if they were successful in their claim in other cases, so leaseholders should not be treated any differently.

[Barry Gardiner (Brent North) (Lab)]

The Minister was most accommodating throughout the proceedings in Committee, and we are all grateful to him for the way in which he has listened.

Further to the point raised by my hon. Friend the Member for Sheffield South East (Mr Betts), the Minister will know that many developers have located themselves extrajudicially in places such as the Cayman Islands. Wembley Central Apartments Ltd in my constituency has finally ended up there, as have many others. What in this Bill will enable us to extend our reach and force such companies to respond, reply and do what the Building Safety Act 2022 already says they ought to do?

[Lee Rowley]

The hon. Gentleman makes an important point, which I know we debated in Committee. He correctly highlights the challenges in certain areas of enforcement. If I may, I will come back to that later in the debate.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I join my hon. Friend the Member for Brent North (Barry Gardiner) in recognising that this is not a partisan issue, because so many of us see the problems. The Minister talked about people not paying the costs when they win, but many will be shocked to discover that no precedent is set at a leasehold tribunal. We see companies exploit our constituents time and again, and it creates no precedent on which the courts and the tribunal courts could draw. Will he look at my amendment 1? It seeks to set that precedent and give people the protection of knowing that a freehold manager who has mistreated people will not be able to do it with impunity, because the courts will be able to take that into consideration if a tribunal has found that to be the case.

[Lee Rowley]

I am grateful to the hon. Lady, and I know that she feels strongly about this matter and has raised it previously. I am always happy to talk outside the Chamber, but the advice I have received is that, at the higher tier of the tribunal, there is the ability to give an indication of the direction of travel and a precedent can be set there. As I say, I am happy to talk to the hon. Lady separately.

In Committee, we made efforts to further improve and expand the Bill. We moved 119 amendments, including on expanding leaseholder rights of redress and providing new guarantees that leaseholders will receive sales information, and tabled a number of technical amendments to improve it. Today we are proposing further improvements, and I will now turn to the Government amendments on Report. I will first speak to new clauses 30 to 35, and amendments 23 and 49.

Building on the Building Safety Act 2022, the Government have tabled a number of amendments to clarify and extend protections in specific areas to further prevent freeholders and developers from escaping their liabilities to fund building remediation work. The Building Safety Act provided leaseholders with a range of protections to ensure that those responsible for building safety defects were made to carry out the works or pay for them to be carried out. However, before and during the process of remediation, relevant steps may be required to keep the building and the residents safe. Relevant steps include such measures as providing waking watches, fire sprinklers or simultaneous alarms. Unfortunately, there have been cases where the landlord has failed to put those in place or to pay for the relevant steps. That has caused the leaseholder to bear the financial burden or required the local authority to step in.

New clause 30 would place beyond doubt that the first-tier tribunal can order that the costs of the relevant steps are met when making a remediation contribution order or a remediation order. It is often the case that doing surveys or investigative works to discover the full extent of remediation required on a building takes time, money and effort, and those assessments can be invasive. New clause 31 would place it beyond doubt that the first-tier tribunal has the power to order that a respondent must arrange and pay for evaluations, surveys or expert reports to establish the full extent of a building’s defects.

On new clause 32, we know that in some instances, landlords of buildings that are 11 metres high or above are failing to provide alternative accommodation for leaseholders when they are decanted from their homes. This new clause would place it beyond doubt that, in addition to relevant steps and expert reports, the costs of alternative accommodation for leaseholders and other residents who are decanted from their homes can be recovered through remediation contribution orders.

On new clause 33, resident management companies and right-to-manage companies allow leaseholders to have more control over their buildings. However, such management companies are unable to fund litigation against non-compliant landlords, as they are unable to recover the costs for doing so from leaseholders in their buildings. This new clause would allow such management companies, where the relevant lease allows, to raise funds for remediation contribution orders, making sure that we continue to hold those responsible for life-threatening defects to account.

New clause 34 would repeal section 125 of the Building Safety Act, which was intended to allow for the recovery of remediation costs relating to residential buildings that are 11 metres high or above in an insolvency, and for these funds to be used to remediate the building. However, there is a conflict with insolvency law and a risk that, instead of being used for remediation, any sums recovered under section 125 could be directed to pay down the debt. This problem cannot easily be remedied, so we are seeking to repeal the section at this time.

New clause 35 proposes that regulators need to be made aware if those responsible for relevant buildings—that is, responsible persons—become insolvent. This new clause introduces a duty on insolvency practitioners to notify local fire and rescue authorities, local authorities and, where necessary, the building safety regulator.

I also want to speak to new clauses 42 to 66, new schedules 2 and 3 and amendment 84. We know that there is little justification for selling houses on a leasehold basis. For years, developers have exploited the sale of houses on a leasehold basis for the sole purpose of generating an income stream from ground rents and fees. This has been done at the expense of consumers, who receive little or no benefit in return. We promised to shut down this abusive practice by banning the sale of houses on a leasehold basis, and today we are doing so. Other than in narrow circumstances where a lease can still be justified, all new houses will need to be sold on a freehold basis.

[Wendy Morton (Aldridge-Brownhills) (Con)]

I am really grateful for this news from the Minister. It certainly goes a long way towards addressing my new clause 13. He speaks specifically about banning leasehold sales of new houses, but what consideration will he give to extending that ban to leasehold flats? I know that that is a concern for a number of us on both sides of the House.

[Lee Rowley]

I know that my right hon. Friend has campaigned extensively for the ban on leasehold houses, as many in this Chamber have done, and she has spoken up in this place on the issue before. I am grateful for her support for it. She also rightly talks about the extensive debate about the potential extension of the ban to flats. The Secretary of State has said at this Dispatch Box on numerous occasions that the Government remain keen to make progress on finding an alternative workable solution to leasehold flats—most people in this place recognise that that will probably be commonhold—and work will continue on that. We hope to make further progress on that in the future—

[Several hon. Members rose—]

[Lee Rowley]

Commonhold has clearly created a significant amount of interest.

[Bob Blackman (Harrow East) (Con)]

I thank my hon. Friend for giving way, and for what he is saying. There are certain building companies in this country—Bellway Homes, for example—whose policy is to sell the leasehold to leaseholders and sell the freehold to a company that then exploits every aspect of the freehold, without even informing the leaseholder that they have done this. Surely we can close this loophole—we could close it this afternoon—by ensuring that the freeholder must give the leaseholder the first right of refusal to purchase the freehold.

[Lee Rowley]

My hon. Friend raises an important point. I know that it is covered in an amendment put down by the hon. Member for Sheffield South East (Mr Betts), and I will come to it later in the debate.

[Mark Tami (Alyn and Deeside) (Lab)]

On the point made by the hon. Member for Harrow East (Bob Blackman), Bellway is certainly a company that has done this. Indeed, many people did not even realise that they had a leasehold house and only found out quite a while afterwards when all the costs started to come down the road. I welcome what the Government have done, but we must try to find a good solution for everybody who now finds themselves in this position, because in the years to come those houses could become very difficult to sell.

[Lee Rowley]

The right hon. Gentleman makes an important point about the need to ensure that this regime works. We recognise that there are challenges, which is why we are bringing forward a number of measures.

[Richard Fuller (North East Bedfordshire) (Con)]

On the point about existing contracts that have been signed by people purchasing a leasehold property, is it the Government’s view that those were legitimate contracts and that there is therefore a risk in trying retrospectively to reverse the conditions of those contracts? Or is it the Government’s view that those were abusive contracts and that there is therefore a public policy interest in retrospectively eliminating the leasehold element of them?

[Lee Rowley]

I hope that I will be able to answer my hon. Friends’ questions in a moment when I run quickly through our amendments. We are banning the sale of leasehold houses in all but unusual circumstances, but for those that are out there at the moment, there must be an ability to ensure that they can buy the freehold and move from the leasehold challenges to a freehold. Let me deal with some specifics that I hope will answer some of the questions that have been raised.

--- Later in debate ---

[Mark Tami]

I thank the Minister for giving way again. One problem is that many of these companies encouraged buyers to use their lawyers, who did not point out some of the pitfalls of leasehold properties.

[Lee Rowley]

The right hon. Gentleman is absolutely right, which is why I hope that measures such as new clause 51 go some way towards making it crystal clear that there is no way to get around this, and towards providing clarity to those who seek to buy a new property.

New clause 52 will require a statement on the front of all new leases declaring that it is a permitted lease and is not a long residential lease of a house. Should a developer make a dishonest declaration to His Majesty’s Land Registry, the homeowner may be able to exercise the redress right contained in new clause 54, which will allow them to acquire the freehold from the developer free of charge.

Under new clause 53, if a lease does not include the prescribed statements, His Majesty’s Land Registry will have the power to restrict the resale of the property until the right information and declarations have been provided.

[Mr Betts]

The Minister is talking about the information on houses. Will it also apply to flats so that, before anyone buys a property, it must be explained to them that they are buying a lease and what that entails? I tabled new clause 38, which says that everyone buying a lease should be presented with a copy of the Government’s “How to Lease” document. Everyone in this situation should be given independent advice.

[Lee Rowley]

I am focusing on homes, and we have been emphatic and clear that the sale of leasehold homes will be precluded other than in exceptional circumstances. I am happy to talk to the hon. Gentleman both later in the debate and outside the Chamber about whether further consumer protections for those purchasing a flat may be proportionate and reasonable.

New clause 54 grants homeowners who have been mis-sold a new lease of a house the right to acquire the freehold from the landlord, as well as any superior leasehold interest in the property, for zero cost. New clauses 55 and 56 set out protections and reasonable limitations on this requirement, and new clause 57 provides for the Secretary of State to make regulations setting out further details on how redress can be obtained.

We understand that granting homeowners the right to redress alone may not be enough to prevent bad actors from attempting to breach the ban on the sale of leases on houses, which is why we are introducing a system of financial penalties where there is a breach. These penalties will start at £500 for a minor breach, rising to £30,000 for the most serious breaches. To enforce this system of fines, as set out in new clause 58, we are asking all local weights and measures authorities to play a part where they see infractions in their area. We will also set out how they need to work through new clause 60.

The chief responsibility for investigating and taking action will lie with the lead enforcement authority. Through new clause 61, the Secretary of State will have the power to appoint the right authority to fulfil this important role, while new clause 62 details the duties. By amending the Consumer Rights Act 2015, clauses 63 and 64 also vest the appropriate investigatory and enforcement powers essential for both the lead authority and local authorities to carry out the job.

[Matt Rodda (Reading East) (Lab)]

Can the Minister assist me with a relatively unusual issue in my constituency? I have listened very carefully to his helpful speech. In the Loddon Park development on the edge of Woodley in my constituency, residents were sold properties only to discover in the small print of their contract, as my right hon. Friend the Member for Alyn and Deeside (Mark Tami) said, that they were expected to pay a standing charge to upkeep open space on this large development, even though they are freeholders of their own houses. Will the Minister look into this matter and write to me about what redress might be open to them?

[Lee Rowley]

I am very happy to write to the hon. Gentleman about the specifics.

In addition to the building safety measures and the ban on new leasehold houses, the Government have tabled a number of consequential amendments to refine and improve the Bill.

With the leave of the House, I will mention three key issues among the many that were brought to our attention in Committee. I understand these issues will be subject to further debate today, but I want to acknowledge that they are: capping existing ground rents, which has already been raised; leaseholder forfeiture, which I know will be raised; and support for the residents of freehold estates, which has already been extensively addressed.

I know that Members will have questions about the Government’s plan to address ground rents, and we have consulted on introducing a cap on ground rents in the Bill. We extended the consultation on request and, as a result, we are still considering our next steps. We will say more shortly.

[Wendy Morton]

The Minister is generous in giving way. Can he give us an indication of the timescale? Many Members will be interested to know the answer. And does he anticipate being able to introduce something when the Bill reaches the other place?

[Lee Rowley]

Although I cannot give the specific assurances that my right hon. Friend seeks, we are trying to work through this at speed. We recognise that it is an important issue, and we recognise that it is vital to today’s discussion. I know that hon. and right hon. Members will recognise that this is a hugely contested area in which there has already been significant discussion. People have very different views, so we want to make sure that, while we are moving at speed, we take our time so that we reach a conclusive decision through the right methodology and process.

[Vicky Ford (Chelmsford) (Con)]

My constituent is in a flat with a ground rent of £454 a year. As that is over the £250 threshold, it means that their property can be taken away from them if they fail to pay their ground rent. As a result, my constituent has failed to sell their property six times, even though they have had buyers. They are stuck in this flat, and they cannot get on with their life. Will the Minister please look at this threshold, which is causing real problems?

[Lee Rowley]

My right hon. Friend moves me on to my second point. We also recognise the strength of feeling on the vexed issue of forfeiture. The hon. Member for Greenwich and Woolwich (Matthew Pennycook) made a clear case on this in Committee, as did other Members, and I also heard a passionate and eloquent case in Committee from my hon. Friend the Member for Walsall North (Eddie Hughes).

[Eddie Hughes]

Will the Minister simply remove any opportunity for forfeiture? It is arcane and has no place in our system. I strongly suspect that would get support on both sides of the House.

[Lee Rowley]

The House sees my hon. Friend’s passion, which he demonstrated in Committee and is demonstrating again today. Both he and my hon. Friend the Member for Redditch made passionate cases in Committee.

I recognise that this is a real and significant problem, and there is a huge iniquity at stake. I have heard from colleagues, both today and previously, about why we should act, and we are currently working through the detail of the issue. We will report back to the House with more details shortly.

Finally, a comprehensive debate in Committee on freehold estates was led by my hon. Friend the Member for North East Bedfordshire (Richard Fuller). He is a committed campaigner on this issue, and I know that many other Members also have very strong views. I have also been involved in this in places such as Alderman Park and Hunloke Grove in my constituency. We understand the strength of feeling on this issue, and we are considering it further.

[Alistair Strathern (Mid Bedfordshire) (Lab)]

Residents of estates across my constituency are trapped in extortive relationships with unaccountable private management companies while their estates go unadopted. On Second Reading, the Secretary of State expressed his willingness to bring forward and consider measures to make sure that residents have the right to manage on such estates, at a bare minimum, before considering wider action. Is there any reason why the Government would not accept new clause 7 in the name of the shadow Minister to finally give the residents of these estates the right to manage and to get out of these extortive relationships?

[Lee Rowley]

The hon. Gentleman made that case in Committee, and I am grateful to him for that and for repeating it today. As I say, we understand the strength of feeling on the issue and are considering it further.

[Gareth Johnson (Dartford) (Con)]

rose—

[Lee Rowley]

I will give way one final time and then I will conclude, so that others can get in.

[Gareth Johnson]

These management companies that the Minister alluded to have a literal monopoly over the residents they are meant to serve—in effect, they control the residents, rather than the other way round—so I welcome the amendments made in Committee to ensure that residents can change their management companies. Will he give a commitment to this House that he will ensure that those amendments stay in the Bill, both here and in the other place, and that they will become law?

[Lee Rowley]

My hon. Friend has been a campaigner for many years on the importance of this matter, and I know how strongly he feels and how much he acts on it on behalf of his constituents. We are absolutely committed to making progress on estate management. The Bill demonstrates a significant step forward in doing that, and we will see what else we can do in the future.

[Neil O’Brien (Harborough) (Con)]

rose—

[Lee Rowley]

I am going to wind up so as to give others the opportunity to speak. To sum up, property ownership has been described as one of the bulwarks of individual freedom, and the measures I have described today are designed to give all homeowners, particularly the younger generation, the chance to gain a proper stake in our democracy. The Bill seeks to bring greater fairness, transparency and accountability to the system, and to give millions of people across the country a more secure foundation to get on in life, a stronger stake in our society and a solid platform for the future. I am grateful for all Members’ efforts to improve the Bill and for the scrutiny and debate it has received so far, and I look forward to hearing the further discussions to that effect this afternoon.

--- Later in debate ---

My amendment would provide a safer passage for this Bill on its way to becoming law. It would ensure that any lease below 80 years at the time the Act is passed would continue to have marriage value, but any lease that goes below 80 years after the Act has passed would not. I ask the Minister to consider that as the Bill moves to its next stage.

[Lee Rowley]

With the leave of the House, let me start by thanking all Members for their contributions to the debate. The breadth of discussion across the House has shown that while we can discuss precisely how far we should go, there is a general consensus that progress needs to be made, and I think all Members will accept that it has been and is being made in the Bill.

My hon. Friend the Member for Worthing West (Sir Peter Bottomley) tabled new clause 25, and he is right to say that it deals with an important issue. As he said, a consultation is open, and we will review the responses very seriously. I urge anyone whose views are as strong as those expressed by my hon. Friend to contribute to the consultation, so that we can consider the issue in the round.

The hon. Member for Sheffield South East (Mr Betts) spoke passionately about his new clauses 39 and 40, and I understood the points that he was making. I hope that some of the changes introduced in the Bill will make the acquisition of freeholds much easier. We have discussed regularly the need for a disincentive for freeholders not to respond or to “go slow”, which should mean that the right to first refusal falls away to the extent that it is no longer necessary.

I was sorry to hear about the problems experienced by the constituents of my right hon. Friend the Member for Camborne and Redruth (George Eustice). He was kind enough to mention them to me earlier, but I would be happy to meet him as he requested, because I recognise that the specific matter that he raised is important to his constituents, and we need to look into it in more detail.

The hon. Member for Brent North (Barry Gardiner), who served on the Bill Committee, made many useful points. I cannot do justice to all of them, but I am happy to continue the discussion about Daejan Holdings and building safety to ensure that, if there is an issue that the Government have not worked through fully, we understand the details better.

The hon. Member for West Ham (Ms Brown), my hon. Friend the Member for Romford (Andrew Rosindell), my right hon. Friend the Member for Chelmsford (Vicky Ford) and my hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) highlighted the huge inequity that is affecting individuals in individual blocks in their constituencies. That inequity is exactly the reason why we must make progress, and I hope that the Bill is a good proposition for that to happen.

The hon. Member for Lewisham East (Janet Daby) was kind enough to give me more details about the background to her new clause in a separate discussion. What I have heard about from her, and also from the hon. Member for Walthamstow (Stella Creasy)—who is not in the Chamber, but who has a similar concern—is absolutely unacceptable. I entirely appreciate the individual concerns that are felt, and I am keen to continue our discussion so that we can learn from it for the broader good of the building safety sector in general.

My right hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) tabled an important new clause about leasehold houses. I am glad she recognised that the Government have now introduced measures to deal with the issue that she raised. She also raised two important points about reports, and I am keen to meet her so that we can discuss those further and, in particular, discuss the impact involved.

I can tell the right hon. Member for East Ham (Sir Stephen Timms) that we are looking into the issue of the Building Safety Regulator, and I will be happy to talk to him about that when we meet to discuss Barrier Point. Since his speech I have checked the position on asbestos. We do not believe that that right is extinguished, but if we are not correct I would be keen to talk to him further to ensure that we understand exactly how that regime will work in practice, and to try to assuage his concerns.

My hon. Friend the Member for Cities of London and Westminster (Nickie Aiken) exhorted us to move at this watershed moment. I am keen to talk to her further about the participation thresholds. She has made a powerful case, both to me in the House today and more broadly, about the importance of ensuring that this is workable, particularly in the circumstances that are faced in the centre of London.

While I entirely understand the point made by the hon. Member for North Shropshire (Helen Morgan) about some of these changes, I worry about her new clause, and I ask her not to push it to a vote. While her intentions are clearly noble, the new clause would put us into a position in which assets were being expropriated for the purpose of something that could be as insufficient as notice of an annual general meeting. I hope that she will reflect on that during the time we have left before the votes.

My right hon. Friend the Member for Witham (Priti Patel) made a strong point about the need to consider estate management further, and I have given a commitment to do so. FirstPort was raised by a number of Members, including my right hon. Friend. It may interest the House to know that my hon. Friend the Member for Harborough (Neil O’Brien) will lead a Westminster Hall debate on that tomorrow—so same time, same place, same discussion, but an opportunity to consider further the people and organisations that are not doing the right thing in this regard.

My hon. Friend the Member for North East Bedfordshire (Richard Fuller) has been an absolutely doughty champion of progress on estate management, and he is absolutely right to do that. His speech demonstrates again the strength of feeling about this issue and, as I said at the Dispatch Box a moment ago, we are considering it further and recognise the importance of doing that.

I turn to the contribution from the hon. Member for Greenwich and Woolwich (Matthew Pennycook), who speaks for the Opposition. He has tabled a new clause on forfeiture. I hope that the Government have indicated very clearly that we recognise the significant problems in this area and are working through the detail. Although I understand what he is trying to do with amendments 4 and 8, we think it is proportionate to retain the current position that we have set out from the Front Bench, for the same reasons as in Committee.

My hon. Friends the Members for Redditch (Rachel Maclean) and for Harborough made a very clear case about the importance of those on the Government Benches leaning into reform. In the time I have left, knowing that other parties and other traditions represented in this House will make similar cases—it is a shared endeavour in this area—I want again to make the Conservative case for leasehold reform. Building on our proud heritage of reform, it is a Conservative Government who are bringing forward the most transformational proposals for improving the lives of millions of leaseholders. It is a Conservative Government who are building the case for change to deal with the iniquities present on new estates, and who are committed to setting ordinary families free from unnecessary burdens. It is a Conservative Government who have brought forward one of the most comprehensive changes to property in a generation.

Why have we come forward with these proposals? It is precisely because it is a Conservative thing to do. We are cautious about interfering in the markets, for fear of unintended consequences or the creation of barriers. We know that no Government can ever fix every problem, but when we are convinced about the case for reform, we will fight for it with every sinew. At the heart of being a Conservative is the desire to smash monopolies and remove bad practice. We will celebrate where things work well, but we will joyfully remove distortions that are exploited by chancers and rogues. We will constrain rent seekers and middlemen, who add little to the basic economic exchange of goods and services that is at the heart of our economy.

Fundamentally, we are committed to making our markets more perfect and, as a consequence, to setting people free to make their own choices, live their lives and build their own future. Leasehold has been exploited for far too long by those who have no interest in the good functioning of capitalism. The lack of transparency, clarity and redress in freehold estate charges causes frustration up and down the land, and it does nothing for the efficient functioning of markets. That is why we are reforming.

Adam Smith talked of ground rents as monopolistic in 1776, Hayek reminded us in 1944 of the importance of making competition work and of not accepting institutions as they stand and, as my hon. Friend the Member for Harborough indicated, Margaret Thatcher asserted in 1982 that there is no prouder word in our history as Conservatives than “freeholder”. That is the centuries-long call as to why we have to make further improvements to our property system. With this Bill, in the true spirit of thousands of Conservative reforms that have made this country better, we are sending a clear signal that change for the better is coming and will benefit millions of people for the long term. That is only possible because of all the hard work of all the officials, all the people in the Law Commission and my opposite number, the hon. Member for Greenwich and Woolwich, who has been extremely constructive on this Bill.

I give huge thanks to Professor Nick Hopkins; Tom Nicholls and Chris Pulman at the Law Commission; officials in the Department, led by Robin Froggatt-Smith; my private office, including Grace Doody; and Members from across the House for their valuable input. Although I have just made the Conservative case for reform, we know that this is a shared endeavour among us all, which is why there is an unusual amount of unanimity in this place. It demonstrates the importance of our continuing to make progress on this issue.

As the Bill moves to the other place, I hope that those sat in the other place take note of the consensus and keenness here to ensure that progress is made. I hope they also take note of the importance of ensuring that the Bill continues and of the very many great reforms that are in it already. This demonstrates that together, as a broad group all across this House, we are committed to ensuring that leasehold reform happens, that leaseholders get a better deal and that the estate managers, estate management and freehold estates get clearer transparency, clearer information and a clear understanding of how they can live their lives and set themselves free in the future.

Local Government Finance

Lee Rowley Excerpts

Wednesday 7th February 2024 Commons Chamber

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

I beg to move,

That the Local Government Finance Report (England) 2024–25 (HC 318), which was laid before this House on 5 February, be approved.

[Madam Deputy Speaker (Dame Eleanor Laing)]

With this we shall consider the following motions:

That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2024–25 (HC 319), which was laid before this House on 5 February, be approved.

That the Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) Report 2024–25 (HC 320), which was laid before this House on 5 February, be approved.

[Lee Rowley]

Today, we are confirming the major parts of the settlement announced in December, as well as reiterating the £600 million additional funding boost announced in January. Local government has welcomed the extra money as important in offering the ability to provide further support to children, particularly those with special educational needs and disabilities, while also being mindful of the increased demand for social care. Governments always need to take tough decisions, and despite the suggestions of some in this place, there is always a balance to be struck: infinite worthy demands, but finite resources. None the less, we recognise that it is important to support local government in the face of increasing demands for services and the rising inflation and costs that are the legacy of the war in Ukraine and instability in the middle east. That is exactly what we are seeking to do.

In recognition of those challenges, I am pleased to announce a settlement totalling nearly £65 billion for local authorities in England for the next financial year. The settlement includes an increase in core spending power of up to £4.5 billion compared with 2023-24; a £1.2 billion uplift to the social care grant, which can be used for children’s or adult services subject to individual local priorities; an increase in the funding guarantee, which will ensure that all authorities see a minimum increase in core spending power of 4% before any local decisions are made on council tax rates; additional support for rural councils through a £15 million increase to the rural service delivery grant; funding worth £3 million to support authorities experiencing significant difficulties because of internal drainage board levy costs; and additional funding for the Isle of Wight and the Isles of Scilly, in recognition of their circumstances and their physical separation from the mainland. As a result, available funding for local government in England will rise by 7.5% in cash terms for 2024-25.

[Bob Seely (Isle of Wight) (Con)]

I am most grateful for the Minister’s statement, and I am also grateful for the uplift in funding for the Island. As I understand it, that is higher than average—we are most grateful—and that took place after meetings between me and Ministers. I am also grateful that they have specifically mentioned and accepted the additional costs that the Isle of Wight faces by dint of being an island, and that we are in effect now catching up with other parts of or other islands in the UK. I am very keen for this uplift to be seen as permanent, and then to be built on. Will Ministers meet me to discuss ways in which we can ensure that the uplift for the Island and the recognition of island status are now fixed?

[Lee Rowley]

I am grateful to my hon. Friend for, while I have been in post looking at this portfolio specifically, his invite to the Isle of Wight, his support in facilitating that and his continued work on behalf of the Island. The change, which has been brought forward today by the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend the Member for North Dorset (Simon Hoare), and the Secretary of State, is in direct recognition of the work he has done, and I am grateful for it. I know that the Under-Secretary will meet my hon. Friend to continue that discussion.

[Sir Desmond Swayne (New Forest West) (Con)]

Very briefly, is the Minister comfortable with our persisting in protecting our constituents from the local councils they elect with the referendum threshold? When are we going to allow local authorities to govern, and to suffer the consequences if the electorate disagrees with what they have done?

[Lee Rowley]

I am grateful to my right hon. Friend for raising a very philosophical important point, which is about the balance between local and national Government, and he is absolutely right to raise it. It is a long-standing principle of our local government settlement that we allow local councils the flexibility to be able to make decisions about the finances in their local areas, while also taking a general view that there are caps in place on how far they can go. I will come on to say more about that in my speech, but he raises an important point, and I know it will have been noted by my hon. Friend the Under-Secretary.

With available funding for local government in England rising by 7.5% in cash terms for the coming financial year, that significant increase will allow councils to continue to deliver local services. Thanks to the funding guarantee, all authorities will see an increase of at least 4%, before any council tax increases are taken into account.

We continue to monitor the financial health of all councils on a regular basis, using a range of data as well as extensive direct engagement. Examples of significant financial failure in local government remain low, but we will take action where necessary. We will always be ready to speak to councils should that be necessary, and should any have concerns about their ability to manage their finances or pressures that they have not planned for.

We do not just provide funding through the settlement. Separately, we are proud that there is £15 billion of taxpayer funding in a suite of complementary levelling-up projects that will help grow local economies, create local jobs, improve local transport, provide local skills training and support local businesses, making real differences to real people’s lives in communities all across the country.

Since 2021, the levelling-up fund has been changing communities across the United Kingdom, with £4.8 billion of taxpayer funds allocated to 271 projects, kick-starting regeneration and funding vital projects across the UK. Our levelling-up partnerships are delivering regeneration, and 12 investment zones are driving innovation all across the country. In addition, there is £1.1 billion for 55 left-behind towns through the long-term plan for towns, which is reviving high streets and tackling antisocial behaviour, and more than 250 venues are to be saved through the community ownership fund.

I know I speak for the whole ministerial team when I say that we cherish our close working relationship with local government partners. Every year, we have the opportunity, through consultation on the provisional settlement, to listen to them even more keenly, along with the public and right hon. and hon. Members, on the funding proposals for the coming financial year. The number of responses was particularly high this year at 267. The Under-Secretary, who is the Minister for local government—he is sitting beside me—engaged personally with over 90 Members and local government leaders. We are grateful to all who responded, and I pay tribute to the work my hon. Friend did in listening.

It was after listening to these views that the Secretary of State announced in January an additional £500 million to bolster social care budgets, which are a key concern for councils. We have heard about and listened to councils in relation to pressures on social care services, particularly for children, which we know have increased. The £500 million uplift to the social care grant, announced on 24 January, can be used for children’s or adult services, subject to local priorities. That is on top of the £1 billion in additional grant funding for social care in 2024-25 confirmed at the provisional settlement in December.

Overall, this means that, in the next financial year, local authorities with social care responsibilities will receive £5 billion through the social care grant, £1.1 billion through the market sustainability and improvement fund, £500 million through the discharge fund and £2.1 billion through the improved better care fund, and that is on top of their local decisions about funding for social care in their area. We recognise that some councils can generate more income from council tax to fund social care, so we have equalised against the adult social care precept since it was introduced, and we will continue to do that in the coming financial year.

As my hon. Friend the Member for Isle of Wight (Bob Seely) indicated, we have heard through the consultation—we know this from our constant contact with local government partners—that the sector is keen for progress across the board, not just in authorities with social care responsibilities. We will support all tiers of government, so we have announced an uplift of the funding guarantee proposed at the provisional settlement. This means that every council will see a 4% increase in its core spending power before any local decisions are made about council tax.

We have also heard about the particular impacts in rural areas, which is why we have announced a £15 million increase to the rural services delivery grant. That is making available a total of £110 million of taxpayers’ money, in the second successive year of above inflation increases. In recognition of the unique circumstances facing our island authorities and their physical separation from the mainland, we are increasing funding to the Isle of Wight and the Isles of Scilly.

However, we are clear—I do not hesitate to repeat it today—that this money is for the frontline services on which our communities rely. It is not to be put aside for later use, nor wasted on myriad council hobby-horses and schemes. Taxpayers deserve value for money. So many of those involved in the settlement—so many parts of the community and so many parts of the local government sector—do that brilliantly already. The small number that do not are on clear notice this afternoon that they must do so. To ensure that, we are asking all local authorities to produce productivity plans, which will encourage them to set out how they will improve service performance and reduce wasteful expenditure.

Turning to council tax, we continue to strike the balance between giving councils flexibility to make local decisions, to meet local pressures and support the most vulnerable, and continuing to seek to protect council tax payers from excessive increases. In any constitutional settlement that divides responsibilities between central and local government, it must follow that local government has the ability and the responsibility to raise some of its own funds, and that it is held to account for the decisions it makes to do that. So this year, as in previous years, we have set core referendum principles of up to 3%, plus 2% for the adult social care precept.

At the same time, it remains the case that some council reserves are significantly higher than prior to the pandemic. For some, that will be for good reasons, but a number of councils have reserves well in excess of 100% of their core spending power, and the latest data shows that about half of all local authorities have seen their unallocated reserves grow since the 2019-20 financial year. It is for those councils to decide the appropriate balance between council tax increases and the use of reserves to fund services, depending on their local context. However, I very much hope that they will consider their unallocated reserves, and I hope that appropriate questions are asked in each locality where that applies by those who are interested.

At the provisional local government finance settlement, in consideration of the significant failures of a number of councils—Thurrock Council, Slough Borough Council and Woking Borough Council historically—and their need for ongoing exceptional financing support, the Government proposed that bespoke council tax referendum principles should apply. We are today confirming those principles, with a core council tax referendum of 8% for Thurrock and Slough and of 10% for Woking. As councils with adult social care responsibilities, Thurrock and Slough will also be able to use the 2% adult social care precept, and the councils can make use of the additional flexibilities provided to support their financial recovery.

At the provisional local government finance settlement, the Department set out that councils could seek additional support from the Government via the exceptional support framework. As part of that process, the Government were prepared to consider representations from councils on council tax provision. In recognition of the scale and nature of the council’s failings, and its precarious financial situation, the Government have decided not to oppose a request from Birmingham City Council for the flexibility to increase council tax by an additional 5% above referendum principles, to start paying for the historic failures of the Labour council.

We have heard requests from devolved authorities about the benefits of tax being retained in the area where it is raised. The trailblazer deals with Greater Manchester and the west midlands are unprecedented in their reach, and include a significant transfer of fiscal power. Sixty per cent of England is now covered by a devolution deal, which is up 20% since the levelling-up White Paper was published. We will continue to expand and deepen local devolution in England through the devolution framework and the work of the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend the Member for Redcar (Jacob Young).

Finally, I wish to make a general point about how local government is financed. Many right hon. and hon. Members, as well as colleagues in the sector, have emphasised the need for reform in the system—I heard that when I was covering this brief—particularly of the funding formula. We have heard those concerns loud and clear. Today we continue to restate our commitment to reform and modernise the local government finance settlement and system in the next Parliament, to deliver the most effective financial settlements for councils—[Laughter.] I hear noises from the Opposition Benches. If Opposition Members had wanted to say that at the beginning of this Parliament, when covid started and when we asked our local authorities to do the most extraordinary things, that would have been an interesting position for the Labour party had it been in government at the time. We took decisions that were necessary at the time. We are restating our commitment to reform. That is what a sensible, proportionate and reasonable Government do, and it demonstrates yet again the difference between a Labour party that is seeking to play at being a Government and will be unsuccessful, and the actual difficult decisions that are being taken every day on the Government Benches.

In a year that has seen unprecedented increases in demand for social care, housing and other vital local government services, the Government have listened and are providing more support. The above-inflation funding increase will allow councils to carry on delivering the local services on which we all depend. Because local authorities must be accountable to local people, we are putting in place ways to ensure that they are working effectively and efficiently. We have a long-term economic plan that is working. We are supporting local councils with what is needed, and ensuring that they spend wisely. That is exactly what the Conservatives have done throughout this time and what we will continue to do, and I commend the settlement to the House.

Draft Combined Authorities (Mayoral Elections) Order 2017 (Amendment) Regulations 2024 Draft Combined Authorities (Mayors) Filling of Vacancies Order 2017 (Amendment) Regulations 2024

Lee Rowley Excerpts

Wednesday 31st January 2024 General Committees

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

I beg to move,

That the Committee has considered the draft Combined Authorities (Mayoral Elections) Order 2017 (Amendment) Regulations 2024.

[The Chair]

With this it will be convenient to consider the draft Combined Authorities (Mayors) Filling of Vacancies Order 2017 (Amendment) Regulations 2024.

[Lee Rowley]

It is a pleasure to serve under your chairmanship, Mr Davies. The draft regulations were laid before the House on 11 December 2023. If approved and made, they will provide the rules for the conduct of elections for directly elected mayors of combined county authorities, the rules by which mayoral vacancies in such authorities are to be declared and the procedure for filling them through by-elections.

The draft mayoral elections regulations are essential for the first election of the east midlands combined county authority mayor. Subject to Parliament approving the secondary legislation to establish that mayoralty, the election is planned for May 2024. The regulations will pave the way for further mayoral combined county authority elections. They make detailed provision about the conduct of elections for mayors of combined county authorities by extending the application of the Combined Authorities (Mayoral Elections) Order 2017 to elections for combined county authority mayors. They also apply the Voter Identification Regulations 2022 to combined county authority mayoral elections, to maintain consistency with other local government elections.

The regulations ensure that transitional provisions for EU citizens who stand as candidates in other local elections in May 2024 apply to combined county authority mayoral candidates. The Combined Authorities (Mayoral Elections) Order 2017 itself largely replicated the rules for elections of local authority mayors and police and crime commissioners. Procedural consistency is the hallmark of local government electoral law and seeks to ensure the smooth running of polls, particularly where they are held in combination.

Let me mention certain specific provisions that we are making for combined county authority mayors, to reflect the constitutional arrangements for such authorities. We are creating a new role—the combined county authority returning officer—to oversee the whole of the election of a combined county authority mayor. This important role mirrors the role of the combined authority returning officer. The regulations clarify that the returning officer for a district council in a two-tier area of a combined county authority is to be responsible for running the mayoral election within that council’s area. That follows the approach generally taken in other polls, such as county council and police and crime commissioner elections.

In addition, the regulations contain two provisions that apply to both combined authority and combined county authority mayoral elections. They enable the appointment of a combined authority returning officer, or a combined county authority returning officer, before the respective authority is established. That will help to ensure the smooth running of the first mayoral election if the statutory instrument that establishes the new authority is delayed.

We have set the figures in the formula for the calculation of candidate spending limits at combined county authority mayoral elections at £3,040 per constituent council and 8p per elector. We have consulted the Electoral Commission, as statute requires, and, on the basis that the figures align with the candidate spending limits for combined authority mayors, the commission recommended this approach. The regulations establish new spending limits for combined authority mayors by uprating in line with inflation the limits that were set in 2017. We have used the powers given by Parliament to the Secretary of State to make such upratings in line with inflation, so no further recommendation is required from the Electoral Commission. Parity is therefore maintained between combined county authority elections and combined authority elections.

The filling of vacancies regulations also extend the scope of the existing provision for combined authorities to include combined county authorities. They are necessary to establish the rules by which vacancies are to be declared in the office of combined county authority mayor and the procedure for filling such vacancies through by-elections. The provisions need to be in place in advance of any combined county authority mayor being elected to ensure that any subsequent vacancy can be appropriately and consistently dealt with.

The Government undertook extensive consultation ahead of the 2017 electoral provisions for combined authorities. The regulations apply the 2017 provisions to combined county authorities, reflecting the parity between the two types of authority. We have undertaken statutory consultation with the Electoral Commission on the provision in the draft mayoral elections regulations about expense limits for candidates for combined county authority mayoral elections and combined authority elections. The regulations reflect the commission’s recommendation on setting a new combined county authority mayoral spending limit.

In addition, we shared informally with the commission a draft of the filling of vacancies regulations. We have also engaged with officers of constituent councils of the east midlands, and we are grateful for their input as we have developed drafts.

In conclusion, the draft regulations set out a robust legal framework for the election of combined county authority mayors. They provide the necessary clarity to those tasked with running those elections and ensure that local electors can have confidence in their fair conduct.

--- Later in debate ---

[Lee Rowley]

I will not detain the Committee for more than a few moments. I am grateful to the hon. Member for Oldham West and Royton for confirming that the official Opposition will not seek to divide today, and I welcome their broad willingness to support the change.

In response to the hon. Member’s points, I understand that there is a broad and valid debate to be had about the composition of combined authorities. That has been discussed previously by my colleagues and others in this place and beyond. Other people will take different views about the decision and its end point, but it will be incumbent on the elected mayor, whether it be Claire Ward or, more likely and hopefully, my hon. Friend the Member for Mansfield (Ben Bradley), in a few months’ time, to make sure that he or she—I say this as an east midlands Member of Parliament—rightly engages both of our counties and all our district councils to ensure that they bring together the broadest range of voices so that the east midlands can speak even louder.

With that answer, and the confirmation from the Government that we are looking forward to working closely with my hon. Friend the Member for Mansfield when he is successful in May, I commend the draft regulations to the Committee.

Question put and agreed to.

Draft Combined authorities (Mayors) Filling of Vacancies Order 2017 (Amendment) regulations 2024

Resolved,

That the Committee has considered the draft Combined Authorities (Mayors) Filling of Vacancies Order 2017 (Amendment) Regulations 2024. —(Lee Rowley.)

Leasehold and Freehold Reform Bill (Ninth sitting)

Lee Rowley Excerpts

Committee stage
Tuesday 30th January 2024 Public Bill Committees

[Barry Gardiner]

The Minister will recall that in response to a Government consultation in 2018, the Government committed to introducing a section 24 right for freeholders on housing estates, but that has not appeared in the Bill. It would have given those freeholders the right to go to a first-tier tribunal and appoint a court protective manager. The Minister and his officials may wish to reflect on and remedy that failing in the Bill. However, even that would be an imperfect measure, because it would not ensure that leaseholders in homes on estates had the same rights as leaseholders in a development block, for whom the Bill seeks to facilitate the right to manage. Will the Minister look at that issue and ensure that that provision is realised?

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

It is a pleasure to serve under your chairmanship, Sir Mark, and it is good to continue debating these issues this morning. I am grateful to all hon. Members who have raised such important points. I do not think that the disagreement between Members on any of the Benches is about whether there are issues; the question is rather about the technicalities of how to approach them, what to do and what is proportionate.

I will talk briefly about the amendments. Although the Government cannot accept them now, I hope that my hon. Friend the Member for North East Bedfordshire and the shadow Minister will listen to the points that I make; the broader point is that I am listening carefully and have a lot of sympathy for the underlying point, which we are all trying to solve. The question is about how we do it and whether we need to go further.

There was an extended debate between my hon. Friend the Member for North East Bedfordshire and the hon. Member for Greenwich and Woolwich. I will not try to repeat that, but not because I do not want to give due regard to everything that my hon. Friend put on record or to his underlying point. He is absolutely right that there is a problem; we all see it in our constituencies. The challenge, as I see in my constituency of North East Derbyshire, is that there is now a move towards greater estate management outside the demise of the local representation of the state. It works in some areas and for some elements, but there are specific areas and specific estates in which it clearly does not work. We have all heard the stories about the issues that are visible.

In the past, it would have been typical for local authorities to have adopted estates, but that is moving further and further away from reality. There is a question about whether there are some elements of estate management where it is reasonable to have some kind of arrangement outside the aegis of the state, but equally I accept the argument that that has gone too far in certain areas.

[Rachel Maclean (Redditch) (Con)]

I have listened carefully to the debate. I thank my hon. Friend the Member for North East Bedfordshire for his reference to the work that we did together.

I want to ask the Minister to expand a bit more on his comments, as I am sure he will. The argument has often been made that if we make clear to the people who are buying those homes what they are actually getting into, and if we give them a schedule of charges, the regime will be more acceptable. That is the heart of the issue: if customers know what they are buying, presumably they can freely choose whether to buy that property or a different type of property.

I think we all agree that there should be freedom of choice and that the buyer should take responsibility for their choices. However, does the Minister think that the current regime and framework are adequate to provide choice? My personal view is that we do not have that, and that that is at the heart of the problem. But even if we provide that choice, a fundamental philosophical problem remains. I am interested in his view on the balance of those two issues.

--- Later in debate ---

[Lee Rowley]

I am grateful to my hon. Friend, who has a huge amount of knowledge, expertise and background in the subject. She is right to highlight the tension with agency. As long as there is sufficient knowledge in the decision being made, the logical extension is that the decision was made on the basis on the preponderance of the facts, and people should therefore be willing to accept the consequences of their choices.

Equally, through colleagues and in our postbags, we have all seen the reality that this does not work in all instances, and it is not necessarily clear where it works. We have examples of where an indication was given about some of these things, but the reality is very different from what may have been said during the sales process. A different estate manager may take over, the developer may disappear or things may change. The reality of what happens on the ground with estate management charges can be very different from what has been talked about.

The question is therefore not whether there is an issue, but how we drive up standards. Clause 41, which I will address in a moment, seeks to drive up standards through transparency. There is a perfectly legitimate question—it has been correctly posed via the amendments tabled by my hon. Friend the Member for North East Bedfordshire and by the hon. Member for Greenwich and Woolwich, and has been outlined by the hon. Member for Mid Bedfordshire and others—as to whether that is sufficient or whether additionality is needed. Although I cannot accept the amendments today, because I think that there are genuine questions about whether they would work, the Department wants to continue looking at the issue. I would be happy to talk about it at a future stage.

[Andy Carter (Warrington South) (Con)]

I am listening carefully to the debate. Warrington is a new town. Over the past 60 years, about 100,000 homes have been built in total. From looking carefully at the borough council’s own details on estate adoption, it is clear that there are currently 13 estates that are not adopted, where there have been agreements in place with the council but, for all kinds of reasons, developers are not doing anything. One problem seems to be that in many cases the estates are built out over many years and things change. Some estates have been building for 13 years. The builders have changed, the involvement of council officers has changed and the structure of how things are built out has changed.

There seems to be no redress for householders so that what was promised in the first place can be delivered. That is a real problem. When the Minister is looking carefully at the issue, can he bear in mind that it is not a straightforward case of “The developer promised to do this, but they haven’t”? Things can change dramatically over time, and there is a complicated path. I think that that is what the Minister is saying; it is certainly my experience in Warrington.

[Lee Rowley]

My hon. Friend is absolutely right. If the Committee will indulge me, I have personal experience of examples of this in North East Derbyshire, and I know the complexity involved in getting this correct. I have an estate by an unnamed developer in the south of the constituency, near Wingerworth, where this discussion is going on already. Before Christmas, I spent two hours talking to representatives of owners on the estate and to the estate management company itself. I recognise the complexities on an estate that was being managed relatively adequately from afar but clearly still had issues.

The second example—this is why we have to be so careful to get this right—is from the other side. Fenton Street in Eckington has been unadopted for more than a century. The residents recognise that it is unadopted and have bought their houses understanding and acknowledging that. Possibly it was been adopted many decades ago, but there is no record.

We have to make sure that this works for everybody. In an ideal world, everybody would be scooped up and this would all be fixed in one fell swoop with whatever a benevolent Government could do, but that is not the reality of the choices that we face. Nor is it often the reality of what happens when a Government try to do things that work in the way that we all intend. Although I understand the intention behind the two amendments, I encourage hon. Members to withdraw them.

[Barry Gardiner]

The Minister has not responded to the point about a section 24 court-appointed manager. Would that not give a power enabling redress for residents in situations such as the one he outlines, where there has been a complete failure to adopt and maintain? Will he commit to considering that point as part of the mix?

[Lee Rowley]

We may touch on some of those elements under later clauses. The hon. Gentleman’s core point is about whether the Government are willing—without providing any guarantees in this place—to look at additionality. Of course we are. There are the usual caveats, which I have explained in previous sittings, about what we can do, how we do it, and the priorities, but this is an area in which we are listening carefully.

In conclusion, I ask my hon. Friend the Member for North East Bedfordshire and the hon. Member for Greenwich and Woolwich to consider withdrawing their amendments. I hope that they have heard that I am serious and willing to look at the issue again, although I cannot offer guarantees at this stage.

I will turn briefly to clause 41, to put on the record exactly what the clause contains and what we are voting for. Freehold homeowners on private and mixed-tenure estates who pay estate management charges have fewer protections than leaseholders paying the service charges that we have spoken about. Clause 41 will introduce limitations on what estate management companies can charge homeowners through estate management charges. Subsection (1) states:

“Costs incurred by an estate manager are relevant costs…only to the extent that they are reasonably incurred.”

Clause 41 will ensure that where these costs are incurred in the provision of services or the carrying out of works, they will be relevant costs only if the services or works are of a reasonable standard.

Subsection (2) makes it clear that when an estate management charge is payable in advance, only reasonable costs are payable. Furthermore, after reasonable costs have been incurred, any necessary adjustment must be made to the charge by repayment, reduction of subsequent charges or any other method. Those new rules are equivalent to requirements in the leasehold regime and provide homeowners with more confidence that they will not be overcharged. We seek to provide increased protections for homeowners through the clause. I commend it to the Committee.

[Matthew Pennycook]

Amendment 150 was a probing amendment. I take on board the Minister’s statement that the Government are looking at the issue and that they do not believe that this legislation is the appropriate vehicle to deal with it.

If the Minister is willing to respond again, I would like a bit more clarity on precisely why in many cases amenities on estates are not being built to an adoptable standard. I think we all agree that we would like to see such a system. The Minister introduced a different problem, namely circumstances in which residents might not want their amenities adopted; I think that that would be a relatively small number of estates, but we would have to account for them. In general, we want to reduce the prevalence of arrangements and see adoption becoming mandatory in most circumstances.

Will the Minister expand on why the Government think the common amenable standards are not being met across the board? In a previous debate, the then Minister stated:

“The local authority has powers to ensure that developers build and maintain communal facilities to the standards and quality set out in the planning permission.”—[Official Report, 22 January 2019; Vol. 653, c. 132WH.]

Is something going wrong with the standards that most local authorities require at the planning permission stage? Is the section 106 agreement breaking down in some way? What is the reason? That might give us an insight into the solution that the Government have in mind and into why common adoptable standards are not currently the norm.

[Lee Rowley]

The hon. Gentleman is absolutely right that there are a variety of scenarios. I am not sure that residents of Fenton Street would not take the opportunity to adopt if they were given the opportunity; it is more about the broader challenges of getting a single coherent answer to a very complicated set of questions that have come about in the past few decades or over a longer period.

The hon. Gentleman raises a valid point about the outcome of the planning system. Everybody, irrespective of party, would want the planning system to work to a point where there are common standards for roads and public spaces. There is an interesting question as to why that is not the case. It is an area that as a Minister I intend to look into in more detail.

The question is whether is it a systemic problem or a matter of individual circumstances, where it is working okay in some areas but not in others. Anecdote leads to bad policy and bad law, but in my experience as a constituency MP it has worked in a number of areas and not in others. That suggests that there is variability and that it is therefore not a systemic issue, but that might be different elsewhere in the country. It is an area that I think we should look at more; I am not sure whether it needs legislation. That is an open question, but it is definitely something that I am keen to understand more.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 42 introduces new obligations on estate managers where the costs they wish to charge a homeowner exceed an appropriate amount. It mirrors sections 20 and 20ZA of the Landlord and Tenant Act 1985. Subsection (1) places an obligation on estate managers to consult homeowners where the costs for works or services exceed a given threshold. Subsections (2) to (4) confer a power to allow the Secretary of State to determine the appropriate threshold in regulations; the Secretary of State may also determine whether the threshold is to be a total sum or if the costs for individual homeowners exceed an appropriate amount.

Subsections (6) and (7) confer a power on the Secretary of State to set out in regulations the consultation require-ments and the provisions that may be included in the consultation process. Issues that may be in regulations are not exhaustive, but may include matters of relevance, including details of the proposed works, the provision of estimates, and requirements to have regard to homeowner observations and to specify reasons for carrying out the works if they proceed. We recognise that there are occasions where it may not be appropriate or possible for estate managers to consult homeowners—for example, where urgent or emergency works need to be carried out. Subsections (5) and (8) to (10) therefore allow estate managers to seek dispensation from the relevant tribunal of the need to consult. However, should estate managers fail to obtain dispensation or follow the consultation requirements, individual homeowner contributions are capped at the appropriate amount. The Government will engage extensively with stakeholders to determine the appropriate threshold for consultation and what the detail of the consultation arrangements should be. I commend the clause to the Committee.

[Matthew Pennycook]

I wish to probe the Minister a little further on the clause. As he said, it introduces requirements for estate managers to consult managed owners if the costs of any works to be charged as an estate management charge exceed an appropriate amount, which will be set out in regulations. Overall, the Government’s aim in this part of the Bill is clearly to introduce statutory protections for residential freeholders equivalent to those enjoyed by long leaseholders with regard to service charges.

If I understood the Minister correctly, he has confirmed that the Government’s intention with the clause is to establish for residential freeholders an equivalent to section 20 of the Landlord and Tenant Act 1985. If that is the intention, can the Minister confirm that the new requirements provided for by the clause will include requiring estate managers to have regard to written observations from residential freeholders on charges in excess of the to-be-determined appropriate amount, and where necessary to justify in writing the reasons why they awarded a contract to a tenderer that neither submitted the lowest estimate nor was nominated by a resident?

Furthermore, if the clause is indeed intended to mirror the operation of the existing section 20 consultation process, I urge the Minister to consider what might be done to address the known deficiencies of the process, including the fact that a leaseholder’s sole means of redress if they take issue with the landlord’s decision is the tribunal, and that there is no statutory meaning of what “have regard to” means in the context of the consultation. While he does so, I encourage him to take the opportunity to overturn, or at least modify, the decision of the Supreme Court in the 2013 Daejan Investments Limited v. Benson case, which has proved so detrimental to the consultation rights of leaseholders. I make this series of points because the Homeowners Rights Network, among others, has questioned the logic of extending to privately managed estates a regime that is not always effective in protecting residential leaseholders from unreasonable charges associated with major works.

[Lee Rowley]

The hon. Member for Greenwich and Woolwich encourages me to seek to overturn decisions of the Supreme Court! That could start a whole heap of discussion early on a Tuesday morning, but I will withhold further comment for now.

The hon. Member is absolutely right that clause 42 is intended to mirror section 20 of the 1985 Act. He is correct that the intention is to consider written responses as well; I hope that that reassures him. We will need to go through a consultation process: although we have said that our intention is to mirror section 20 of the 1985 Act to give confidence about the direction of travel, what is appropriate for these individual circumstances will need to be discussed, and I hope that we can pick up that discussion within the consultation.

Question put and agreed to.

Clause 42 accordingly ordered to stand part of the Bill.

Clause 43

Limitation of estate management charges: time limits

[Lee Rowley]

I beg to move amendment 53, in clause 43, page 68, line 7, leave out from “not” to end of line 12 and insert

“given a future demand notice in respect of the costs before the end of the period of 18 months beginning with the date on which the costs were incurred.

(2) A ‘future demand notice’ is a notice in writing that—

(a) relevant costs have been incurred, and

(b) the owner will subsequently be required to contribute to the costs by the payment of an estate management charge.

(3) A future demand notice must—

(a) be in the specified form,

(b) contain the specified information, and

(c) be given in a specified manner.

‘Specified’ means specified in regulations made by the Secretary of State.

(4) The regulations may, among other things, specify as information to be contained in a future demand notice—

(a) an amount estimated as the amount of the costs incurred (an ‘estimated costs amount’);

(b) an amount which the owner is expected to be required to contribute to the costs (an ‘expected contribution’);

(c) a date on or before which it is expected that payment of the estate management charge will be demanded (an ‘expected demand date’).

(5) Regulations that include provision by virtue of subsection (4) may also provide for a relevant rule to apply in a case where—

(a) the owner has been given a future demand notice in respect of relevant costs, and

(b) a demand for payment of an estate management charge as a contribution to those costs is served on the owner more than 18 months after the costs were incurred.

(6) The relevant rules are—

(a) in a case where a future demand notice is required to contain an estimated costs amount, that the owner is liable to pay the charge only to the extent it reflects relevant costs that do not exceed the estimated costs amount;

(b) in a case where a future demand notice is required to contain an expected contribution, that the owner is liable to pay the charge only to the extent it does not exceed the expected contribution;

(c) in a case where a future demand notice is required to contain an expected demand date, that, if the demand is served after the expected demand date, the owner is not liable to pay the charge to the extent it reflects any of the costs.

(7) Regulations that provide for the relevant rule in subsection (6)(c) to apply may also provide that, in a case set out in the regulations, the rule is to apply as if, for the expected demand date, there were substituted a later date determined in accordance with the regulations.

(8) A statutory instrument containing regulations under this section is subject to the negative procedure.”

This amendment would require notice of future service charge demands (as envisaged in clause 43(b)) to be given in accordance with regulations.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Lee Rowley]

We are aware that there is no clear limit on when homeowners on private and mixed-tenure estates can be charged for works and services, regardless of when the costs were incurred. Homeowners could therefore be subjected to unexpected estate management charge demands, making it difficult for them to plan for and finance those costs. That could be the case if in future there are long-term works that take some time to complete.

Clause 43 introduces a new 18-month time limit for estate management companies to demand payment for works that have been carried out. If they fail to issue a demand within this period, the costs will not be recoverable and homeowners will not be required to pay them. Paragraph (b) sets out arrangements making it clear when the homeowner will not receive a demand for payment within the 18-month period. It requires the estate manager to notify in writing before the end of the period that the costs have been incurred and that the homeowner will be required to contribute through their estate management charge. If the estate manager does not notify, the homeowner is not liable to pay. The clause seeks to provide greater certainty for homeowners; I commend it to the Committee.

Currently, when works are undertaken estate managers may require a homeowner to pay the costs up front or pass on costs to the homeowner once the work has been carried out. Clause 43 will require estate managers to charge homeowners for works within 18 months. Amendment 53 introduces new subsections (2) to (9), which require estate managers to specify the costs incurred, the expected contribution of homeowners and the date by when the demand will be served. The intention is to give homeowners certainty about the costs that have been incurred by the manager, their own individual liability, and when they are likely to receive the demand. The amendment requires estate managers to issue a future demand notice if they will be passing on costs more than 18 months after works are carried out. Subsection (2) defines a future demand notice as a notice in writing that the relevant costs have been incurred and the homeowner is required to contribute.

New subsection (3) sets out that the Secretary of State and Welsh Ministers can, by regulations, specify the form, the information to be included and the manner in which the future demand notice must be given to the homeowner. Subsection (4) details that regulations made by the Secretary of State and Welsh Ministers may specify as information to be included in the future demand notice an estimated amount of the costs incurred, an amount that the homeowner is expected to contribute, and a date by which it is expected that the service charge will be demanded. We will work with estate managers, managing agents and homeowners to set out what a future demand notice may contain, to ensure that notices have the right level of information.

New subsection (5) lays out that regulations may provide for a relevant rule to apply where the homeowner has been given a future demand notice and the demand for payment is served more than 18 months after costs were incurred. New subsection (6) details the relevant rules and the homeowner’s liability to pay the estate management charge where a future demand notice contains estimated costs, an expected contribution or an expected demand date. New subsection (7) allows estate managers to extend the expected demand date in cases specified by regulations, for example because of unexpected delays in completing the work.

Through these measures, we seek to provide homeowners with more certainty about costs. I commend amendment 53 to the Committee.

Amendment 53 agreed to.

Clause 43, as amended, ordered to stand part of the Bill.

Clause 44

Determination of tribunal as to estate management charges

[Richard Fuller]

I beg to move amendment 139, in clause 44, page 68, line 31, at end insert—

“(3A) Where the appropriate tribunal has made a determination on an application under subsection (1) or (3) that an estate management charge is not payable because the costs incurred by an estate manager are not relevant costs under section 41(1)(b) (services or works to be of a reasonable standard), the tribunal may impose a penalty on the estate manager which is payable to the residents of affected managed dwellings; and the tribunal may determine how much of the penalty is to be paid to the residents of each affected managed dwelling.”

This amendment would enable the tribunal to impose a financial penalty, payable to residents of affected managed dwellings, where estate management work has not been completed to a reasonable standard.

The clause is an excellent step forward in ensuring that freeholders will have rights to access a tribunal when there are errors and poor provision of services on their estate, so I very much welcome it. Through the amendment, I seek to probe the Minister about whether we have got the balance right to enable effective use of the tribunal. The amendment essentially says that in addition to requiring that poor-standard, poorly provided services are brought up to standard, the tribunal could impose a financial penalty on the management company.

It requires a tremendous effort for people to take cases to a tribunal: they often have to make a collective effort and gather evidence about what has gone wrong, and they may have to go through weeks, months or potentially years to get to the point where they can take a case successfully to tribunal. If the only remedy at the end of that is that those services have to be brought up to standard, where is the incentive not to provide defective services in the first place? By enabling the tribunal to impose financial penalties, the amendment would redress the balance, with the bias more towards those suffering from poor service in the first place.

[Lee Rowley]

I am grateful to my hon. Friend for tabling this probing amendment. I agree that where works and services are provided and charged for on freehold estates, their costs should be charged to residents only if they are of a reasonable standard. As he indicated, clause 41 makes progress in that regard. Clause 44 allows for the appropriate tribunal to determine whether an estate management charge is payable. Should the tribunal find that services or works charged for have not been carried out to a reasonable standard, it will determine the amount that the homeowner is liable to pay. That is equivalent to the leasehold regime, and I do think that tribunals are the best placed to make that decision.

On whether additionality is required, the appropriate tribunal is not an enforcement body; it is not a weights and measures authority or a district council. If a financial penalty were applied for works not completed to a reasonable standard, the appropriate tribunal would need to be satisfied beyond reasonable doubt that that was the case. My hon. Friend may say—I have some sympathy with the point—that people would probably not go to tribunal, given its complexity. In addition, if people want to sue for defective works and such things, they can do so through other parts of the legal system; that form of redress is available if necessary.

If we were to introduce penalties for works or services not completed to a reasonable standard on freehold estates, the challenge would be in the implications for the tribunal and the equivalent leasehold regime. Therefore, while I have a lot of sympathy with my hon. Friend’s point, I hope that he will consider withdrawing the amendment it on the basis that it would probably move the tribunal too much in one direction and create a whole heap of other consequences that we would need to think carefully about, and which I do not think we can accept at the current time.

[Richard Fuller]

I am grateful for the Minister’s comments. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Matthew Pennycook]

I rise to support the amendment. We discussed litigation costs in relation to clause 34; we strongly argued for a general prohibition with very limited exceptions. The hon. Gentleman is right to draw attention to the fact, which applies to part 4 as a whole, that we should not replicate the flaws of the leasehold system in the newer system of estate management charges. Our arguments in relation to the leasehold regime therefore apply equally here, and the hon. Gentleman is right to raise the point.

[Lee Rowley]

I will try directly to address the point made by my hon. Friend the Member for North East Bedfordshire, to which we are sympathetic. It is important that litigation costs are not passed on. On the leasehold side, there is clear evidence that that is happening, but the question is whether there is clear evidence of it happening in the area of estate management. From speaking to officials, we do not see that clear evidence at the moment. However, if any members of the Committee or others have such evidence, I would welcome it. If it is happening, I am sure that we would be happy to consider the issue as the Bill progresses.

[Richard Fuller]

With the Minister’s assurance that he will keep a watching brief on the issue, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 44 grants homeowners a new right to apply to the appropriate tribunal for a determination on whether their estate management charge is payable, and if it is, how it should be paid, by whom and to whom it should be paid, and the date by which the payment should be made. Under this provision, the tribunal will enforce the newly established reasonableness principle set out by clause 41, which requires estate management services to be reasonable, and any works or services to be of a reasonable standard.

The clause requires estate management companies to charge the correct fees from the outset, thereby reducing the number of homeowners being overcharged for works and services on their estate or being at risk of legal action. The clause also sets out the circumstances in which an application cannot be made, including when the homeowner has already agreed to, but not paid, the charge, or in which the issue has already been subject to a decision by a court. That will prevent homeowners from bringing unjustified or vexatious claims, which can lead to delays in the payment of valid estate management charges and negatively impact the upkeep and good management of the estate. The clause delivers on a Government commitment to increase protections for existing homeowners, and I commend it to the Committee.

Question put and agreed to.

Clause 44 accordingly ordered to stand part of the Bill.

Clause 45

Demands for payment

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Where homeowners on a managed estate pay an estate management charge, it is essential that they have transparency about what they are paying for. Currently, there is no universal approach for demanding payment of such a charge, so there can be inconsistencies between estates and potential confusion for homeowners. Clause 45 mirrors the obligations that we introduce for leaseholders elsewhere in the Bill. Subsection (1) enables the Secretary of State to prescribe a standard form for demanding payment and the information that it should contain. We will work closely with the sector to ensure that that is the right level of information and detail. Subsection (2) makes it clear that failure to provide information in the new standard format means that homeowners do not have to pay the charge, and any provisions in the deed, lease or any other contractual document for non-payment will not apply. The Secretary of State will also have the power to create any exemptions if our work with stakeholders demonstrates a good case for them both now and in the future. I commend the clause to the Committee.

Question put and agreed to.

Clause 45 accordingly ordered to stand part of the Bill.

Clause 46

Annual reports

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 46 introduces a new obligation for estate management companies to provide homeowners on their estates with an annual report, which might cover issues such as budgets for the year ahead and details of planned works.

Subsections (2) and (5) require that the report must be provided within one month of the end of the 12-month accounting period, although it may be provided earlier if it is practical and expedient to do so. Subsection (4) defines the 12-month accounting period as starting either on a date agreed between the company and homeowner or, if no period is agreed, on 1 April. Subsection (3) allows the Secretary of State to prescribe the detailed contents of the report, while subsection (6) allows the Secretary of State to provide exceptions from the duty to provide a report.

The detail will be set out in secondary legislation and allows the Secretary of State to respond effectively to changing market circumstances. We will work closely with the sector and relevant parties to ensure that we have the right level of detail and consider the case for any exceptions.

[Matthew Pennycook]

Briefly, when we discussed the regulation of service charges in clauses 26 to 30, we made a number of specific arguments about how those clauses might be tightened and strengthened. Can the Minister give us a commitment that if the Government determine to amend those clauses in any way, they will seek to read across the equivalent changes to this part of the Bill or, if they do not think that they apply, to justify where wider deviations between the two regimes are necessary? As I said, we are mirroring broadly the statutory protections in place for long leaseholders here, but where they differ, the Committee would certainly welcome clarification as to why.

[Lee Rowley]

I am grateful to the hon. Gentleman for his question. He tempts me into hypotheticals, but I hope that we are demonstrating our willingness to try to work constructively to see where areas can be improved. I must caveat that with clarity that we will not be able to improve every area; of necessity, prioritisations will need to be made. Of course there will be disagreements in this place and elsewhere about what is possible, but we shall see; if there is read-over, we shall see.

Question put and agreed to.

Clause 46 accordingly ordered to stand part of the Bill.

Clause 47

Right to request information

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 48 stand part.

[Lee Rowley]

As part of our reforms to drive up transparency, clause 47 introduces new provisions to enable freehold homeowners of managed dwellings to request information from their estate manager.

Subsections (1) and (3) give owners of a managed dwelling the right to require an estate manager to provide information. As per subsection (2), that information may relate to estate management. One example of such information might be a health and safety assessment of communal areas. The estate manager will be required to provide relevant information that they have in their possession.

We know that, sometimes, the estate manager will not have that information to hand, so subsections (4) and (5) introduce an obligation for the estate manager to request the information from a third party and, if they hold it, that the third party is required to provide it. Subsections (6) and (7) create an obligation where the other person under subsection (4) does not have it, but knows who does. This person must make the request to the person who does have it, who in turn must provide the information, and—presumably—so on and so on.

Subsections (1) and (8) allow the Secretary of State to prescribe further details of these requirements in secondary legislation, such as the type of information to be provided, how a request can be made and when the request can be denied. We will consult on that to make sure that it works effectively. I commend the clause to the Committee.

--- Later in debate ---

[Richard Fuller]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 49 ordered to stand part of the Bill.

Clause 50

Meaning of “administration charge”

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Currently, freehold homeowners on managed estates have very few protections relating to the cost of administration charges they may be liable to pay. This can leave homeowners paying excessively high administration charges that they are unable to challenge. We will address this issue and give homeowners greater protection. We intend to do that by mirroring the existing framework in place to protect leaseholders.

Clause 50 provides a definition of an administration charge. It is

“an amount payable…by an owner of a dwelling”.

That amount must be in connection with applications or approvals in connection with a relevant obligation, the provision of documents, the sale or transfer of land, a failure to make a payment by the owner, or a breach of a relevant obligation. Subsections (2) and (3) allow the Secretary of State and Welsh Ministers to amend the definition of an administration charge by regulations, which must be done using the affirmative procedure. I commend the clause to the Committee.

Question put and agreed to.

Clause 50 accordingly ordered to stand part of the Bill.

Clause 51

Duty of estate managers to publish administration charge schedules

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 143, in clause 52, page 74, line 10, leave out “£1,000” and insert “£10,000”.

This amendment would increase from £1,000 to £10,000 the maximum amount of damages which may be awarded for a failure on the part of an estate manager to comply with the provisions of clause 51 (duty of estate managers to publish administration charge schedules).

Amendment 144, in clause 52, page 74, line 13, at end insert—

“(5) An estate manager may not for any purpose set off damages payable by the estate manager to the owner under subsection (2)(b) against any present or future liability of the owner to the estate manager.”

This amendment would prevent estate managers from recouping damages from residents through subsequent charges.

Clause 52 stand part.

[Lee Rowley]

Homeowners on managed estates can be subject to high and unreasonable administration charges, as I indicated. Part of the problem is the lack of clarity or transparency surrounding them. Clause 51 introduces a duty for an estate manager to publish an administration charge schedule if they expect to impose an administration charge.

Subsection (2) requires that the schedule should include the detail of administration charges that the estate manager considers to be payable and their associated costs. Where the cost cannot be confirmed before a charge is payable, the method of determining the cost should be included. Subsection (3) requires a revised schedule to be published if an estate manger revises the administration charges. Subsection (5) allows the Secretary of State and Welsh Ministers to prescribe in regulations the form and content of the administration charge schedule and how it is to be provided to homeowners. We will work with all relevant partners to ensure that we obtain the right level of detail in regulations.

I thank my hon. Friend the Member for North East Bedfordshire for his amendment 143, which would increase the maximum amount of damages from £1,000 to £10,000. I hope that, potentially, our discussion on the previous clause would apply here, and I repeat that the Government intend to write to all Committee members about this issue in the days ahead.

Amendment 144 seeks to ensure that any damages that the tribunal orders payable under Clause 52 (2)(b) cannot be recouped from residents through subsequent charges. I agree with my hon. Friend that residents should be protected from future charges. An estate manager can only recover costs incurred in estate management. A tribunal order to pay damages would not be regarded as falling within the definition of costs of estate management.

The transparency measures included in clauses 46 and 47, in the form of the annual report and the right to obtain information upon request, would also deter estate managers from attempting to recoup these costs. That is because it would become obviously visible and it would be clear that it was not related to estate management. I note, however, my hon. Friend’s concerns and I am listening carefully on this matter. I hope that he might see fit to withdraw his amendment, having heard the Government’s response.

Finally, clause 52 sets out the enforcement provisions that reinforce the new duty in clause 51 to publish a schedule. A freehold homeowner on a managed estate may make an application to the appropriate tribunal if an estate manager has not published a schedule, or has done so but contrary to any provisions determined by the relevant Ministers.

The appropriate tribunal may order that the estate manager provides a correct schedule within 14 days of the order being made, and it may also order that the estate manager pays damages not exceeding £1,000 to the homeowner. We believe that this is a proportionate and effective enforcement mechanism where an estate manager fails to comply with its obligations. I commend the clause to the Committee.

[Richard Fuller]

Many thanks to the Minister, again, for proposing further changes to help homeowners who are affected by estate management charges. I am pleased to hear him reiterate that he will consider the issues raised in my amendment 143 about the appropriateness of charges. The shadow Minister raised similar concerns about those being set at an effective level.

On amendment 144, will the Minister consider writing to the Committee about how, in practice, not passing on damages, fees or charges to residents will work? Great Denham is a new part of my constituency, and in an estate of a few thousand houses, there may be 50, 60, 70 or more property management companies. All of them are discrete limited companies and all were set up as subsidiaries of one or more parent company. We need to be sure, from the Government’s point of view—given that some of these limited companies could go bust—about where the trail leads to. Under corporate law, as I understand it, there is no requirement for a parent company to be liable for the losses of a subsidiary that goes bust, and we want to ensure that liabilities flow upwards to the ultimate holding company.

Presumably, the payment of administration fees or dividends may go from subsidiary companies to the very large companies that are the ultimate parents. Is the Minister able to explain how he sees that working in practice? If not, or if it is too detailed to talk about now, perhaps he could agree to write to give some examples to the Committee in due course.

[Lee Rowley]

My hon. Friend highlights an important point. I think it is better that I write, but in principle, the transparency we seek to bring and the requirement to clearly articulate the charges that have been made, either in the annual report or elsewhere, aim to provide the sunlight that means that it is clear who is paying for what, and, if it is not a reasonable charge, there is a process that can be followed. But I will write to him with more on that, if that is helpful, because we all want to get this right.

[Matthew Pennycook]

I rise briefly to support the argument made by the hon. Member for North East Bedfordshire. There is a specific problem on privately managed estates, which I referred to when speaking to clause 41, relating to the fragmentation of multiple estate management companies. I share his concern, which partly speaks to whether the penalties are appropriate in terms of enforcement. On some estates, residential leaseholders will face a situation where, yes, there may be a requirement for an annual report and there may be a degree of transparency, but the onus will be on them to go through six or seven sets of accounts from the different subsidiaries. We need to look at how we can simplify some of the management structures that companies use, which could cause huge amounts of confusion for residential leaseholders, and, as I say, put the onus on them to try to work through different sets of accounts in a way that they might find difficult to do.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Clause 52 ordered to stand part of the Bill.

Clause 53

Limitation of administration charges

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

I hope that some of the comments I am about to make will reassure my hon. Friend the Member for North East Bedfordshire that we are keen to get this right.

Homeowners on managed estates can be subject to excessive administration charges, with little understanding of what fees they may be liable to pay. Subsection (1) puts a stop to that by introducing a requirement for all administration charges to be reasonable. Subsections (2) and (3) require that an administration charge is payable only if the amount or the description of how the amount is to be calculated has been published on an administration charge schedule for 28 days. Subsection (4) sets out other conditions under which an administration charge is not payable to the estate manager. They include circumstances where the estate manager is charging homeowners on the same estate different amounts for carrying out similar tasks, and therefore prevents them from being charged at different rates. I commend the clause to the Committee.

Question put and agreed to.

Clause 53 accordingly ordered to stand part of the Bill.

Clause 54

Determination of tribunal as to administration charges

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 54 introduces a new right for homeowners on managed estates to challenge the reasonableness of administration charges they are liable to pay. This approach delivers on a Government commitment to give freehold homeowners the equivalent right as leaseholders with regards to the charges they pay, and allows homeowners to get an independent assessment of whether the charge they are being asked to pay is justified and appropriate.

Subsection (1) sets out the basis on which homeowners may make an application to the appropriate tribunal and describes those issues on which the tribunal is able to be determined. They include: whether the administration charge is payable and, if so, by whom and to whom it is payable; the amount that is payable, as well as the date by, or on which, it is payable; and the manner in which it is payable. Subsection (2) is clear that this application can be made whether or not any payment has been made. Subsection (4) confirms that any payment made by the homeowner does not mean that they have agreed or admitted to its reasonableness. Subsection (3) sets out instances when an application may not be made to the tribunal. These measures mirror those provisions that apply to leaseholders under the Landlord and Tenant Act 1985.

This clause, alongside clauses 50 to 53, brings the rights of homeowners on managed estates in line with those of leaseholders with regard to administration charges. I commend the clause to the Committee.

Question put and agreed to.

Clause 54 accordingly ordered to stand part of the Bill.

Clause 55

Codes of management practice: extension to estate managers

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 55 amends section 87 of the Leasehold Reform, Housing and Urban Development Act 1993. It enables the Secretary of State to approve or publish a code of practice in relation to managed estates. The effect of this clause mirrors the position in leasehold, for which the Government have approved two codes of practice. These codes outline best practice for managing agents, landlords or other relevant parties in relation to residential leasehold property management. An approved code of practice may be taken into account as evidence of a breach of an estate manager’s obligation at a tribunal or a court. I commend this clause to the Committee.

Question put and agreed to.

Clause 55 accordingly ordered to stand part of the Bill.

Clause 56

Part 4: application to government departments

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 56 deals with the issue of Crown land, and makes it clear that the measures in part 4 should apply in circumstances where estate management functions are carried out by or on behalf of Government Departments. We consider that there are no grounds to exclude homeowners who live on land owned by Government Departments where they pay a contribution. They have as much right to hold the estate manager accountable for the charges it spends. There may be a very small number of locations where land that could now or in the future be built on is owned by His Majesty or other parts of the Crown Estate. In such circumstances, the Crown will act by analogy—in other words, it will ensure homeowners on such estates have access to equivalent rights. Prior to Second Reading, the King and the Prince of Wales granted consent in writing. I commend the clause to the Committee.

Question put and agreed to.

Clause 56 accordingly ordered to stand part of the Bill.

Clause 57

Interpretation of Part 4

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 57 provides a comprehensive definition of terms used in part 4 of the Bill. For key terms used in the Bill, such as “estate manager” or “relevant costs”, it points to other parts of the Bill where they are defined. Subsection (2) sets out the definition of an “owner” of a dwelling as being either the person who owns the freehold land that comprises a dwelling, or the person who is a leaseholder of a dwelling under a long lease. This ensures that all homeowners who pay a contribution can enjoy the new protections in this part. It also makes it clear that, where homeowners rent out their property or let it out under an assured tenancy, they—not the occupants of the dwellings—are entitled to these protections. This clause provides the more comprehensive definition of relevant measures that inform the regulatory framework in part 4. I commend the clause to the Committee.

Question put and agreed to.

Clause 57 accordingly ordered to stand part of the Bill.

Clause 58

Meaning of “estate rentcharge”

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Part 5 of the Bill addresses issues relating to rentcharges. Since the Rentcharges Act 1977, the creation of most types of rentcharge has been prohibited. The main class of rentcharge excepted from the general prohibition is known as an estate rentcharge. Estate rentcharges are usually mechanisms for a management company to obtain contributions towards the costs of maintaining communal areas.

Part 4 of the Bill creates new protections for homeowners who pay an estate rentcharge to an estate manager for the provision of estate management services. Clause 58 makes a minor amendment to the Rentcharges Act 1977 to amend the definition of “estate rentcharge” in section 2 of the Act. The effect of the amendment is to ensure that payments may be made to cover improvements to communal areas as well as maintenance and repairs. This ensures that it aligns with the definition of the service charges that leaseholders must pay, and allows estate managers to pass on costs of any improvements to the areas they look after, and will ensure that they meet their legal obligations as well as having sufficient funds to carry out such works. The sums paid for improvement will still be subject to the protections in part 4—for example, the requirement to be reasonable. This is a clarificatory amendment, and I commend clause 58 to the Committee.

[Matthew Pennycook]

This is a clarificatory amendment, and we do not take issue with it. I will speak on our concerns about rentcharges in relation to clause 59.

Question put and agreed to.

Clause 58 accordingly ordered to stand part of the Bill.

Clause 59

Regulation of remedies for arrears of rentcharges

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss new clause 4—Remedies for the recovery of annual sums charged on land—

“(1) Section 121 of the Law of Property Act 1925 is omitted.

(2) The amendment made by subsection (1) has effect in relation to arrears arising before or after the coming into force of this section.”

This new clause, which is intended to replace clause 59, would remove the provision of existing law which, among other things, allows a rentcharge owner to take possession of a freehold property in instances where a freehold homeowner failed to pay a rentcharge.

[Lee Rowley]

An income-supporting rentcharge is an annual sum paid by a freehold homeowner to a third party who normally has no other interest in the property. Under the 1977 Act, no new rentcharges of this type may be created, and all existing ones will be extinguished in 2037. Most income-supporting rentcharges can be for relatively small amounts—typically between £1 and £25 per annum—and the majority of freehold properties affected by these rentcharges are located in the north-west and the south-west of England.

However, a loophole remains. Failure to pay a rentcharge within 40 days of its due date means that, under section 121 of the Law of Property Act 1925, the recipient of the rentcharge may take possession of the subject premises until the arrears and all costs and expenses are paid. The rentcharge owner may alternatively grant a lease of the subject premises to a trustee that the rentcharge owner may set up themselves. The Government believe that that law is unfair and can have a grossly dispro-portionate consequence for a very small amount of money not being paid. This clause seeks to address that and ensure that freeholders cannot be subject to a possession order or the granting of a lease for rentcharge arrears.

Subsection (2) introduces new sections into the 1925 Act. Proposed new section 120B details that no action to recover or require payment of regulated rentcharge arrears may be taken unless notice has been served and the demand for payment complies with the new requirements. Those requirements set out what information the notice must include. The section also sets out that the homeowner does not have to pay the rentcharge owner any administrative fee.

Proposed new section 120C sets out various requirements relating to the serving of notice under proposed new section 120B, aimed at ensuring that freeholders receive the demand of payment at the address of the charged land. Proposed new section 120D confers powers on the Secretary of State to set out in regulations a limit on the amounts payable by landowners, indirectly or directly, in relation to the action of recovering or requiring payment of regulated rentcharge arrears. That provision seeks to avoid abuse of administration costs charged when simply accepting payment of arrears, and the process of removing any restriction on the freehold title at the Land Registry. The charge does not affect the cost that is paid directly to the Land Registry itself.

Clause 59 (3) and (4) to clause 59 seek to disapply rentcharge owners from using the provisions set out in sections 121 and 122 of the 1925 Act. In doing so, they provide additional protection to avoid rentcharge owners rushing to invoke those provisions. The effect of those subsections is to make any action to reclaim arrears using the 1925 Act void retrospectively once the provisions are introduced. Subsection (5) ensures that the provisions of the clause apply to rentcharge arrears that have arisen before and after the changes come into force. Subsection (6) inserts new section 122A into the 1925 Act, which details that an instrument creating a rentcharge, contract or any other arrangement is of no effect to the extent that it makes provision contrary to the provisions in this clause. Clause 59 delivers on a Government commitment to protect freehold homeowners from the disproportionate effects of falling into arrears in the payment of their rentcharge.

I turn to new clause 4, for which I thank the shadow Minister, the hon. Member for Greenwich and Woolwich. It seeks to abolish section 121 of the 1925 Act. The effect of the new clause would be that a failure to pay any form of rentcharge would prevent the owner of the rentcharge from granting a lease on the property, or from taking possession of it until the fee was paid. We are sympathetic to the issue raised by the shadow Minister, and we have recognised that forfeiture is an extreme measure and should only be used as a last resort. Although in practice it is already rarely used, I recognise that the potential consequences may feel disproportionate. That is why we have included clause 59, which disapplies this remedy for income-supporting rentcharges where we know that homeowners pay nominal sums for very little in return.

As with leasehold forfeiture, any changes will require a careful balancing of the rights and responsibilities of interested parties. We are concerned as to what this new clause could mean where a homeowner pays estate rentcharges that are essential for the management of their estate, or any other form of legitimate rentcharge. The Government want to ensure that where they are required to be paid, these charges are paid in a timely manner so that the smooth running of the estate can continue. If estate management companies are unable to recover these sums, there is the potential that the costs will fall to other homeowners or that the upkeep of the estate will worsen. We are keen to understand any unintended consequences before abolishing section 121 of the 1925 Act all together. We need to weigh up the needs of the estate with the stress and uncertainty that we know this law can cause for some homeowners and lenders. We are listening carefully to the arguments, and I am happy to give the hon. Gentleman that commitment. I hope that, with those reassurances, he may consider not moving his new clause.

[Matthew Pennycook]

I was slightly surprised, in a welcome way, by the Minister’s response, in that he seemed to indicate that the Government are open to considering the abolition of section 121 of the 1925 Act all together, notwithstanding the need to ensure that there are no unintended consequences, but we are debating clause 59 as it stands, which does not propose that, so I hope to convert the Minister’s sympathy into agreement with our position if I can.

Part 5 of the Bill concerns rentcharges, which in general terms can be understood as an indefinite, periodic payment made in respect of freehold land by the current freeholder to a third party or “rent owner” who has no reversionary interest in the charged land in question. In some cases, the charge relates to the provision of a service; in others it is, in effect, simply a profit stream for the interested third party. All rentcharges, as the Minister made clear, are covered by the Rentcharges Act 1977, which prohibited the creation of new so-called income-only rentcharges and provided that all such rentcharges will be extinguished in 2037.

The 1977 Act does not detail the remedies available to a rentcharge holder whose rentcharge is not paid, although any can simply sue for a money judgment. It is section 121 of the Law of Property Act 1925 that creates two additional remedies for rentcharge non-payment. First, unless excluded by the terms of the rentcharge itself, there is a right for the rentcharge holder to take possession of the charged land in question and retain any income associated with it so long as the money owed, whether demanded or not, is unpaid for 40 days. Secondly, unless prohibited by the terms of the rentcharge, and assuming that the money owed is outstanding for at least 40 days, there is a power to demise the land to a trustee by way of a lease in order to raise the funds necessary to pay the arrears and costs.

In short, the 1925 Act provides for the power to seize freehold houses for non-payment of a rentcharge, even if the arrears are merely a few pounds, and allows the rentcharge holder to retain possession or render it in effect worthless by means of maintaining a 99-year lease over it, even if, as demonstrated by the 2016 case of Roberts v. Lawton, the rentcharge is redeemed or the underlying debt cleared. In our view, the remedies provided for by the 1925 Act are a wholly disproportionate and draconian legacy of Victorian-era property law. As I have said, the 1977 Act prohibited the creation of new rentcharges and provided for existing rentcharges to be abolished in 2037, but 13 years from now is still a long time away and any lease granted prior to the abolition will remain in force. Rentcharges are therefore an area of law in respect of which legislative reform is long overdue, and the need to protect rent payers from what amounts, essentially, to a particularly severe form of freehold forfeiture as a result of the relevant remedies provided for by the 1925 Act is pressing.

With clause 58 having amended the definition of estate rentcharge, clause 59 seeks to provide for revised remedies for arrears by amending the 1925 Act. As the Minister has set out, clause 59, in place of the existing two remedies for rentcharge non-payment under the Act, proposes requiring the third party or rent owner to issue an appropriate demand before they can seek to recover or compel payment, and gives the Secretary of State the power by regulation to limit the amount payable by the freehold homeowner in respect of rentcharge arrears or to provide that no amount is repayable. Although we appreciate that the intent of the clause is to better protect freehold homeowners from the existing disproportionate remedies that are available to rentcharge holders when rentcharges go unpaid, we believe it is an overly complicated and onerous attempt to make more palatable the methods of enforcing rentcharges provided for by the 1925 Act that are simply not justifiable in any form.

No one disputes that there might be a need for legitimate and reasonable rentcharges. Indeed, if and when the Government finally deliver on the pledge to require all new houses in England and Wales to be sold as freehold properties, such charges will become even more important as a means to ensure that freehold houses contribute towards communal estate services. However, the threat of their being enforced by means of the draconian remedies in section 121 of the 1925 Act must, in our view, be removed.

--- Later in debate ---

If accepted, the effect of replacing the existing clause 59 with new clause 4 would be that the rentcharge holder would have to seek to recover any rentcharge arrears like anyone else seeking to recover a contractual debt —namely, by suing for it. We think that that is a far more reasonable and appropriate way to deal with the contraventions that we are talking about. I look forward to the Minister’s response.

[Lee Rowley]

I am grateful to the hon. Gentleman. He makes a strong case for his arguments. As I have indicated, although I will not accept new clause 4, we do think there is an argument that is reasonable to be had here, while recognising that we need to consider the consequential potential of any change. I am happy to discuss that further with him separately to see whether we can make further progress at a later stage of the Bill.

[Matthew Pennycook]

I thank the Minister for that answer. I am tempted to not move the new clause, but I can only deal with the piece of legislation in front of me. What is in front of me is not a placeholder clause that says, “We will review the 1925 Act”; it is a clause that puts in place an amended version of the remedies. We feel so strongly about this point that we will vote against clause stand part, but I will take the Minister up on his offer to discuss a more sensible way of dealing with the types of contraventions that we have discussed.

Question put, That the clause stand part of the Bill.

--- Later in debate ---

Question put, That the clause, as amended, stand part of the Bill.

[Lee Rowley]

Clause 60 sets out the meaning of references throughout the Bill to other Acts. I commend the clause to the Committee.

Question put and agreed to.

Clause 60, as amended, accordingly ordered to stand part of the Bill.

Clause 61

Power to make consequential provision

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 61 gives the Secretary of State the power to make provision that is consequential on the Bill through regulations, including provision amending an Act of Parliament. We do not take such a power lightly and, in drafting this legislation, we have sought to identify necessary consequential amendments on the face of the Bill. Long residential leasehold is, however, a complex and interdependent area of law. Therefore we consider it prudent to take the power in Clause 61 in order to ensure that, should any further interdependencies be identified at a later date, those can be addressed appropriately.

There are various precedents for such provisions, including section 92 of the Immigration Act 2016, section 213 of the Housing and Planning Act 2016, section 42 of the Neighbourhood Planning Act 2017, and section 20 of the Leasehold Reform (Ground Rent) Act 2022.

Question put and agreed to.

Clause 61 accordingly ordered to stand part of the Bill.

Clause 62

Regulations

[Lee Rowley]

I beg to move amendment 55, in clause 62, page 80, line 33, at end insert—

“(1A) A power to make regulations under Part 4A also includes power to make different provision for different areas.”

This amendment would expressly provide that a power to make regulations under the new Part to be inserted after Part 4 includes the power to make different provision for different areas.

[The Chair]

With this it will be convenient to discuss the following:

Government amendment 56.

Government new clause 9—Appointment of manager: breach of redress scheme requirements.

Government new clause 15—Leasehold and estate management: redress schemes.

Government new clause 16—Redress schemes: voluntary jurisdiction.

Government new clause 17—Financial assistance for establishment or maintenance of redress schemes.

Government new clause 18—Approval and designation of redress schemes.

Government new clause 19—Financial penalties.

Government new clause 20—Financial penalties: maximum amounts.

Government new clause 21—Decision under a redress scheme may be made enforceable as if it were a court order.

Government new clause 22—Lead enforcement authority: further provision.

Government new clause 23—Guidance for enforcement authorities and scheme administrators.

Government new clause 24—Interpretation of Part 4A.

Government new schedule 1—Redress schemes: financial penalties.

[Lee Rowley]

Turning first to new clause 15, some leaseholders and homeowners on freehold estates do not currently have access to redress outside of the tribunal or the courts. I should note that part 4 of the Bill will give comprehensive rights and protections to homeowners on freehold estates, including access to the relevant tribunal. Though property managing agents are required by law to join a Government-approved redress scheme, there is no such requirement for leasehold landlords and freehold estate managers who manage their property or estate themselves. This means that for issues that fall outside the court or tribunal’s jurisdiction, such as poor communication or behavioural issues, those leaseholders and homeowners on freehold estates can make a complaint only through their landlord or estate manager’s own complaints process. If there is no complaints procedure, or once the leaseholder or homeowner has exhausted it, their access to redress is exhausted.

New clause 15 will fill this gap by providing that leasehold landlords and freehold estate managing agents who manage their property or estate can be required to join a redress scheme. The redress scheme will independently investigate and determine complaints made by a current or former owner. A redress scheme will need to be approved by, and administered by or on behalf of, the “lead enforcement authority”—the Secretary of State or other designated body. The Government have taken powers that will allow us to make exemptions to the requirement in specific circumstances and also a power to amend the definitions in this section. New clause 15 will fill gaps that leaseholders and homeowners on freehold estates currently experience in access to redress. I commend the clause to the Committee.

New clause 16 makes it clear that the redress scheme provided for under this part may act under a voluntary jurisdiction. That means they may allow for members to join the scheme who are not required to join under new clause 15. The scheme may also investigate and determine complaints outside their jurisdiction at their discretion, including complaints by people who are not current or former owners of a relevant dwelling. The scheme may offer voluntary mediation services and allow for certain complaints or circumstances to be excluded from their remit. The voluntary jurisdiction may be subject to the approval conditions that the redress scheme must comply with under new clause 18, which I will come to in a moment.

New clause 17 gives the Secretary of State the power to make payments, including loans, or give financial assistance to establish or maintain a redress scheme. The Government expect the costs of the redress scheme to be funded by the scheme themselves—for example, through charging membership fees. However, there may be some circumstances where the provision of funding is needed. The clause offers flexibility in that instance.

New clause 18 makes provision for the approval and designation of redress schemes. The approval conditions will apply to the future redress scheme and must be satisfied before the redress scheme is approved or designated. The approval conditions will be set out in regulations made by the Secretary of State and will include, but are not limited to, those conditions set out in subsection (3). In addition, new clause 18 allows the Secretary of State to make regulations to provide for the process for making applications for the approval of a redress scheme, the time the approval or designation remains valid, and the process for approval or designation to be withdrawn or revoked. It also allows for a scheme to set membership fees to cover the cost of providing the service.

I will now turn to new clauses 19, 20 and 9, and new schedule 1. To ensure compliance from landlords and freehold estate managers who are required to join a redress scheme, we need to ensure that robust enforcement mechanisms are in place. New clause 19 does that by allowing an enforcement authority to impose financial penalties where breaches of regulations by not joining a redress scheme occur. It also allows for the Secretary of State to make regulations to allow for the investigation of suspected breaches, and for co-operation and information sharing between enforcement authorities for the purposes of investigation.

New clause 20 sets out the amounts of the financial penalty that enforcement authorities may impose on landlords and freehold estate managers who do not comply with the requirement to join a redress scheme. An initial penalty for breaching the requirement may be up to £5,000. However, repeated breaches could lead to a penalty of up to £30,000. The new clause also allows the Secretary of State to amend the amount of financial penalty in regulations to reflect changes in the value of money.

New clause 9 provides a route for leaseholders to apply to the tribunal for an order to appoint a manager in place of their landlord if their landlord has failed to join the redress scheme. As with other “reasons”, leaseholders can apply for an order that a manager be appointed, and the tribunal will make one if

“it is just and convenient to make the order in all the circumstances of the case”.

[Richard Fuller]

The Minister will be aware of concerns about the practical application of this provision when it is put into practice, and the pressures on the tribunal. Under new clause 9, as I best understand it, homeowners will have the right to go to the first-tier tribunal to ask to change from company A to company B as their estate manager. If that is the case, why does it have to go through a tribunal? Why is it not feasible for people to determine that themselves without referring to a tribunal?

[Lee Rowley]

My hon. Friend raises an important point. I recognise the significant body of views in this place and elsewhere about the ability to appoint a right to manage company or a representative directly, and I have certainly heard those concerns. In this case, working within the framework of the proposed legislation, we wanted to ensure that there is a route to allow a manager to be appointed if a landlord refuses to comply. Of course, we would hope that a landlord would not refuse in the first instance.

The Government have also provided in new clause 13 that homeowners on freehold estates can apply to the tribunal for an order to appoint a new manager for the estate if a relevant estate manager has breached the requirement to join a redress scheme. New schedule 1 sets out further provisions relating to the penalties set out in new clause 19. It will require an enforcement authority to give a landlord or freehold estate manager whom they suspect of breaching the requirement to join a scheme a notice of its intention to issue a financial penalty before issuing a final notice. Those who are given a notice by the enforcement authority may make representations. The schedule sets out that where an enforcement authority imposes a financial penalty, it may apply the proceeds towards meeting the costs and expenses incurred in carrying out its functions. Any proceeds that are not so applied will be paid to the Secretary of State.

New clause 21 gives the Secretary of State the power to provide that a future redress scheme provider may apply to a court or tribunal for an order that a decision made under the scheme be enforced as if it were an order of the court. That may be necessary if there is an issue with landlords or freehold estate managers not complying with the redress scheme’s decisions.

New clause 22 makes the necessary provisions for the role of the lead enforcement authority. That is defined by new clause 15 as the Secretary of State, or another person designated by the Secretary of State. New clause 22 provides that the lead enforcement authority will have necessary oversight of the scheme. It also provides that if the Secretary of State decides to designate the role of the lead enforcement authority to another person, the Secretary of State will still have the appropriate power to direct the lead enforcement authority. That includes provisions to make payments and to bring the arrangement to an end.

New clause 23 provides for the Secretary of State to issue or approve guidance for enforcement authorities and the administrator of the future redress scheme about co-operation. It makes clear that the Secretary of State will exercise powers under new clause 18 to ensure that the administrator of the redress scheme has regard to guidance issued or approved under the section. Importantly, the amendment also requires the enforcement authority to have regard to the same guidance. New clause 24 makes necessary provision for the interpretation of this part of the Bill, including the definitions used. I commend the clauses to the Committee.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 63 states the territorial extent of the Bill. It applies to England and Wales. We have worked closely with the Welsh Government to develop the reforms, and we will continue to engage with them. That will ensure that the legislation operates effectively to deliver long-term improvements to home ownership across both England and Wales. I commend the clause to the Committee.

Question put and agreed to.

Clause 63 accordingly ordered to stand part of the Bill.

Clause 64

Commencement

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 64 makes provision for the commencement of the Bill. The substantive provisions of the Bill will come into force on a day appointed by the Secretary of State by regulation. For a number of policy areas, regulations need to be drafted and laid before Parliament before the provisions in the Bill can commence. Hon. Members should be assured that we are not intending to have any unnecessary delay in implementation, and the Department is working hard to plan and carry out the associated programme of secondary legislation. Subsection (2) sets out that the provisions for section 59, namely the regulation of remedies for rent charge arrears, come into force two days after the Act is passed. I commend the clause to the Committee.

[Matthew Pennycook]

I have two brief points. On the general commencement provisions, the Minister just made it perfectly clear that there are no firm dates for commencement on all the issues that require regulations. I take on board what he said about not seeking any unnecessary delay, and that is welcome. However, I push him to go slightly further to give us a sense of the timetabling of some of the more important provisions in the Bill, because leaseholders watching our proceedings will want to know when the rights provided for by the Bill can be enjoyed.

I have a point specifically on subsection (2), which specifies that clause 59 comes into force at the end of a period of two months, as I understand it—the Minister said “two days”, and I think it is two months. Given that some of the provisions in clause 59—I am thinking particularly of new subsection 120D(4)—bring the relevant provision into force on First Reading on 27 November 2023, why is there a two-month delay after Royal Assent? Why not bring the measures into force on Royal Assent?

[Lee Rowley]

I am grateful to the hon. Gentleman for his questions. Obviously, as he will know, I do not need to push too heavily the point that we need to get the Bill through this place. We are trying to move it as quickly as we possibly can, but the other place may have other ideas, although I hope that it will not. I hope I can provide assurances that we will try to get these things moving as quickly as possible.

On the hon. Gentleman’s specific point about subsection (2), I thank him for correcting me; it is two months. As I understand it—I am happy to go away and review it—there is a relative convention in these instances. However, given the desire and intention of all parties, including the Secretary of State, to move as quickly as possible, we will see whether we can speed it up.

Question put and agreed to.

Clause 64 accordingly ordered to stand part of the Bill.

Clause 65

Short Title

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 65 sets out that the short title of the legislation is to be the Leasehold and Freehold Reform Act. I commend the clause to the Committee.

Question put and agreed to.

Clause 65 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mr Mohindra.)

Social Housing

Lee Rowley Excerpts

Tuesday 30th January 2024 Written Statements

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

Social housing is a finite resource and in any compassionate society it is incumbent upon the Government of the day to ensure it is utilised in the most effective way to support those who truly need it and those who play by the rules. This is not least because those fortunate enough to get a social home benefit from paying below market rents and almost all will have the security of that social home for life.

Over 1 million households are on the social housing waiting list and around a quarter-of-million new tenancies are agreed each year. It is therefore important that social housing is fairly allocated. The British public want to know that decent and hard-working people who have contributed to this country can secure a home in their local community. People already living in social homes want to know that anyone moving near them will be respectful of their neighbours. That is why the Government are going to make sure that all applicants and tenants benefit from a system that rewards responsible behaviour and protects local households, while supporting the most vulnerable and those in priority need.

Today we are launching a consultation on our proposed reforms regarding who is eligible and who qualifies for social housing, and how local housing authorities decide to allocate social housing stock where demand exceeds supply. The changes seek to prevent people who abuse the system from benefiting at the expense of those who have played by the rules.

The reforms would apply both to new applicants in England and those who are already on a social housing waiting list. The introduction of a UK connection test and new qualification tests—local connection test, terrorism and antisocial behaviour tests, false statement test and income test—will apply to new social housing applicants and those on a waiting list, meaning those currently living in social housing would not be subject to these new tests. The new ground for eviction for unspent terrorism convictions, as well as the “three strikes and you’re out” policy for antisocial behaviour, would apply to those currently living in social housing as well as future tenants.

When drawing up qualification tests, local housing authorities decide on matters including when to prioritise those newly arrived in the country or a local area over local families; and under which circumstances they should allocate a social home to a high-income household over a lower income one, or to grant social housing to those who commit antisocial behaviour. Our proposals seek to set a national minimum standard for qualification tests while still allowing for local flexibility.

Social housing waiting lists have stabilised at around 1.2 million after rising from 1 million in 1997 to 1.7 million in 2010 under the last Labour Government. The waiting list remains too high, but it is also essential that local housing authorities do not disproportionately allocate social housing to those newly arrived in the country or local area while local families are left on waiting lists. In Labour-run Brent, 40% of new social lets in 2021-22 were to non-British citizens. In Labour-run Oxford the figure was 25% and in Labour-run Haringey the figure was 24%.

The Government believe that everyone has the right to a safe, decent and warm home that meets their needs. We have made significant progress both to increase the quality and quantity of social housing, and at the same time to hold negligent landlords to account.

Under the affordable homes programme, the Government are spending over £11.5 billion of taxpayers’ money to deliver more than 100,000 affordable homes, among them tens of thousands specifically for social rent. This will unlock a further £38 billion in public and private spending in affordable housing. It builds on the Government’s record since 2010—with over 696,000 new affordable homes delivered, including over 172,000 for social rent. Through the Social Housing (Regulation) Act 2023, we have strengthened the powers of the Regulator of Social Housing, and improved residents’ ability to seek redress by granting new powers to the Housing Ombudsman.

Overview of proposals



The new set of tests on which we are seeking views are as follows:

UK connection test—requiring people to be a British citizen, Irish citizen, Commonwealth citizen with a right of abode, or EEA or Swiss citizen with equal treatment rights in matters of housing under the withdrawal agreement, the EEA-EFTA separation agreement or the Swiss citizens’ rights agreement, or otherwise to have been lawfully resident in the UK for 10 years, in order to be eligible for social housing. We are consulting on an exemption for those arriving via safe and legal resettlement routes and the Ukrainian temporary visa schemes. This will allow for the allocation of more social homes to those with the strongest connection to the UK, while enabling the Government to continue to deliver their commitments to provide urgent humanitarian support.

Local connection test—preventing individuals from being allocated social housing if they have not had links to the local authority area for two years—for example, through residence or work. This will ensure greater consistency across the country and ensure more local people can access social housing in the area they call home where they need it, supporting people to put down roots and maintain links to family and community.

Income test—households earning above a maximum threshold —to be defined following responses to the consultation—would not qualify for social housing. This would only apply to new tenants and existing tenants would be unaffected.

Antisocial behaviour test—disqualifying people who have unspent convictions for certain criminal antisocial behaviour offences, as well as certain civil orders, from social housing for a defined period.

Terrorism test—we propose that people who have unspent terrorism convictions should be disqualified from social housing unless excluding them would increase the risk to public safety.

False statement test—mandating a period of disqualification for those who knowingly or recklessly make false statements when applying for social housing.

The Government do not believe that those who repeatedly commit acts of antisocial behaviour or have unspent terrorism offences should continue to access social homes while law-abiding individuals remain on waiting lists. We are keen that all social landlords should be able to evict those who have unspent convictions for terrorist offences; we are also committed to a “three strikes and you’re out” expectation of social housing landlords, as set out in the “Anti-Social Behaviour Action Plan” published last year. This means that they will be expected to evict tenants whose behaviour is disruptive to neighbours and jeopardises community cohesion.

To ensure that the reforms are informed by the expertise of local housing authorities, social landlords, tenants and the wider public, the full consultation launched today will run for eight weeks. Reforms based on the consultation responses will ensure that waiting lists are managed effectively and that more social housing is allocated to those with the closest connection to the UK and their local area. Changes will be delivered by secondary legislation at the earliest opportunity.

The proposals will help to fulfil the Government’s pledge to tackle antisocial behaviour, and ensure we preserve and protect the country’s social housing.

A copy of the consultation document will be placed in the Libraries of both Houses and published on www.gov.uk.

[HCWS225]

Leasehold and Freehold Reform Bill (Tenth sitting)

Lee Rowley Excerpts

Tuesday 30th January 2024 Public Bill Committees

Brought up, and read the First time.

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

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

[The Chair]

With this it will be convenient to discuss the following:

Government new clause 11—Appointment of substitute manager.

Government new clause 12—Conditions for applying for appointment order.

Government new clause 13—Criteria for determining whether to make appointment order.

Government new clause 14—Appointment orders: further provision.

--- Later in debate ---

[Lee Rowley]

Homeowners who pay estate management charges for the upkeep and management of their estate must be able to hold their estate management company to account. The Government are committed to giving homeowners the right to apply to the appropriate tribunal to appoint a substitute manager where the estate management company is failing them. The intention is that the substitute manager will then carry out the services set out in an order that will be issued by the tribunal.

New clause 10 introduces the first stage in the procedure for doing so. It will require one or more homeowners to issue a notice of complaint to their estate management company.

Subsection (2) sets out what information must be contained in the notices. Subsection (3) sets out the grounds for issuing a complaint, which largely mirror the grounds set out under section 24 of the Landlord and Tenant Act 1987 that apply to leaseholders. Subsections (4) and (5) make it clear that a notice may be issued jointly with more than one complainant, and that it is not necessary for the grounds for complaint to be the same for each complainant.

Subsection (7) defines the term “qualifying period”. It gives the estate management company a period of six months from the time at which a complaint is received to remedy the complaint before the homeowner can move towards the next step. That is a sensible period to ensure that estate management companies have sufficient time to address concerns fully. It gives homeowners time to gather the evidence required to demonstrate failings, should that be necessary, to any tribunal. I commend new clause 10 to the Committee.

New clause 11 will introduce arrangements to allow owners of managed dwellings to apply for the appointment of a substitute estate manager. Subsection (1) requires an application by an owner of a managed dwelling to be made to the appropriate tribunal. Once it receives an application, the appropriate tribunal may appoint a person to carry out functions in connection with estate management as the tribunal sees fit. That appointed person would then carry out functions instead of the estate manager or the agent acting on its behalf.

Subsections (2) to (4) refer to other new clauses that set out the process to be followed and the issues that must be take into account. Subsection (2) refers to new clause 12, which sets out the conditions that must be met for the person to make an application. Subsection (3) refers to new clause 13, which sets out the criteria that the appropriate tribunal must consider in deciding whether to make an order.

Subsection (4) refers to new clause 14, which makes further provision in relation to appointment orders, including what may be contained in such an order and under what terms an order may be varied or discharged. Subsection (5) sets out the two key definitions that apply to this new power: it defines an appointment order, and then defines a substitute manager as the person appointed under the appointment order. New clause 11 sets out the parameters for the new power and how it should be used; I commend it to the Committee.

New clause 12 sets out the conditions for an application for an appointment order to be made under new clause 11. Subsection (1) sets out the main condition that must be met: the homeowner must have given a notice of complaint and must have given the estate manager the required six-month period to resolve that complaint. The homeowner must also have issued a subsequent final warning notice, such that it is clear within a reasonable time period that either the estate manager is not capable of taking steps or not willing to take steps to remedy the problem.

Subsections (2) and (3) set out the arrangements for an appointment notice where it is given jointly by a number of homeowners. Critically, they allow additional homeowners to join the final warning notice even if they were not part of the initial complaint. Importantly, people who have provided the initial notice of complaint must also sign the final warning notice.

Subsection (4) sets out what a final warning notice must contain, such as the addresses and names of those issuing the notice. The notice must also set out the grounds on which those people consider that the appropriate tribunal should make that order. The final warning notice must give the estate manager a reasonable period in which to solve the problem. The Secretary of State and equivalent Welsh Ministers have the power to specify what other information might be required.

Subsection (6) allows the appropriate tribunal to dispense with the need to make a final warning notice if it is satisfied that it would not be reasonably practical to do so. New clause 12 provides clarity about what steps are required in order to make an appropriate order to the tribunal. I commend it to the Committee

New clause 13 sets out the criteria and grounds on which the appropriate tribunal may make an appointment order. Subsection (1) defines the estate management arrangements that are within scope of an appointment order by allowing the appropriate authority to set out in regulations any exemptions, should they be required.

Subsection (2)(a) states that the appropriate tribunal may make an appointment order if it is “just and convenient” in the circumstances. Subsections (2)(b) and (3) set out the grounds under which an appointment order may be made. In broad terms, these are where the estate manager has breached an obligation; where a management charge or an administration charge may be unreasonable; where a manager has failed to comply with a relevant code of practice; and where the estate manager has failed to belong to a redress scheme. However, the appropriate tribunal is also able to issue an order if it considers that there are other circumstances that make it just and convenient to do so.

Subsection (4) sets out the grounds under which an estate management charge under subsection (3)(b) is taken to be unreasonable. Subsection (5) will allow the appropriate tribunal additional freedom to make an order in circumstances in which

“a period specified in a final warning notice was not a reasonable period”,

or in which the final warning notice did not contain all the required information. I commend new clause 13 to the Committee.

New clause 14 sets out further provision relating to the making of orders to appoint substitute estate managers. Subsection (1) sets out matters for which the appropriate tribunal may wish to make a provision in an appointment order, such as provision allowing the substitute manager to become party to certain rights and liabilities, provision for remuneration to be paid to a substitute manager by the estate management company, and provision setting a time limit for how long the manager may carry out its functions.

Subsection (2) allows the appropriate tribunal to

“vary or discharge…an appointment order.”

Subsection (3) sets out the conditions under which an appointment order may be varied or discharged. Subsection (4) states that

“the appropriate tribunal must have regard to whether”

or not the estate management company is part of a “redress scheme” in deciding the terms of the appointment order, or when it considers variation or discharge of the order. I commend new clause 14 to the Committee.

Question put and agreed to.

New clause 10 accordingly read a Second time, and added to the Bill.

New Clause 11

Appointment of substitute manager

“(1) The appropriate tribunal may, on the application of an owner of a managed dwelling, by order appoint a person to carry out, in place of an estate manager, such functions in connection with the estate management relating to that dwelling as the tribunal thinks fit.

(2) Section (Conditions for applying for appointment order) sets out conditions that must be met for a person to make an application.

(3) Section (Criteria for determining whether to make appointment order) sets out criteria the appropriate tribunal must consider in deciding whether to make an appointment order.

(4) Section (Appointment orders: further provision) makes further provision in relation to appointment orders.

(5) In this section and sections (Conditions for applying for appointment order) to (Appointment orders: further provision)—

‘appointment order’ means an order under subsection (1);

‘substitute manager’ means a person appointed under an appointment order.”—(Lee Rowley.)

This new clause, to be inserted after NC10, would allow owners of managed dwellings to apply for the appointment of a substitute estate manager.

Brought up, read the First and Second time, and added to the Bill.

New Clause 12

Conditions for applying for appointment order

“(1) An owner of a managed dwelling may make an application for an appointment order in relation to an estate manager only if—

(a) the owner has given a notice of complaint to the estate manager,

(b) the qualifying period in relation to that notice has ended,

(c) the owner has, after the end of the qualifying period but before the application is made, given further notice to the estate manager (a ‘final warning notice’), and

(d) the condition in subsection (5) is met in relation to the final warning notice.

(2) If the owner gave the notice of complaint jointly with other persons, the owner may not make an application for an appointment order unless—

(a) the owner does so jointly with each of those other persons that remain owners of managed dwellings in relation to the estate manager, and

(b) the final warning notice was given jointly by the owner and each of those other persons.

(3) The owner, or the owners acting jointly in accordance with subsection (2), may make an application jointly with an owner of a managed dwelling who did not give the notice of complaint to the estate manager (a ‘joined applicant’), if the final warning notice was given jointly by the owner or owners and the joined applicant.

(4) A final warning notice must—

(a) specify—

(i) the name of the person (or persons) giving the notice,

(ii) the address of their dwelling (or the addresses of each of their dwellings), and

(iii) if different, an address (or addresses) at which a person may give notice to that person (or one or more of those persons) in connection with the application,

(b) state that the person or persons giving the notice intend to make an application for an appointment order in respect of the dwelling specified in the notice,

(c) specify the grounds on which the appropriate tribunal would be asked to make such an order and the matters that would be relied on by the person or persons for the purpose of establishing those grounds,

(d) where those matters are capable of being remedied by the estate manager, require the estate manager, within a reasonable period specified in the notice, to take specified steps for the purpose of remedying them,

(e) state that, if those matters are remedied, the person or persons will not make an application, and

(f) contain any other information specified in regulations made by the Secretary of State.

(5) The condition in this subsection is met if—

(a) the matters specified in the final warning notice were not capable of being remedied, or

(b) the period specified in the final warning notice for the matters to be remedied has expired without the estate manager having taken the required steps to remedy them.

(6) The appropriate tribunal may by order dispense with a requirement in subsection (1), (2) or (3) if the tribunal is satisfied in light of the urgency of the case that it would not be reasonably practicable for the requirement to be satisfied.

(7) But the tribunal may, when so ordering, direct that such other notices are given, or such other steps are taken, as it thinks fit.

(8) If the tribunal makes an order under subsection (6), an application for an appointment order may be made only if any notices required to be given, and any other steps required to be taken, by virtue of the order have been given or taken.

(9) The Secretary of State may by regulations make provision for determining when a notice under this section is given.

(10) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)

This new clause, to be inserted after NC11, would set out conditions for an application to be made under NC11.

Brought up, read the First and Second time, and added to the Bill.

New Clause 13

Criteria for determining whether to make appointment order

“(1) The appropriate tribunal may not make an appointment order in relation to an estate manager if the estate manager is specified, or is of a description specified, in regulations made by the Secretary of State.

(2) The appropriate tribunal may make an appointment order only if the tribunal is satisfied that—

(a) it is just and convenient to make the order in all the circumstances of the case, and

(b) either—

(i) those circumstances include those set out in subsection (3), or

(ii) there are other circumstances that make it just and convenient for the order to be made.

(3) The circumstances are—

(a) that the estate manager is—

(i) in breach of an obligation in relation to a dwelling, or

(ii) in the case of an obligation dependent on notice, would be in breach of the obligation but for the fact that it has not been reasonably practicable to give the estate manager the appropriate notice;

(b) that an estate management charge payable, or proposed or likely to be payable, is unreasonable;

(c) that an administration charge payable, or proposed or likely to be payable, is unreasonable;

(d) that the estate manager has failed to comply with a relevant provision of a code of practice approved by the Secretary of State under section 87 of the LRHUDA 1993 (codes of management practice);

(e) that the estate manager has breached regulations under section (Leasehold and estate management: redress schemes)(1) of this Act (requirement to be member of redress scheme).

(4) For the purposes of subsection (3)(b), an estate management charge is to be taken to be unreasonable if—

(a) the amount is unreasonable having regard to the items for which it is payable,

(b) the items for which it is payable are of an unnecessarily high standard, or

(c) the items for which it is payable are of an insufficient standard with the result that additional charges are or may be incurred.

(5) An appointment order may be made despite the fact that—

(a) a period specified in a final warning notice was not a reasonable period, or

(b) a final warning notice otherwise failed to comply with a requirement under section (Conditions for applying for appointment order)(4).

(6) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)

This new clause, to be inserted after NC12, would set out criteria for the making of an order under NC11.

Brought up, read the First and Second time, and added to the Bill.

New Clause 14

Appointment orders: further provision

“(1) An appointment order may—

(a) make provision with respect to such matters relating to the exercise by the substitute manager of their functions under the order, and such incidental or ancillary matters, as the tribunal thinks fit, including—

(i) for rights and liabilities arising under contracts or other arrangements to which the substitute manager is not party to become rights and liabilities of the substitute manager;

(ii) for the substitute manager to be entitled to prosecute claims in respect of causes of action (whether contractual or tortious) accruing before or after the date of their appointment;

(iii) for remuneration to be paid to the substitute manager by the estate manager;

(iv) for the substitute manager’s functions to be exercisable during a specified period;

(b) be subject to such conditions as the tribunal thinks fit;

(c) be subject to suspension on terms set by the tribunal.

(2) The appropriate tribunal may, on the application of any interested person or of its own motion, vary or discharge (whether conditionally or unconditionally) an appointment order.

(3) The tribunal may not vary or discharge an appointment order unless the tribunal is satisfied that—

(a) the variation or discharge will not result in a recurrence of the circumstances which led to the appointment order being made, and

(b) it is just and convenient in all the circumstances of the case to vary or discharge the order.

(4) In deciding—

(a) the terms of an appointment order, or

(b) whether or how to vary or discharge an appointment order,

the appropriate tribunal must have regard to whether the estate manager in relation to which the order is made has breached regulations under section (Leasehold and estate management: redress schemes)(1) (requirement to be member of redress scheme).”—(Lee Rowley.)

This new clause, to be inserted after NC13, would set out further provision about orders to appoint substitute estate managers under NC11.

Brought up, read the First and Second time, and added to the Bill.

New Clause 15

Leasehold and estate management: redress schemes

“(1) The Secretary of State may by regulations require a person that carries out estate management in respect of a dwelling in England in a relevant capacity to be a member of a redress scheme.

(2) A person carries out estate management in a ‘relevant capacity’ if they do so—

(a) as a relevant landlord of the dwelling, or

(b) as an estate manager.

(3) But a person may not be required to be a member of a redress scheme under this section if they carry out estate management only—

(a) as a tenant, or

(b) as an agent.

(4) A ‘redress scheme’ is a scheme—

(a) which provides for a complaint against a member of the scheme made by or on behalf of a current or former owner of a dwelling in relation to which estate management is carried out to be independently investigated and determined by an independent individual, and

(b) which is—

(i) approved by the lead enforcement authority for the purposes of regulations under subsection (1), or

(ii) administered by or on behalf of the lead enforcement authority and designated by the lead enforcement authority for those purposes.

(5) Regulations under subsection (1) may require a person to remain a member of a redress scheme after ceasing to be a person mentioned in that subsection, for a period specified in the regulations.

(6) Before making regulations under subsection (1), the Secretary of State must be satisfied that all persons who are to be required to be a member of a redress scheme will be eligible to join such a scheme before being so required (subject to any provision in the scheme about expulsion, as to which see section (Approval and designation of redress schemes)(3)(k)).

(7) For potential consequences of breaching regulations under subsection (1), see—

(a) section 24(2)(ad) of the LTA 1987 and section (Criteria for determining whether to make appointment order)(3)(e) of this Act (appointment of manager by tribunal);

(b) section (Financial penalties) of this Act (financial penalties by enforcement authorities).

(8) In this Part—

‘estate management’ means—

(a) the provision of services,

(b) the carrying out of maintenance, repairs or improvements,

(c) the effecting of insurance, or

(d) the making of payments,

for the benefit of one or more dwellings;

‘estate manager’ means a body of persons (whether incorporated or not)—

(a) which carries out, or is required to carry out, estate management, and

(b) which recovers the costs of carrying out estate management by means of relevant obligations;

‘the lead enforcement authority’ means either—

(a) the Secretary of State, or

(b) another person designated by the Secretary of State as the lead enforcement authority,

and see section (Lead enforcement authority: further provision) for further provision about the lead enforcement authority;

‘relevant landlord’, in relation to a dwelling, means a landlord under a long lease of the dwelling;

“relevant obligation’, in relation to a dwelling, means each of the following—

(a) a rentcharge which—

(i) is charged on or issues out of the land which comprises the dwelling or a building of which the dwelling forms part, and

(ii) is an estate rentcharge by virtue of section 2(4)(b) and (5) of the RA 1977;

(b) an obligation under a long lease of the dwelling;

(c) any other obligation that—

(i) runs with the land which comprises the dwelling or a building of which the dwelling forms part, or

(ii) otherwise (whether in law or in equity) binds the owner for the time being of the land which comprises the dwelling;

(d) any other obligation—

(i) to which the owner of the dwelling is subject, and

(ii) to which any immediate successor in title of that owner will become subject, if an arrangement to which a relevant landlord or an estate manager and that owner are parties is performed.

(9) The arrangements that are within paragraph (d) of the definition of ‘relevant obligation’ include an arrangement under which the owner is required (in particular by a limitation on transfer of title to the dwelling or on registration of a transfer of title) to ensure that any immediate successor in title to the owner enters into an obligation.

(10) The Secretary of State may by regulations make provision (including provision amending this Act) for the purpose of changing the meaning of ‘relevant capacity’, ‘relevant landlord’ or ‘relevant obligation’.

(11) A statutory instrument containing regulations under this section (whether alone or with other provision) is subject to the affirmative procedure.”—(Lee Rowley.)

This new clause, to be inserted as the first clause of a new Part after Part 4, would enable the Secretary of State to make provision for redress schemes for property management work carried out other than by agents.

Brought up, read the First and Second time, and added to the Bill.

New Clause 16

Redress schemes: voluntary jurisdiction

“(1) Nothing in this Part prevents a redress scheme from providing (subject to regulations under section (Approval and designation of redress schemes))—

(a) for membership to be open to persons who wish to join as voluntary members;

(b) for the investigation or determination of any complaints under a voluntary jurisdiction (including complaints by persons who are not current or former owners of dwellings in relation to which estate management is carried out);

(c) for voluntary mediation services;

(d) for the exclusion from investigation and determination under the scheme of any complaint in such cases or circumstances as may be specified in or determined under the scheme.

(2) In this Part—

‘complaints under a voluntary jurisdiction’ means complaints in relation to which there is no duty to be a member of a redress scheme, where the members against which the complaints are made have voluntarily accepted the jurisdiction of the scheme over those complaints;

‘voluntary mediation services’ means mediation, conciliation or similar processes provided at the request of a member in relation to complaints made—

(a) against the member, or

(b) by the member against another person;

‘voluntary members’, in relation to a scheme, means members who are not subject to a duty to be a member of a redress scheme.”—(Lee Rowley.)

This new clause, to be inserted after NC15, would provide for redress schemes to have the possibility of voluntary jurisdiction.

Brought up, read the First and Second time, and added to the Bill.

New Clause 17

Financial assistance for establishment or maintenance of redress schemes

“The Secretary of State may give financial assistance (by way of grant, loan, or guarantee, or in any other form) or make other payments to a person for the establishment or maintenance of—

(a) a redress scheme, or

(b) a scheme that would be a redress scheme if it were approved or designated under section (Leasehold and estate management: redress schemes)(4)(b).”—(Lee Rowley.)

This new clause, to be inserted after NC16, would allow the Secretary of State to give financial assistance for the establishment or maintenance of redress schemes.

Brought up, read the First and Second time, and added to the Bill.

New Clause 18

Approval and designation of redress schemes

“(1) This section applies where the Secretary of State makes regulations under section (Leasehold and estate management: redress schemes)(1).

(2) The Secretary of State must by regulations set out conditions which are to be satisfied before a scheme is approved or designated under section (Leasehold and estate management: redress schemes)(4)(b).

(3) The conditions must include conditions requiring the scheme to include provision in accordance with the regulations—

(a) for an administrator of the scheme to appoint an individual, having obtained the lead enforcement authority’s approval of the individual and the terms of the appointment, who is to be responsible for overseeing and monitoring the investigation and determination of complaints under the scheme;

(b) about the complaints that may be made under the scheme, which must include provision enabling the making of complaints about non-compliance with any codes of practice that are issued or approved by the Secretary of State;

(c) about the time to be allowed for scheme members to resolve matters before a complaint is accepted under the scheme in relation to those matters;

(d) about the circumstances in which a complaint may be rejected;

(e) about co-operation (which may include the joint exercise of functions) of an individual who is investigating or determining a complaint with persons who have functions under other schemes for providing redress and with enforcement authorities;

(f) about the provision of information to the persons mentioned in paragraph (e);

(g) if members are required to pay fees in respect of compulsory aspects of the scheme, about the level of those fees;

(h) if there are voluntary aspects of the scheme—

(i) for fees to be payable in respect of those aspects of the scheme, and

(ii) for the fees to be set at a level that, taking one year with another, is sufficient to meet the costs incurred in the administration of those aspects of the scheme;

(i) for the individual determining a complaint to be able to require members to provide redress of the following types to the complainant—

(i) providing an apology or explanation,

(ii) paying compensation, and

(iii) taking such other actions in the interests of the complainant as the individual determining the complaint may specify;

(j) about the enforcement of the scheme and decisions made under the scheme;

(k) for a person to be expelled from the scheme only—

(i) in circumstances specified in the regulations,

(ii) once steps to secure compliance that are specified in the regulations have been taken, and

(iii) once the decision to expel the person has been reviewed by an independent person in accordance with the regulations;

(l) for an expulsion to be revoked in circumstances specified in the regulations;

(m) prohibiting a person from joining the scheme when the person has been expelled from another redress scheme and the expulsion has not been revoked;

(n) for circumstances in which the administration of the scheme is to be transferred to a different administrator;

(o) about the closure of the scheme by an administrator of the scheme.

(4) Conditions set out in regulations under subsection (3)—

(a) may include conditions requiring an administrator or proposed administrator of a scheme to undertake to do things—

(i) on an ongoing basis following approval or designation;

(ii) after ceasing to be an administrator of the scheme;

(b) in the case of conditions set out in regulations by virtue of subsection (3)(d), may require a scheme to reject complaints by a current or former owner of a dwelling where that owner is of a description specified in the regulations;

(c) in the case of conditions set out in regulations by virtue of subsection (3)(n), may—

(i) require an approved scheme to provide for the administration of that scheme to be transferred to the lead enforcement authority or a person acting on behalf of the lead enforcement authority in circumstances specified in the regulations, and

(ii) where they so require, provide for a scheme whose administration is transferred to be treated as a designated scheme instead of an approved one.

(5) Subsections (3) and (4) do not limit the conditions that may be set out in regulations under subsection (2).

(6) The Secretary of State may by regulations make further provision about the approval or designation of redress schemes under section (Leasehold and estate management: redress schemes)(4)(b), including provision—

(a) about the number of redress schemes that may be approved or designated (which may be one or more);

(b) about the making of applications for approval;

(c) about the period for which an approval or designation is valid;

(d) about the withdrawal of approval or revocation of designation;

(e) authorising the approval or designation of a scheme which provides for fees payable by a compulsory member to be calculated by reference to the total of the costs incurred, or to be incurred, in the administration of the compulsory aspects of the scheme (including costs unconnected with the member in question).

(7) Regulations under this section may confer a discretion on the lead enforcement authority or require a scheme to do so.

(8) In this section—

‘compulsory aspects’, in relation to a scheme, means aspects of the scheme relating to complaints in relation to which there is a duty to be a member of a redress scheme;

‘compulsory member’, in relation to a scheme, means a member of the scheme who is subject to a duty to be a member of a redress scheme;

‘voluntary aspects’, in relation to a scheme, means aspects of the scheme that relate to—

(a) complaints under a voluntary jurisdiction,

(b) voluntary mediation services, or

(c) voluntary members.

(9) A statutory instrument containing regulations under this section (whether alone or with other provision) is subject to the affirmative procedure.”—(Lee Rowley.)

This new clause, to be inserted after NC17, would make provision for the approval and designation of redress schemes.

Brought up, read the First and Second time, and added to the Bill.

New Clause 19

Financial penalties

“(1) An enforcement authority may impose a financial penalty on a person if satisfied beyond reasonable doubt that the person has breached regulations under section (Leasehold and estate management: redress schemes)(1).

(2) The Secretary of State may by regulations make provision about the investigation by an enforcement authority of suspected breaches of regulations under section (Leasehold and estate management: redress schemes)(1) for the purpose of determining whether to impose a financial penalty.

(3) Regulations under subsection (2) may, among other things, make provision about—

(a) co-operation between enforcement authorities, and

(b) the sharing of information between enforcement authorities,

for the purposes of an investigation.

(4) The amount of a financial penalty imposed under this section is to be determined in accordance with section (Financial penalties: maximum amounts).

(5) More than one penalty may be imposed for the same conduct only if—

(a) the conduct continues after the end of 28 days beginning with the day after the day on which the final notice in respect of the previous penalty for the conduct was given to the person, unless the person appeals against that notice within that period, or

(b) if the person appeals against that notice within that period, the conduct continues after the end of 28 days beginning with the day after the day on which the appeal is finally determined, withdrawn or abandoned.

(6) Subsection (5) does not enable a penalty to be imposed after the final notice in respect of the previous penalty has been withdrawn or quashed on appeal.

(7) Schedule (Redress schemes: financial penalties) makes provision about—

(a) the procedure for imposing a financial penalty under this section,

(b) appeals against financial penalties,

(c) enforcement of financial penalties, and

(d) how enforcement authorities are to deal with the proceeds of financial penalties.

(8) For the purposes of this section and section (Financial penalties: maximum amounts)—

(a) a financial penalty is imposed on the date specified in the final notice as the date on which the notice is given;

(b) ‘final notice’ has the meaning given by paragraph 3 of Schedule (Redress schemes: financial penalties).

(9) A statutory instrument containing regulations under this section (whether alone or with other provision) is subject to the affirmative procedure.”—(Lee Rowley.)

This new clause, to be inserted after NC18, would provide for an enforcement authority to impose a financial penalty for breach of regulations under NC15.

Brought up, read the First and Second time, and added to the Bill.

New Clause 20

Financial penalties: maximum amounts

“(1) The amount of a financial penalty imposed on a person under section (Financial penalties) is to be determined by the enforcement authority imposing it, but—

(a) if Case A, B or C applies, the penalty must not be more than £30,000;

(b) otherwise, the penalty must not be more than £5,000.

(2) Case A applies if—

(a) a relevant penalty has been imposed on the person and the final notice imposing the penalty has not been withdrawn, and

(b) the conduct for which the penalty was imposed continues after the end of the period of 28 days beginning with—

(i) the day after the day on which the penalty was imposed on the person, or

(ii) if the person appeals against the final notice in respect of the penalty within that period, the day after the day on which the appeal is finally determined, withdrawn or abandoned.

(3) Case B applies if—

(a) a relevant penalty has been imposed on the person for a breach of regulations under section (Leasehold and estate management: redress schemes)(1) and the final notice imposing the penalty has not been withdrawn, and

(b) the person engages in conduct which constitutes a different breach of such regulations within the period of five years beginning with the day on which the penalty was imposed.

(4) Case C applies if—

(a) a relevant penalty has been imposed on the person for conduct in respect of which Case A, B or C applies and the final notice imposing the penalty has not been withdrawn, and

(b) the person breaches regulations under section (Leasehold and estate management: redress schemes)(1) within the period of five years beginning with the day on which the penalty was imposed.

(5) For the purposes of this section, ‘relevant penalty’ means a financial penalty imposed under section (Financial penalties) where—

(a) the period for bringing an appeal against the penalty under paragraph 5 of Schedule (Redress schemes: financial penalties) has expired without an appeal being brought,

(b) an appeal against the financial penalty under that paragraph has been withdrawn or abandoned, or

(c) the final notice imposing the penalty has been confirmed or varied on appeal.

(6) The Secretary of State may by regulations amend the amounts specified in subsection (1) to reflect changes in the value of money.

(7) A statutory instrument containing regulations under this section is subject to the negative procedure.’—(Lee Rowley.)

This new clause, to be inserted after NC19, would provide for the maximum penalties that may be imposed under NC19.

Brought up, read the First and Second time, and added to the Bill.

New Clause 21

Decision under a redress scheme may be made enforceable as if it were a court order

“(1) The Secretary of State may by regulations make provision for, or in connection with, authorising an administrator of a redress scheme to apply to a court or tribunal for an order that a determination made under the scheme and accepted by the complainant in question be enforced as if it were an order of a court.

(2) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)

This new clause, to be inserted after NC20, would enable the Secretary of State to make regulations making a decision under a redress scheme enforceable as if it were a court order.

Brought up, read the First and Second time, and added to the Bill.

New Clause 22

Lead enforcement authority: further provision

“(1) The lead enforcement authority must oversee the operation of a redress scheme under this Part.

(2) The lead enforcement authority must provide—

(a) other enforcement authorities, and

(b) the public in England,

with information and advice about the operation of redress schemes, in such form and manner as the lead enforcement authority considers appropriate.

(3) The lead enforcement authority may disclose information to another enforcement authority for the purposes of enabling that authority to determine whether there has been a breach of regulations under section (Leasehold and estate management: redress schemes)(1).

(4) The lead enforcement authority may issue guidance to other enforcement authorities about the exercise of their functions under this Part.

(5) Enforcement authorities other than the lead enforcement authority must have regard to any guidance issued under subsection (4).

(6) If the Secretary of State designates a person as the lead enforcement authority for the purposes of this Part—

(a) the Secretary of State may make arrangements in connection with the person’s role as the lead enforcement authority, which may include arrangements—

(i) for payments by the Secretary of State;

(ii) about bringing the arrangements to an end;

(b) the Secretary of State may give the lead enforcement authority directions as to the exercise of any of its functions, which—

(i) may relate to all or particular kinds of enforcement authorities, and

(ii) may make different provision for different purposes;

(c) the lead enforcement authority must keep under review and from time to time advise the Secretary of State about—

(i) the operation of redress schemes;

(ii) social and commercial developments relating to estate management (including by relevant landlords) in England, so far as it considers those developments relevant to redress schemes.

(7) The Secretary of State may by regulations make transitional or saving provision which applies when there is a change in the lead enforcement authority (which may relate to a specific change in the lead enforcement authority or to changes that might arise from time to time).

(8) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)

This new clause, to be inserted after NC21, would make further provision about lead enforcement authorities.

Brought up, read the First and Second time, and added to the Bill.

New Clause 23

Guidance for enforcement authorities and scheme administrators

“(1) The Secretary of State may from time to time issue or approve guidance for enforcement authorities in England and administrators of redress schemes about co-operation between such enforcement authorities and persons exercising functions under the schemes.

(2) An enforcement authority in England other than the Secretary of State must have regard to any guidance issued or approved under this section.

(3) The Secretary of State must exercise the powers in section (Approval and designation of redress schemes) for the purpose of ensuring that every administrator of a redress scheme has regard to any guidance issued or approved under this section.”— (Lee Rowley.)

This new clause, to be inserted after NC22, would enable the Secretary of State to issue guidance to enforcement authorities and scheme administrators.

Brought up, read the First and Second time, and added to the Bill.

New Clause 24

Interpretation of Part 4A

“In this Part—

‘complaints under a voluntary jurisdiction” has the meaning given in section (Redress schemes: voluntary jurisdiction)(2);

‘dwelling’ means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, outhouses and appurtenances belonging to it or usually enjoyed with it;

‘enforcement authority’ means—

(a) the lead enforcement authority,

(b) the Secretary of State,

(c) a local housing authority, or

(d) another person designated by the Secretary of State as an enforcement authority;

‘estate management’ has the meaning given in section (Leasehold and estate management: redress schemes)(8);

‘estate manager’ has the meaning given in section (Leasehold and estate management: redress schemes)(8);

‘the lead enforcement authority’ has the meaning given in section (Leasehold and estate management: redress schemes)(8);

‘local housing authority’ means—

(a) a district council,

(b) a London borough council,

(c) the Common Council of the City of London (in its capacity as a local authority), or

(d) the Council of the Isles of Scilly;

‘long lease’ has the meaning given in section 77(2) of the LRHUDA 1993;

‘owner’, in relation to a dwelling, means—

(a) the owner of freehold land which comprises the dwelling;

(b) a tenant under a long lease of the dwelling;

‘redress scheme’ has the meaning given in section (Leasehold and estate management: redress schemes)(4);

‘relevant capacity’ has the meaning given in section (Leasehold and estate management: redress schemes)(2);

‘relevant landlord’ has the meaning given in section (Leasehold and estate management: redress schemes)(8);

“relevant obligation’ has the meaning given in section (Leasehold and estate management: redress schemes)(8);

‘rentcharge” has the same meaning as in the RA 1977 (see section 1 of that Act);

‘voluntary mediation services’ has the meaning given in section (Redress schemes: voluntary jurisdiction)(2);

‘voluntary members’ has the meaning given in section (Redress schemes: voluntary jurisdiction)(2).”—(Lee Rowley.)

This new clause, to be inserted after NC22, would make interpretation provision for the purposes of the new Part to be inserted after Part 4.

Brought up, read the First and Second time, and added to the Bill.

New Clause 42

Leasehold sales information requests

“(1) In the LTA 1985, after section 30J (as inserted by section 35) insert—

‘Sales information requests

30K Sales information requests

(1) A tenant of a dwelling under a long lease may give a sales information request to the landlord.

(2) A “sales information request” is a document in a specified form, and given in a specified manner, setting out—

(a) that the tenant is contemplating selling a long lease of the dwelling,

(b) information that the tenant requests from the landlord for the purpose of the contemplated sale, and

(c) any other specified information.

(3) A tenant may request information in a sales information request only if the information is specified in regulations made by the appropriate authority.

(4)The appropriate authority may specify information for the purposes of subsection (3) only if the information could reasonably be expected to assist a prospective purchaser in deciding whether to purchase a long lease of a dwelling.

(5) The appropriate authority may by regulations provide that a sales information request may not be given until the end of a particular period, or until another condition is met.

(6) Regulations under this section—

(a) are to be made by statutory instrument;

(b) may make provision generally or only in relation to specific cases;

(c) may make different provision for different purposes;

(d) may include supplementary, incidental, transitional or saving provision.

(7) A statutory instrument containing regulations under this section is subject to the negative procedure.

30L Effect of sales information request

(1) A landlord who has been given a sales information request must provide the tenant with any of the information requested that is within the landlord’s possession.

(2) The landlord must request information from another person if—

(a) the information has been requested from the landlord in a sales information request,

(b) the landlord does not possess the information when the request is made, and

(c) the landlord believes that the other person possesses the information.

(3) That person must provide the landlord with any of the information requested that is within that person’s possession.

(4) A person (“A”) must request information from another person (“B”) if—

(a) the information has been requested from A in a request under subsection (2) or this subsection (an “onward request”),

(b) A does not possess the information when the request is made, and(c)A believes that B possesses the information.

(5) B must provide A with any of the information requested that is within B’s possession.

(6) A person who is required to provide information under this section must do so before the end of a specified period beginning with the day on which the request for the information is made.

(7) A person who—

(a) has been given a sales information request or an onward request, and

(b) as a result of not possessing the information requested, does not provide the information before the end of a specified period beginning with the day on which the request is made, must give the person making the request a negative response confirmation.

(8) A “negative response confirmation” is a document in a specified form, and given in a specified manner, setting out—

(a) that the person is unable to provide the information requested because it is not in the person’s possession;

(b) a description of what action the person has taken to determine whether the information is in the person’s possession;

(c) any onward requests the person has made and the persons to whom they were made;

(d) an explanation of why the person was unable to obtain the information, including details of any negative response confirmation received by the person;

(e) any other specified information.

(9) A person who is required to give a negative response confirmation must do so before the end of a specified period beginning with the day after the day on which the period referred to in subsection (7)(b) ends.

(10) The appropriate authority may by regulations—

(a) provide that an onward request may not be made until the end of a particular period, or until another condition is met;

(b) provide for how an onward request is to be made;

(c) make provision as to the period within which an onward request must be made;

(d) provide for circumstances in which a duty to comply with a sales information request or an onward request does not apply;

(e) make provision as to how information requested in a sales information request or an onward request is to be provided;

(f) make provision for circumstances in which a period specified for the purposes of subsection (6), (7) or (9) is to be extended.

(11) Regulations under this section—

(a) are to be made by statutory instrument;

(b) may make provision generally or only in relation to specific cases;

(c) may make different provision for different purposes;

(d) may include supplementary, incidental, transitional or saving provision.

(12) A statutory instrument containing regulations under this section is subject to the negative procedure.

30M Charges for provision of information

(1) Subject to any regulations under subsection (2), a person (“P”) may charge another person for—

(a) determining whether information requested in a sales information request or an onward request is in P’s possession;

(b) providing or obtaining information under section 30L.

(2) The appropriate authority may by regulations—

(a) limit the amount that may be charged under subsection (1);

(b) prohibit a charge under subsection (1) in specified circumstances or unless specified requirements are met.

(3) If a landlord charges a tenant under subsection (1), the charge—

(a) is an administration charge for the purposes of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 (see paragraph 1(1)(b) of that Schedule), and

(b) is not to be treated as a service charge for the purposes of this Act.

(4) For the purposes of the provisions of this Act relating to service charges, the costs of—

(a) determining whether information requested in a sales information request or an onward request is in a person’s possession, or

(b) providing or obtaining information under section 30L,are not to be regarded as relevant costs to be taken into account in determining the amount of any variable service charge payable by any tenant.

(5) Regulations under this section—

(a) are to be made by statutory instrument;

(b) may make provision generally or only in relation to specific cases;

(c) may make different provision for different purposes;

(d) may include supplementary, incidental, transitional or saving provision.

(6) A statutory instrument containing regulations under this section is subject to the negative procedure.

30N Enforcement of sections 30L and 30M

(1) A person who makes a sales information request or an onward request (“C”) may make an application to the appropriate tribunal on the ground that another person (“D”) failed to comply with a requirement under section 30L or 30M in relation to the request.

(2) The tribunal may make one or more of the following orders—

(a) an order that D comply with the requirement before the end of a period specified by the tribunal;

(b) an order that D pay damages to C for the failure;

(c) if D charged C in excess of a limit specified in regulations under section 30M(2)(a), an order that D repay the amount charged in excess of the limit to C;

(d) if D charged C in breach of regulations under section 30M(2)(b), an order that D repay the amount charged to C.

(3) Damages under subsection (2)(b) may not exceed £5,000.

(4) The appropriate authority may by regulations amend the amount in subsection (3) if the appropriate authority considers it expedient to do so to reflect changes in the value of money.

(5) Regulations under this section—

(a) are to be made by statutory instrument;

(b) may make provision generally or only in relation to specific cases;

(c) may make different provision for different purposes;

(d) may include supplementary, incidental, transitional or saving provision.

(6) A statutory instrument containing regulations under this section is subject to the negative procedure.

30P Interpretation of sections 30K to 30N

(1) In sections 30K to 30N—

“information” includes a document containing information, and a copy of such a document;

“landlord” includes—

(a) any person who has a right to enforce payment of a service charge;

(b) a RTM company within the meaning of Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (see section 73 of that Act);

“long lease” has the same meaning as in Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (see sections 76 and 77 of that Act);

“onward request” has the meaning given in section 30L(4)(a);

“sales information request” has the meaning given in section 30K(2);

“specified” means specified in, or determined in accordance with, regulations made by the appropriate authority.

(2)A reference in sections 30K to 30N to purchasing a long lease is a reference to becoming a tenant under the lease for consideration, whether by grant, assignment or otherwise, and references to selling a long lease are to be read accordingly.

(2) In section 172(1) of the CLRA 2002 (application to Crown of provisions of the LTA 1985), after paragraph (ac) (as inserted by section 35) insert—

“(ad) sections 30K to 30P of the 1985 Act (sales information requests),”.’”—(Lee Rowley.)

This new clause, to be inserted after NC9, would require a landlord to provide specified information to a tenant, in anticipation of the tenant selling their property, within a specified time and at a specified cost, and request that information from other parties.

Brought up, and read the First time.

[Lee Rowley]

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

[The Chair]

With this it will be convenient to discuss the following:

Government new clause 43—Estate management: sales information requests.

Government new clause 44—Effect of sales information request.

Government new clause 45—Charges for provision of information.

Government new clause 46—Enforcement of sections (Effect of sales information request) and (Charges for provision of information).

[Lee Rowley]

New clause 42 will introduce a requirement for a landlord to provide specific information requested by a leaseholder. That information is vital for a leaseholder to enable the sale of their property; it also provides the detail that a prospective purchaser needs to make an informed decision. Regulations will set out what information is to be provided, as well as a maximum timeframe and a maximum cost for providing that information. Regulations will further specify how a request must be made, how the requested information must be provided, in what circumstances a request can be refused and when the time period for its provision may be extended. The clause also sets out enforcement mechanisms, including the various orders that a tribunal may make such as requiring compliance, awarding damages and requiring the repayment of excessive fees.

Under the current system, there is no consistency for leaseholders, some of whom are left paying thousands of pounds and waiting months for this information. Some of them never receive the information at all. The clause will reduce the time that leaseholders have to wait to receive the information that they need, which should reduce delays in selling their properties. It will also make the selling process cheaper and less uncertain. I commend new clause 42 to the Committee.

--- Later in debate ---

[Barry Gardiner (Brent North) (Lab)]

I, too, welcome the new clauses, but I do so in the knowledge that they do not provide a perfect solution. My concern, and the question I put to the Minister, relates to situations such as the one that I outlined the other day. Where information is held by a series of Russian dolls, as it were, the ultimate one of which is located in the Cayman Islands—as is the case with Wembley Central Apartments in my constituency—what ultimate redress do the leaseholders have? Damages does not get to the nub of the problem.

[Lee Rowley]

As the hon. Member has outlined, we spoke about this issue on Thursday. I have a lot of sympathy for the point that he makes, and I think we agreed that we would explore it further; I was going to write to the hon. Gentleman and the Committee, if I recall correctly. He is right to raise and highlight that point. Where we can make further progress, we should try to do so. As I know he will appreciate, there is ultimately a challenge when entities move out of jurisdictions, but that should not mean that we should not have a look at whether we can make things better, if not perfect.

Question put and agreed to.

New clause 42 accordingly read a Second time, and added to the Bill.

New Clause 43

Estate management: sales information requests

“(1) An owner of a managed dwelling may give a sales information request to the estate manager.

(2) A ‘sales information request’ is a document in a specified form, and given in a specified manner, setting out—

(a) that the owner is contemplating selling the dwelling,

(b) information that the owner requests from the estate manager for the purpose of the contemplated sale, and

(c) any other specified information.

(3) An owner of a managed dwelling may request information in a sales information request only if the information is specified in regulations made by the appropriate authority.

(4) The appropriate authority may specify information for the purposes of subsection (3) only if the information—

(a) relates to estate management, estate managers, estate management charges or relevant obligations, and

(b) could reasonably be expected to assist a prospective purchaser in deciding whether to purchase a dwelling.

(5) The appropriate authority may by regulations provide that a sales information request may not be given until the end of a particular period, or until another condition is met.

(6) In this section and sections (Effect of sales information request) to (Enforcement of sections (Effect of sales information request) and (Charges for provision of information))—

(a) a reference to purchasing a dwelling is a reference to becoming an owner of the dwelling, and references to selling a dwelling are to be read accordingly;

(b) ‘sales information request’ has the meaning given in subsection (2);

(c) ‘specified’ means specified in, or determined in accordance with, regulations made by the appropriate authority.

(7) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)

This new clause, to be inserted after NC14, would provide for the owner of a managed dwelling to give a sales information request to the estate manager in anticipation of selling the dwelling.

Brought up, read the First and Second time, and added to the Bill.

New Clause 44

Effect of sales information request

“(1) An estate manager who has been given a sales information request by the owner of a managed dwelling must provide the owner with any of the information requested that is within the estate manager’s possession.

(2) The estate manager must request information from another person if—

(a) the information has been requested from the estate manager in a sales information request,

(b) the estate manager does not possess the information when the request is made, and

(c) the estate manager believes that the other person possesses the information.

(3) That person must provide the estate manager with any of the information requested that is within that person’s possession.

(4) A person (‘A’) must request information from another person (‘B’) if—

(a) the information has been requested from A in a request under subsection (2) or this subsection (an ‘onward request’),

(b) A does not possess the information when the request is made, and

(c) A believes that B possesses the information.

(5) B must provide A with any of the information requested that is within B’s possession.

(6) A person who is required to provide information under this section must do so before the end of a specified period beginning with the day on which the request for the information is made.

(7) A person who—

(a) has been given a sales information request or an onward request, and

(b) as a result of not possessing the information requested, does not provide the information before the end of a specified period beginning with the day on which the request is made,

must give the person making the request a negative response confirmation.

(8) A ‘negative response confirmation’ is a document in a specified form, and given in a specified manner, setting out—

(a) that the person is unable to provide the information requested because it is not in the person’s possession;

(b) a description of what action the person has taken to determine whether the information is in the person’s possession;

(c) any onward requests the person has made and the persons to whom they were made;

(d) an explanation of why the person was unable to obtain the information, including details of any negative response confirmation received by the person;

(e) any other specified information.

(9) A person who is required to give a negative response confirmation must do so before the end of a specified period beginning with the day after the day on which the period referred to in subsection (7)(b) ends.

(10) The appropriate authority may by regulations—

(a) provide that an onward request may not be made until the end of a particular period, or until another condition is met;

(b) provide for how an onward request is to be made;

(c) make provision as to the period within which an onward request must be made;

(d) provide for circumstances in which a duty to comply with a sales information request or an onward request does not apply;

(e) make provision as to how information requested in a sales information request or an onward request is to be provided;

(f) make provision for circumstances in which a period specified for the purposes of subsection (6), (7) or (9) is to be extended.

(11) In this section and sections (Charges for provision of information) and (Enforcement of sections (Effect of sales information request) and (Charges for provision of information)), ‘onward request’ has the meaning given in subsection (4)(a).

(12) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)

This new clause, to be inserted after NC43, would require an estate manager who has been given a sales information request to provide the information requested, and request that information from other parties.

Brought up, read the First and Second time, and added to the Bill.

New Clause 45

Charges for provision of information

“(1) Subject to any regulations under subsection (2), a person (‘P’) may charge another person for—

(a) determining whether information requested in a sales information request or an onward request is in P’s possession;

(b) providing or obtaining information under section (Effect of sales information request).

(2) The appropriate authority may by regulations—

(a) limit the amount that may be charged under subsection (1);

(b) prohibit a charge under subsection (1) in specified circumstances or unless specified requirements are met.

(3) If an estate manager charges the owner of a managed dwelling under subsection (1), the charge—

(a) is an administration charge for the purposes of this Part, and

(b) is not to be treated as an estate management charge for the purposes of this Part.

(4) For the purposes of this Part, the costs of—

(a) determining whether information requested in a sales information request or an onward request is in a person’s possession, or

(b) providing or obtaining information under section (Estate management: sales information requests),

are not to be regarded as relevant costs to be taken into account in determining the amount of any estate management charge.

(5) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)

This new clause, to be inserted after NC44, would regulate charges for the provision of information under NC44.

Brought up, read the First and Second time, and added to the Bill.

New Clause 46

Enforcement of sections (Effect of sales information request) and (Charges for provision of information)

“(1) A person who makes a sales information request or an onward request (‘C’) may make an application to the appropriate tribunal on the ground that another person (‘D’) failed to comply with a requirement under section (Effect of sales information request) or (Charges for provision of information) in relation to the request.

(2) The tribunal may make one or more of the following orders—

(a) an order that D comply with the requirement before the end of a period specified by the tribunal;

(b) an order that D pay damages to C for the failure;

(c) if D charged C in excess of a limit specified in regulations under section (Charges for provision of information)(2)(a), an order that D repay the amount charged in excess of the limit to C;

(d) if D charged C in breach of regulations under section (Charges for provision of information)(2)(b), an order that D repay the amount charged to C.

(3) Damages under subsection (2)(b) may not exceed £5,000.

(4) The appropriate authority may by regulations amend the amount in subsection (3) if the appropriate authority considers it expedient to do so to reflect changes in the value of money.

(5) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)

This new clause, to be inserted after NC45, would provide for the enforcement of obligations under NC44 and NC45.

Brought up, read the First and Second time, and added to the Bill.

New Clause 1

Abolition of forfeiture of a long lease

“(1) This section applies to any right of forfeiture or re-entry in relation to a dwelling held on a long lease which arises either—

(a) under the terms of that lease; or

(b) under or in consequence of section 146(1) of the Law of Property Act 1925.

(2) The rights referred to in subsection (1) are abolished.

(3) In this section—

“dwelling” means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, or outhouses and appurtenances belonging to it or usually enjoyed with it;

“lease” means a lease at law or in equity and includes a sub-lease, but does not include a mortgage term;

“long lease” has the meaning given by sections 76 and 77 of the Commonhold and Leasehold Reform Act 2002.” —(Matthew Pennycook.)

This new clause would abolish the right of forfeiture in relation to residential long leases in instances where the leaseholder is in breach of covenant.

Brought up, and read the First time.

[Matthew Pennycook]

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

It is a pleasure to continue our line-by-line proceedings with you in the Chair, Sir Edward. For the sake of probity, simply because I will make reference to the organisation’s work, I once again declare that my wife is the joint chief executive of the Law Commission.

The reason for tabling the new clause is simple: forfeiture is a wholly disproportionate and horrifically draconian mechanism for ensuring compliance with a lease agreement, and it needs to be abolished through the Bill. To remind the Committee, the law of forfeiture gives the landlord the right, following a breach of a clause in the lease or an unpaid debt of £350, or a lesser sum if it has been outstanding for more than three years, to terminate the lease, regain possession of the property and pocket the unmerited windfall gain that would accrue from its sale.

Not all forfeiture actions relate to trivial breaches—some are made in response to serious transgressions of a covenant in a lease, such as instances of persistent and egregious antisocial behaviour—but many are initiated for entirely trivial breaches, such as nominal ground rent or service charge arrears. The current laws of forfeiture render it entirely possible, for example, for a tenant to lose possession of a £500,000 flat or house for a debt of as little as £351, or even £15 if unpaid for more than three years, with the landlord keeping the entire difference between the value of the property and the debt owed.

--- Later in debate ---

[Rachel Maclean (Redditch) (Con)]

It is a pleasure to serve under your chairmanship, Sir Edward. I wish to place on the record my support for the eventual removal of this most feudal and abusive practice—one of the worst examples in this whole system—and I look forward to hearing the Minister’s plans to eventually do that.

In response to my hon. Friend the Member for North East Bedfordshire, I just want to let him know that there is ample evidence that this abusive practice has had a deleterious impact on decent people who have bought their properties in good faith. Take, for example, the evidence from Free Leaseholders, which represents many people in this position. The organisation says,

“Forfeiture has no place in a modern housing market”

and that it gives

“the freeholder landlord complete whip hand over his ‘tenant’.”

It is a “draconian remedy” that really has very few comparators anywhere else. Unlike mortgage foreclosure, where there is a balancing payment at the end of it, someone loses all the equity in their own home. That means they could actually lose, for example, a flat worth half a million pounds because of non-payment of a £5,000 bill. The freeholder would seize that flat, take back the lease, and make a windfall irrespective of the size of the contested charge. It kicks in at just £350.

There are alternative ways of resolving these debts available in our system. For example, the freeholder could sue for an injunction. He does not need forfeiture and the windfall to enable him to carry out good management of the block. The Levelling Up, Housing and Communities Committee looked at this issue and also recommended its abolition, on the grounds that it puts the freeholders in an unassailable position of strength in disputes. Once again, it is about that power imbalance, which we have highlighted all the way through this Committee. We should absolutely take up the Law Commission’s proposals to remove forfeiture. It is true that it is relatively rare, with perhaps an estimated 80 to 90 cases every year, but it is the threat that hangs over people—people who are not legal experts, fighting a very uneven battle against these big boys with deep pockets and plenty of lawyers on speed dial.

As well as the evidence I have just referred to, I want to represent again the fantastic testimony from the National Leasehold Campaign, which I think has 29,000 members. It has described again and again the impact of this sword of Damocles hanging over its members who have bought these properties in good faith, doing their best to navigate this thicket of rules, with the debt completely stacked against them. I look forward to hearing about the pathway that I am sure the Minister will set out for us, where we can remove this element from our laws once and for all.

[Lee Rowley]

I am grateful to the hon. Member for Greenwich and Woolwich for this new clause and for the opportunity to debate it. The hon. Gentleman set me a challenge at the end of his speech. He said he hoped I would not resist the new clause out of hand—I will not resist it out of hand, but I may resist it. In all seriousness, this is an important part of the discussion and I do not disagree with what the hon. Member for Greenwich and Woolwich and my hon. Friend the Member for Redditch said—I absolutely accept it. I am happy to confirm that the Government are aware of the strength of feeling on this issue and sympathetic to some of the objectives of the amendment. It is absolutely the case that forfeiture is an extreme measure. That is why we committed on Second Reading to look at this.

On the question from my hon. Friend the Member for North East Bedfordshire, it is difficult to get numbers. As has been outlined by others, the principle is clearly a real problem. The disproportionate nature of the outcome completely outweighs the likely loss being pursued. The Leasehold Knowledge Partnership, or one of the other witnesses, suggested in oral evidence that there were 80 to 90 forfeitures a year, but the Government do not have specific data to validate that at this stage. We understand that most of the threats are defused during the process—particularly if a mortgage company is involved, it tends to, in extremis, step in and offer to put the amount of money on to the mortgage or equivalent. The evidence base is and will always be challenging, but we absolutely accept that the principle is disproportionate and unreasonable.

However, as with so many of these clauses and elements of law, there is the question of how to make something in the system better while still ensuring the ability to balance all the things underneath. That is probably one of the reasons why this place has returned to this issue so often over the decades—it is not just because the Government may not respond in time, as the hon. Member for Greenwich and Woolwich indicated. This new clause is definitely well intentioned. We are sympathetic, but we do not necessarily believe in the full abolition of forfeiture without some form of replacement for some elements of it that may still have validity—not the forfeiture itself, but a recognition that people cannot just not pay things without some form of process to address that. That is one of the reasons we cannot accept this amendment at the moment.

However, I do not condone the abuse of forfeiture. I want to be absolutely clear that we are listening very carefully to the arguments being made. We have already committed to look at this again, and we are currently looking at it. I hope we will be able to say more at future stages of the Bill. With those reassurances, I hope the hon. Member for Greenwich and Woolwich will consider withdrawing his clause.

[Matthew Pennycook]

That was a slightly frustrating response from the Minister. I had hoped for a little more. I am glad that he thinks the new clause is well intentioned and sympathises with some of its objectives. From the Opposition’s point of view, as with rent charges, another example of draconian and wholly disproportionate Victorian-era property law, we need to cut the knot and get rid of these provisions entirely. As I said, we can have a debate on what we replace them with. We are very clear that there must be a replacement. There must be an effective means of ensuring compliance with a lease agreement, but it must be appropriate and proportionate to the breach in question. We all agree that forfeiture is not proportionate or appropriate to the breach, so why retain it? What I did not get from the Minister, but had hoped for, was a clear indication that that is the Government’s intent, at whatever stage of the Bill.

I suspect this is one of those new clauses that the Minister has resisted—perhaps not out of hand, but resisted none the less—but that we may see back in a different form at a later stage with the Government’s seal of approval. However, I would like to make very clear our strength of feeling on the matter, and I will therefore press the clause to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Lee Rowley]

I thank the hon. Gentleman for his new clause which, as he has indicated, seeks to require the establishment of leaseholder-owned management companies for all new leasehold flats. I understand that his intention is to ensure that, by default, all leaseholders of new flats would be responsible for the management of their buildings. I support the well-intentioned desire to give more homeowners control over the management of their buildings. The Bill as a whole is intended to do that, and I hope everybody accepts that it is moving in the right direction.

As the hon. Gentleman knows, existing leaseholders can already use the right to manage to take over management responsibility for their building. It is an established no-fault right that allows leaseholders to take over management responsibility when a majority of them wish to do so. The Bill accepts and implements key elements of the Law Commission recommendations that broaden access to the right to manage and reduce leaseholders’ costs when they make a claim. The Bill gives leaseholders the right to take control over their building, but it does not compel those who do not wish to. There is an important point there: I understand the intentions behind the new clause, but there is a question about compulsion and there may be a question about operation if some leaseholders do not wish to step up. For that reason, the requirement would not easily apply in some scenarios and a blanket requirement to establish such companies is probably not appropriate.

Although I accept, understand and sympathise with the intention of the new clause, I am afraid that we will resist it because there are times when it would not be appropriate for it to apply, and we should not change the law on that basis.

[Matthew Pennycook]

I am disappointed by that response from the Minister, as he would expect. We very much agree that the Bill is moving in the right direction, but we do not think it goes far enough for two reasons, which I will reiterate to help the Committee to understand why we feel strongly about this issue. Yes, the right to manage is an established right. The Bill makes provisions to enhance and expand access to RTM, but the RTM application process comes after an arduous and costly legal process. We are saying that, as a matter of right, residents in new build blocks of flats would have an RMC put in place and a share of it, without that cost. That is one point.

There is a more fundamental difference of principle, which is that if we are serious about reinvigorating commonhold, we need a number of steps. We need the legal changes that are recommended by the Law Commission, and we need to do those as one process, not in a partial way. However, there are other non-legislative policy changes that we need to make if we are to pave the way for commonhold. This new clause is one of them, and we feel quite strongly that it should be included in the Bill.

The Minister argued that there may be limited cases in which a mandatory RMC is not appropriate. If the Government want to bring forward their own amendment to provide for general RMCs across the board with limited exceptions, they are more than welcome to do so. However, we feel strongly, on a point of principle, that we should take this step alongside providing a share of the freehold, which I will argue for when I speak to new clause 29. Given our strength of feeling on this issue, as with the previous new clause, I will press this one to a vote.

Question put, That the clause be read a second time.

--- Later in debate ---

[Matthew Pennycook]

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

I will be relatively brief in speaking to the new clause, because I trust that it is self-explanatory, and we believe that the case for it is robust and well understood. Part 4 of the Bill, which we have already considered, will give residential freeholders on private and mixed-tenure estates rights to challenge the reasonableness of estate management charges and to hold estate management companies to account that are equivalent to those of leaseholders, but it does not give those same residential freeholders the right to take over the management functions on their estate.

We appreciate the concern among some that the right to manage would be too complex and onerous in a freehold estate setting, but it is only a right; it is not a requirement that it be exercised. We believe that there is evidence of an appetite among residential freeholders not only to be able to change a poorly performing or exploitative estate manager, for which part 4 provides, but to have more direct control of the management of their estates. We also believe that it is right in principle that there is parity between residential leaseholders and freeholders when it comes to the right to manage. New clause 5 simply seeks to provide them with that right.

In their June 2019 response to the 2018 consultation on reforms to the leasehold system in England, the Government committed to considering the implications of introducing a right to manage for residential freeholders, as part of their wider commitment to ensuring that leaseholders and residential freeholders enjoy equivalent rights. The Secretary of State made it clear on Second Reading that this Committee should look at the issue, as well as the issue of the abuse of forfeiture. On that occasion, the hon. Member for Redditch went even further. She stated:

“I know that the Government intend to introduce a right to manage for freeholders”.—[Official Report, 11 December 2023; Vol. 742, c. 677.]

We hope that she is right and that that remains the Government’s intent, but there are no Government amendments that would incorporate the power to establish a right to manage regime for freeholders on privately managed estates. New clause 5 would do so, and I hope the Minister will accept it.

[Lee Rowley]

I am grateful to the hon. Gentleman for tabling the new clause.

Let me separate my remarks into two parts. First, am I relatively sympathetic to the hon. Gentleman’s point? The answer is yes: there is a strong case for the measure. It has not been brought forward to date, and we will have to see whether it is possible to do so in the future. I cannot guarantee that, but we are looking at it and listening carefully. I understand the hon. Gentleman’s point, and he made a strong case for it. We will not be able to do everything that we have said throughout this process, in the end, but I assure him that we are interested in this potential area.

However, we will resist the new clause, not because it is the convention to do so but because we genuinely think that it is not the right measure, even if we did agree with the principle. To go back to the Henry VIII powers discussion, this is probably an area in respect of which, if we were to do something—again, there are no guarantees—we would do it on the face of the Bill.

[Richard Fuller]

I am listening carefully to the Minister, as I did to the shadow Minister. The current Minister says he is sympathetic to the intentions, but I take his point that it is the wrong new clause, so I will oppose it if it is pressed to a vote. However, the shadow Minister said that the Minister’s predecessor, my hon. Friend the Member for Redditch, said on the Floor of the House that she was sympathetic to the measure. That is two up. Will the Minister outline what the impediments might be? Will he give some reassurance that by the time we get to Report the Government may have turned sympathy into action? By the way, I think it is empathy, not sympathy.

[Lee Rowley]

My hon. Friend makes a number of salient points—

[Barry Gardiner]

And puts you on the spot.

[Lee Rowley]

Indeed—so let me see how to get out of this one. Out of principle, from a Conservative perspective, we would want people to have choice about how they approach such things. It is also the case that there is an additional operator, which is the person who owns the capital or the asset. We need to consider that carefully. Having started conversations with officials in the Department, I think there is a challenge around complexity. There is always a challenge with complexity; that is not an argument in itself but a recognition of the reality. I recognise that there are people in this room with much more experience than me on this issue, and hope colleagues will take what I say in the spirit in which it is meant. There will be a point at the end of this process when the sheer number of additional things that have been requested mean that there will need to be prioritisation.

This is a good Bill, and we should not take away from that fact—I think everybody present acknowledges that—but as the Secretary of State said on Second Reading, where we can improve it, we will seek to do so. I confirm that we are looking at this issue in more detail and hope we will be able to say more in the Bill’s following stages, if that is possible—I emphasise the “if”, with no guarantees. I urge the hon. Member for Greenwich and Woolwich, if he is willing, to withdraw his new clause, solely on the basis that if something happens in the future, the provisions should be in primary legislation, not introduced under Henry VIII powers.

--- Later in debate ---

We have therefore deliberately not sought to compel the Government to bring each and every one of the recommendations made by the working group into force on Royal Assent. Instead, new clause 25 would give the Government two years to implement the working group’s proposals as far as they relate directly to matters in the scope of the Bill, with a requirement to report on progress to that end after 12 months to ensure that sufficient progress is being made. We think that our new clause is a necessary and reasonable measure. I urge the Minister to accept it.

[Lee Rowley]

I will not detain the Committee particularly long on this provision. I regret that we will not be able to accept new clause 25, for two reasons. First, I accept that people come down in different places on the use of broad Henry VIII-type powers, but we are not sure that those would be proportionate here. This measure concerns a considerable framework that would require a significant level of scrutiny to make it work. We are not convinced that it would be agreeable or acceptable to the Delegated Powers and Regulatory Reform Committee, either.

Secondly, the new clause relates to an area that has been under debate for a number of years, as the hon. Member for Greenwich and Woolwich has outlined, and we think that it is without the scope of the Bill. It is a significant area on which further consideration is needed, and we do not think that there is space for that among all the other discussions. That will ultimately be a matter for the House to determine, but the Government do not think that this is the place to do it, given its significance and given the significance of the other things that we are trying to bring forward in the Bill.

[Matthew Pennycook]

I expected a little more from the Minister, because the Government have accepted in principle that property agents need to be regulated. We think it important that this matter be discussed in connection with this Bill, and that some form of regulation be introduced. As I say, the effective functioning of many of the provisions in this Bill will rely on the standard of managing agents being driven up, and on substandard agents being driven out of the market.

At the moment, all the Minister is saying is that the lack of an overarching regulatory framework in this area is fine. The Government have had four and a half years and are comfortable with taking many more years to come to consider this matter. From our point of view, that is not good enough. The Government have had the working group’s report for some time. They should have made better progress in implementing at least some of its recommendations, if not the vast majority of them. I will press new clause 25 to a vote.

[Lee Rowley]

I should put it on record—just in case, although it was many years ago—that I used to be an estate agent. I should probably make that clear.

[The Chair]

Dear me—even lower than a politician.

[Lee Rowley]

Indeed, and via banking.

[The Chair]

Well, that’s an admission.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Matthew Pennycook]

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

I do not intend to press new clause 26 to a vote, because it is very much a probing amendment. My remarks on it will be brief because it is extremely simple and straightforward.

Leasehold enfranchisement and the right to manage are extremely complex areas of law. There are at least eight Acts relevant to the rights of residential leaseholders, namely the Leasehold Reform Act 1967, the Landlord and Tenant Acts 1985 and 1987, the Housing Act 1988, the Local Government and Housing Act 1989, the Leasehold Reform, Housing and Urban Development Act 1993, the Commonhold and Leasehold Reform Act 2002 and the Building Safety Act 2022. There are also two Acts relevant to residential freeholders on private and mixed-tenure estates, namely the Rentcharges Act 1977 and the Law of Property Act 1925, both of which we have debated extensively.

This limited Bill has made significant changes to almost all of those Acts. If and when it receives Royal Assent, it will add a further layer of complexity and interpretation to a legislative landscape that is perplexing even to those with legal training. The law as it relates to residential and freehold leaseholders is crying out for consolidation. The statute law must be made clearer, shorter and more accessible so that those who work with the law, are concerned with making it or need to access or use it can do so more easily.

This is not a consolidation Bill, but the Opposition believe that it would be useful to give the Secretary of State the power to amend a number of the Acts to which I referred, so as to facilitate their consolidation. I trust that the Minister will see the benefit of incorporating such a power into the Bill, and I hope that he will accept it.

[Lee Rowley]

I am grateful to the hon. Member for Greenwich and Woolwich for moving new clause 26. He is right that this is an extremely complicated area of law and that there is a significant amount of interaction and overlap between the relevant legislation, which has built up over many decades. He is also right that there is a legitimate question to be asked about whether consolidation or spring cleaning of the relevant Acts is reasonable and proportionate. I am grateful to him and his party for seeking to provide the Government with additional powers to do so. The challenge is in whether that would be proportionate and whether the broad powers are necessary, even given the points that he made.

While I understand the points that the hon. Gentleman highlighted, the Government are taking a self-denying ordinance. We believe that such broad powers should be used only when absolutely necessary and that the test is not met in the case, so we will resist the new clause if the hon. Gentleman chooses to press it, although I hope that, as he indicated, he will not do so.

[Matthew Pennycook]

I commend the Minister for continuing to deny himself additional powers to do very sensible things. Notwithstanding that self-denying ordinance, I hope that he will at least take on board the point and give some further consideration to how we might tidy up the statute law in this area. It has been complex for all members of the Committee to understand. As I said, it is complex even for those with legal training, let alone those who need to access or use the law, whether or not it is through one of the means of redress we have been debating.

I hope that the Government will give some further thought to what might be done on the issue, but I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 27

Qualifying leases for the purposes of the remediation of building defects

“Section 119 of the Building Safety Act 2022 is amended by the insertion after subsection (4) of the following —

‘(5) The Secretary of State may, by regulations, amend subsection (2) so as to bring additional descriptions of lease within the definition of “qualifying lease”.’” —(Matthew Pennycook.)

This new clause would give the Secretary of State the power to bring “non qualifying” leaseholders within the scope of the protections of the Building Safety Act 2022.

Brought up, and read the First time.

--- Later in debate ---

I look forward to the Minister’s response to those questions and to the more fundamental issues raised by new clauses 27 and 28.

[Lee Rowley]

I am grateful to the hon. Members for Greenwich and Woolwich and for Brent North for the new clause and the contributions to the debate. I put on record how sorry I was to hear about Petworth Court, on which I was briefed overnight. It must have been a real challenge, and very scary for the residents of the property. I hope that we can move that on as quickly as we can. I am grateful for the efforts of London Fire Brigade and others, which ensured that no one came to any harm. It is a salutary reminder of the importance of the work that has been outlined by the hon. Members, which we all support.

The hon. Member for Greenwich and Woolwich asked me a number of detailed questions. We have had many exchanges on these issues in the past, so he will appreciate that this is a sensitive and detailed area, and one that we need to get right. The Building Safety Act 2022 made huge steps forward, and there have been many steps forward in the practical reality of building remediation. I want to ensure that we deal with those questions in turn and in the depth that they deserve. We will have different views on some of those questions. Take, for example, the perpetuity issue. Without going into detail, my answer is that all the buildings have pathways to remediation, so long as they choose one or, in extremis, an actor in the system forces them to take one, and that once the remediation has happened the perpetuity point should become moot and fall away. However, it is better that I write to the hon. Gentleman and the Committee on all those points in due course.

Putting those important matters aside, we come to the question of whether the Secretary of State should have specific powers to amend the definition of “qualifying”. This gets to the point of where the Secretary of State’s powers should lie, which is obviously a contested matter. It is one on which the Government have a clear view, which we have articulated, notwithstanding the challenges that that brings to some people who are impacted by it. That is better dealt with in primary legislation, rather than through the Secretary of State making changes or having the ability to make regular changes. On that basis, we will resist the new clause.

Let me turn to new clause 28 on buildings under 11 metres, in the name of the hon. Members for Greenwich and Woolwich and for Weaver Vale. I have taken a particular interest in buildings that are under 11 metres, and I and the hon. Gentlemen have had interactions on the issue in the past. There are specific issues about a small set of buildings that are under 11 metres. The previous Minister, my right hon. Friend the Member for Pudsey (Stuart Andrew), and I have made repeated commitments from the Dispatch Box, from as far back as 2022, to look into each and every one of those buildings, and we have done so. A number of them have been raised with us, and we are working through them and getting to the end of the processes.

I encourage any hon. Members with examples—and I see occasional repetitions in parliamentary questions—to raise them with the Department, as I know members of the Committee have, and we will see what we can do to move those cases on or get clarity that no works are required. With almost all under-11 metre buildings, when we get to the end of the discussion there are no works required under the PAS 9980 assessment. That is positive. There is a clear reality that buildings under 11 metres are less likely to be impacted by this issue, and we will resist the new clause on that basis.

As a result of the fire, as I said to the hon. Member for Brent North, it is important that we make progress. Significant progress has been made, and I am grateful to the hon. Member for Greenwich and Woolwich for his recognition of that. Every month, we see more buildings complete and more buildings starting the process. Where freeholders are willing to make their buildings safe, we have mechanisms and processes in place, both centrally and locally, to make sure that is happening; and I continue to see lots of progress. It will take time, but we are cognisant of the importance of moving fast, and we have certainly sped up over recent months.

[Matthew Pennycook]

I thank the Minister for his response. I will pass over his criticisms of the technical flaws of the new clauses. Their intent is very clear; we can debate whether primary or secondary legislation is the best means of achieving it. I think there is a point of disagreement on qualifying and non-qualifying leaseholders. On a point of principle, we think that the distinction is arbitrary and we should get rid of it. From the evidence I have seen across the country, we should also undoubtedly get rid of it on a practical basis. I do not have responsibility for building safety directly any more—my hon. Friend the Member for Weaver Vale does—but I continue to hear of cases where buildings with a significant proportion of non-qualifying leaseholders see remediation works stalled or held up entirely.

I have always conceded that buildings under 11 metres are small in number and that there is not a systemic issue, but because of the drafting of the Building Safety Act, there remains a problem about liability. In those cases where the Government certify that the buildings are unsafe and require remediation—as the Minister knows, I have a case in my constituency—the stage that we have got to, after many years, is that the Government ask the original developer to put them right. We do not know what lies behind that request or whether there is any enforcement of it, so we are at the same point that we were at many years ago.

We come back to the question, “What is the need for the distinction?” I would argue that if under-11 metre buildings are that small in number, that is all the more reason for opening them up to access for Government grants should they require that—where the developer will not remediate them voluntarily. But that is beside the point.

I thank the Minister for his willingness to provide me detailed answers to all five of the non-specific questions—that is very welcome—but on the point of principle raised by new clauses 27 and 28, there is a clear difference of opinion. I think it is worth us putting on record, again, our strong feelings about that, so I will push both new clauses to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Matthew Pennycook]

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

When making the case for new clause 2, which sought to ensure that all leases on new flats should include a requirement to establish and operate an RMC with each leaseholder given a share, I stressed that it was one of several ways by which we could lay the groundwork for a future where commonhold is the norm. New clause 29 seeks to press the Government to bring forward legislative options to enact another—namely, mandating that leaseholders in all new blocks of flats should automatically be granted a share of the freehold.

I want to be clear about what such a proposition entails. It is not an alternative to leasehold. If such a measure were brought into force, any leaseholder resident in a new block of flats would own both a lease and a share of the freehold. It would, in effect, ensure that all new blocks of flats were collectively enfranchised by default, without the need for leaseholders in them to go through the process of acquiring their freehold. The advantages of having a default share in the freehold is that it would give the leaseholder a direct say in what happens in their building, as is the case with those that have been collectively enfranchised. It would also provide for additional valuable rights, such as the right to a long lease extension on the basis of a peppercorn rent—or, in other words, the rights that will be accorded to existing leaseholders under clauses 7 and 8 but without the cost of paying a premium to the freeholder that is still required to exercise that modified right.

As we know, having flat owners with a share of freehold can cause tensions—for example, in agreeing how to proceed on crucial decisions such as whether to cover the costs of major works through service charges. That is why it is essential that proper management arrangements are in place as a matter of course, to reduce the likelihood of damaging disputes between neighbours, and why we proposed mandatory RMCs on new blocks of flats as a corollary to the new clause. Much like new clause 2, new clause 29 would also help give leaseholders greater control over their buildings and pave the way for commonhold as the default tenure.

Labour is unequivocal about the fact that commonhold is a preferable tenure to leasehold, in that it gives the benefits of freehold ownership to owners of flats without the burdensome shortcomings of leasehold ownership. As we have heard, the Law Commission made 121 recommendations on commonhold, designed to provide a legal scheme that would enable commonhold to work more flexibly and in all contexts. We share the concern expressed by Professor Nick Hopkins in our evidence sessions:

“With commonhold having failed once, there is a risk of partial implementation”—[Official Report, Leasehold and Freehold Reform Public Bill Committee, 16 January 2024, c. 39, Q84.]

of those recommendations and “a second false start” that could be “fatal” to the tenure. That is why we have not sought to persuade the Government to incorporate any subset of Law Commission commonhold recommendations into the Bill. We need to reform the legal regime for commonhold in one go, and Labour is committed to doing so if the British people give us the opportunity to serve after the next general election. Given your indication earlier, you are confident of that outcome too, Sir Edward.

We have also expressed a clear preference for commonhold to be the default tenure. That would be a policy decision distinct from the implementation of the Law Commission’s recommendations and would necessarily have to follow the legal scheme those recommendations would introduce. However, there will inevitably be a transitional period after the reformed legal regime for commonhold has been introduced, during which Government would need to consult thoroughly on the practicalities of making commonhold the default tenure for flats. The introduction of a mandatory share of freehold in all new blocks of flats, as proposed by the new clause, alongside the requirement to establish and operate an RMC with each leaseholder given a share, would be a sensible staging post on the path towards a commonhold future by making conversion to commonhold at a later date a far simpler process. We urge the Government to accept the new clause.

[Lee Rowley]

I am grateful to the hon. Gentleman for his new clause. As he has outlined, in share-of-freehold arrangements leaseholders will own the freehold in larger blocks; they are usually the shareholders of a resident management company from which directors are elected to manage the property. As such, there is no third-party landlord, but instead the leaseholders are themselves joint landlords. We appreciate that there are benefits to share-of-freehold arrangements, and obviously there is the opportunity for people, should they wish, to look at that when making decisions about the properties they live in.

Without seeking to detain the Committee, the reality is that although the new clause is well intentioned and understandable, it would be a significant building out of the Bill; it would be a significant additional framework. Again, it goes back to the point about the size of the Bill and exactly what it is able to do. I realise that we return to that often, and some colleagues in this room will wish us to go as far as we possibly can. That is understandable, but given the scale of the new clause—I realise that the hon. Gentleman probably will push it to a vote as a result of my comments—a pretty large and complicated legal framework would need to be put in place. I am afraid that at the current time it is challenging to have the space to do that, as much as I share the hon. Gentleman’s overall objective of trying to give people greater choice, and as a consequence we will resist the new clause.

[Matthew Pennycook]

I welcome the Minister’s response to the extent that he recognised the benefits of share of freehold. I am not surprised that he resists the new clause; there is no doubt that it would be a significant build-out of the Bill, as he put it. We hope that we will see other significant build-outs of the Bill and finally see a ban on new leasehold houses, as the Government have committed to, at some point. Maybe we will even get a couple of hours to debate that—who knows?

We think that this is an important provision that should be incorporated in the Bill for the reasons I have give, but mainly because—perhaps this is a point of disagreement between us and the Government—we think that we must be serious about paving the way for commonhold with the Bill and cannot leave everything to a future Government to enact. As I said, we should take some practical and specific steps to lay the groundwork for that future, which I think we all want to see. As we felt with mandatory RMCs, we feel that these two specific measures would enable us to go some way on that journey. For that reason, I will push the new clause to a vote—it will probably be the final one.

--- Later in debate ---

[Barry Gardiner]

I am grateful to my hon. Friend for the way in which he has introduced his new clause 30. We heard from witnesses the difficulty faced by leaseholders on larger developments in attaining that 50% participation threshold for the right to manage. It can be a more permissive regime than collective enfranchisement, wherein someone else’s property interests are being compulsorily purchased. Right to manage is just regulating the management of the building and ensuring democratic resident control of the managing agent and service charges.

We heard from Philip Rainey KC in the oral evidence, who said, almost 10 years ago, that the right to manage should be a no-fault right and it should not be caveated with the need to solicit half of the entire building. He suggested the 50% threshold should be reduced to 35%. We have heard leaseholders say that this is not enough, because the threshold is even harder to meet nowadays with high levels of buy to let and overseas leaseholder populations, as suggested by Harry Scoffin of Free Leaseholders, when he gave oral evidence to the Committee. This proposal could help leaseholders to bring their service charges under resident control and scrutiny.

That is the position for flat owners almost everywhere else in the world, including north of the border in Scotland. I believe that the Government should support the amendment from my hon. Friend the Member for Greenwich and Woolwich. If I were to hear any indication that the Government might be so inclined or that they would introduce a measure that would achieve the same effect, I would happily withdraw new clause 33.

[Lee Rowley]

After a number of days of often great agreement across the Committee, it is my job, unfortunately, to point out where we cannot agree, so I apologise for doing that again. The hon. Member for Greenwich and Woolwich has indicated that he is probing the Government with new clauses 30 and 31—at least, I hope he is. We understand the point that he is making, but we are seeking to apply the Law Commission’s recommendation that the participation level should remain at 50%. On that basis, we are not proposing to change that at this time. I do not think it is necessary to create the report, because we have taken a view within this legislation that—

[Matthew Pennycook]

Will the Minister give way?

[Lee Rowley]

I will, happily.

[Matthew Pennycook]

This may not be the case in the Minister’s constituency, but I have very large blocks of flats in my constituency that, as my hon. Friend the Member for Brent North has just made clear, consist of hundreds of buy-to-let flats and flats owned by overseas investors. Are the Government really content to say that in those cases—in large urban centres, these blocks are springing up all over the place—the barrier to collective enfranchisement and RTM acquisition is higher? Effectively, many of these leaseholders will be locked out of the rights in this Bill purely by the design and ownership arrangements in their building. Surely the Minister must recognise that there is a subset of buildings that will not enjoy the rights that the Bill provides for, and that the Government should look again at what can be done in those circumstances.

--- Later in debate ---

[Lee Rowley]

There is no doubt that there are challenges. There are always challenges with individual buildings, but there is a specific challenge here, which the hon. Gentleman has outlined. My hon. Friend the Member for Cities of London and Westminster (Nickie Aiken), who is not serving on this Committee, has outlined that to me, and I have had the privilege of talking to a number of her constituents who are impacted by the understandable challenges that the hon. Gentleman raised.

The question is not about the Government being unwilling to look at this in the future or unwilling to discuss this further in relation to the Bill. I know this is a probing amendment, but the narrow sense of the question is: should we be legislating to create reports? I am always reluctant to legislate in that way. I understand why the Opposition would do it and why the other place do it, all too often, in my view, but I am not sure I am keen on this happening, so the Government are keen to resist it on that basis. But on the broad point about whether we would return to this if it was not working, either in this discussion or more broadly, the answer is: of course—that would be a reasonable thing for the Government to do in the future.

I appreciate the points made by the hon. Member for Brent North about new clause 33, and I know that the measure is potentially in operation elsewhere. I hope that he will agree that, when a minority can make decisions, a whole heap of additional considerations and questions are opened up. At this stage, we remain of the view that the proportion should be 50%, and for those reasons we will oppose the new clause, should it be pressed to a vote.

[Matthew Pennycook]

I will end on an optimistic note, because I got enough from the Minister to suggest that he is conscious of the issue and is open to looking at it again, either in the context of the Bill or at a later date. Setting aside the precise drafting of the new clauses, which have allowed us to debate the issues, the Minister recognised that we may need to look at the substantive point again. We may well come back to this at a later stage of the Bill.

--- Later in debate ---

[Barry Gardiner]

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

I am very happy to move the new clause, which would amend the Commonhold and Leasehold Reform Act 2002 to adopt recommendation 5 of the Law Commission’s right to manage report. That would allow leaseholders in mixed-use buildings with shared services or an underground car park to exercise the right to manage.

We had some debate on this issue last week. I recall, from the time of the 2002 Act, that flatted developments—especially mixed-use blocks—had not taken off yet in England in the same way as they have over the past 22 years. Given the proliferation of mixed-use buildings, the paradigms of the 2002 Act are therefore now outdated and unfair. Developers have sought to use the Act to secure the exclusion of leaseholders on the basis of shared services. If the Government do not move on the issue of shared services, many of the leaseholders in mixed-used buildings who would otherwise have benefited from the uplift in the non-residential limit from 25% to 50%—which, as I said last week, I welcome—will still not qualify for the right to manage or for enfranchisement.

We heard from the founders of the National Leasehold Campaign and from Free Leaseholders on this point. It was clear from the evidence that the presence of a plant room or underground car park alone can disqualify leaseholders from appointing their own managing agent and controlling the service charges, which they already have to pay but do not have any influence over.

The Law Commission did a great deal of work on the right to manage. It stated:

“We recommend that premises should be eligible for the RTM if they are a building or part which is reasonably capable of being managed independently. This means that if leaseholders cannot demonstrate that their premises are either a self-contained building or self-contained part of a building, the RTM will still be available if the premises are nevertheless a building or part which is reasonably capable of being managed independently. This might be straightforwardly demonstrated where parts of a building are already subject to separate management arrangements.”

That is the Law Commission’s case, and it looked into this with great care. It said:

“We think this will lead to fewer Tribunal cases and where there are still disputes the focus will instead switch to whether the premises can properly be managed autonomously, rather than their physical attributes.”

So I plead the backing of the Law Commission; I plead the common sense of some of the foremost jurors of our age. I am sure that the Minister will take on board their wisdom, if not mine.

[Lee Rowley]

I am grateful to the hon. Member for Brent North for moving the new clause. The Government support the aim of the amendment to improve leaseholders’ rights. As he indicates, we are taking forward key recommendations of the Law Commission to do that. The Bill takes forward the most significant measures to increase access to the right to manage and makes it simpler and cheaper for leaseholders to make a claim.

To implement the wider recommendations, the Government need to proceed carefully and undertake further work to ensure that the regime will operate satisfactorily. The Government will keep the remaining recommendations from the Law Commission’s right to manage report under consideration following the implementation of the Bill’s provisions. I thank the hon. Member for bringing forward the amendment, but I hope that because the most significant measures have already been introduced, he may be convinced enough not to push the new clause to a vote.

[Barry Gardiner]

With that very reasonable response, I am happy to beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 34

Commencement of section 156 of the CLRA 2002

“(1) Section 181 of the CLRA 2002 is amended as follows.

(2) In subsection (1), after ‘104’ insert ‘, section 156’.

(3) After subsection (1) insert—

‘(1A) Section 156 comes into force at the end of the period of two months beginning with the day on which the Leasehold and Freehold Reform Act 2024 is passed.’”—(Barry Gardiner.)

This new clause would bring into force a requirement of the Leasehold and Freehold Reform Act 2024 that service charge contributions be held in designated accounts.

Brought up, and read the First time.

[Barry Gardiner]

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

New clause 34 would bring into force the requirement that service charge contributions be held in designated accounts. The new clause seems like a quick win for the Government: it would boost the security of leaseholder funds and would implement a policy that was in the Commonhold and Leasehold Reform Act 2002 which, unusually—22 years later—has still not been brought into force.

We have heard from witnesses such as Martin Boyd at the Leasehold Knowledge Partnership and Andrew Bulmer at the Property Institute, who have signalled support for such a policy. I understand that the British Property Federation has been actively lobbying for section 156 of the CLRA 2002 to be enacted since at least October 2012, so I hope that the Minister will see the new clause as eminently reasonable and will be prepared to comply.

[Lee Rowley]

Landlords and managing agents hold significant sums of leaseholder money, and it is right that they should be held to account for ensuring that such money must be managed effectively, as the hon. Member for Brent North indicates. Those who hold service charge moneys must hold them in trust, and the moneys must be deposited at a bank, building society or financial institution that is regulated by the Financial Conduct Authority. This ensures that those moneys can be used only for their intended purpose and that they are treated separately from the landlord’s other assets. This approach seeks to provide protection.

As the hon. Gentleman indicated, the effect of his new clause would be to commence section 156 of the CLRA 2002. The Government are not convinced that it is necessary. Procedurally, primary legislation is not required. I know that the hon. Gentleman will say, “Well, you’ve had the primary legislation for a significant time, so I’m giving you help to get it through,” but it can be done through secondary legislation, and I am afraid that we would seek to move it back into that domain. There is a perfectly reasonable discussion to be had about whether this provision is enacted, but I do not think that we need this primary challenge in order to continue that debate.

[Barry Gardiner]

Once bitten, twice shy. We were promised this measure in 2002. I am not convinced that I should accept the same blandishments once again, so I am afraid that I really do want to push this one to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Richard Fuller]

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

New clause 35 seeks further to improve the rights of those who will be liable for estate management charges. We know from written and oral evidence that people do not know what they are getting into right at the start of the purchase of a property. My clause asks the Government to make it clear by regulations that purchasers of properties who will get management charges are notified about them. It would ensure that people have access to the latest set of accounts, enabling them not only to understand what charges may be due, but to see what liabilities there were in the past.

[Lee Rowley]

I am grateful to my hon. Friend the Member for North East Bedfordshire for moving new clause 35. I share his concern that purchasers should know about estate management charges; we talked a little about that issue in our sitting this morning.

There is nothing worse than facing a bill that we know nothing about at a time when we can do nothing about it. That is why the Government have been working with the national trading standards estate and letting agency team to develop guidance for property agents on what constitutes material information. The information must be included in property listings to meet the obligations under the Consumer Protection from Unfair Trading Regulations 2008. Estate management charges are considered material if they will have an impact on a decision to purchase. That should mean that purchasers get information on the expected level of estate management charges when they see the property particulars before they even view the property, let alone make an offer.

In addition to the measures that we discussed this morning, we are seeking to include in the Bill a requirement that freehold estate management information be provided to potential sellers, meaning that conveyancers acting on behalf of those sellers can quickly get the detailed information that they need to provide to potential purchasers. That could include accounts, if the estate manager is a resident-owned company, as well as any previous or future charges. With that reassurance in mind, I hope that my hon. Friend will consider withdrawing his new clause.

[Richard Fuller]

I think that that reassurance has been provided. The particular issue is that when people buy these homes, the solicitors are usually appointed by the people selling them. It is important that the Minister thinks carefully about that, and it sounds very much as if he is doing so. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 36

Asbestos remediation

“(1) The Leasehold Reform, Housing and Urban Development Act 1993 is amended as follows.

(2) After section 37B, insert—

‘37C Asbestos remediation

(1) This section applies where a claim to exercise the right to collective enfranchisement in respect of any premises is made by tenants of flats contained in the premises and the claim is effective.

(2) The landlord must cause a survey of the premises to be undertaken by an accredited professional to ascertain whether asbestos is, or is liable to be, present in those parts of the premises which the landlord is responsible for maintaining.

(3) Where the survey required by subsection (2) reveals the presence of asbestos, the landlord must, at the landlord’s cost, arrange for its safe removal.

(4) If the removal of asbestos required by subsection (3) is not carried out before the responsibility for maintaining the affected parts transfers to another person under the claim to exercise the right of collective enfranchisement, the landlord is liable for the costs of its removal.’”—(Barry Gardiner.)

Brought up, and read the First time.

[Barry Gardiner]

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

The Minister will be relieved to know that this is genuinely a probing new clause, which I am pleased to move on behalf of my right hon. Friend the Member for East Ham (Sir Stephen Timms). He is not a member of the Committee, but he certainly wishes to raise the issue on Report.

New clause 36 would address the problems relating to enfranchisement when asbestos has been found, or is liable to be found, in the structure of a building. It requires that a survey be done prior to any enfranchisement process, and sets out that the landlord would be responsible for the remediation if asbestos should need to be cleared from the building. I am laying out the new clause before the Committee so that the Minister can set out his thinking about such problems in buildings, in the full knowledge that my right hon. Friend the Member for East Ham will speak to it on Report.

[Lee Rowley]

I thank the hon. Member for Brent North for moving the new clause. I heard the right hon. Member for East Ham make his case clearly on Second Reading, and I asked officials at the Department to go and look at it. I will read this into the record for their benefit and that of the right hon. Gentleman.

The Government recognise the devastating impact that asbestos-related disease has on those who are exposed and on their families, and we are committed to ensuring that the risk of asbestos exposure is properly managed. New clause 36 would either duplicate existing UK law or change the well-established evidence-based policy in this area.

Specifically, proposed new subsection (3) would mostly duplicate the existing duty in regulation 4 of the Control of Asbestos Regulations 2012 for landlords to survey the common areas of their property, where they are responsible for maintenance. It is true that there is no current requirement for the survey to be done by an accredited professional. That is partly because currently only organisations, not individuals, can be accredited to carry out surveys. The Health and Safety Executive is carrying out research to see whether changes to the accreditation of surveyors would be beneficial. That is in response to a recommendation from the recent inquiry into asbestos by the Work and Pensions Committee, chaired by the right hon. Member for East Ham.

Proposed new subsection (3) would be a significant departure from current health and safety policy regarding asbestos. It could increase the risk of exposure to asbestos: it could create a situation in which asbestos was removed, irrespective of whether it was in good condition. Evidence shows that any removal of asbestos is difficult and inevitably involves disturbing asbestos fibres and making them airborne. In some cases, asbestos can be removed only if there is significant and highly invasive work to the fabric of the building. For that reason, the HSE’s long-held view is that asbestos that is unlikely to be disturbed or is in good condition gives rise to less risk if it is left in situ and monitored until a suitable opportunity to remove it arises, such as refurbishment or demolition. That part of the new clause goes against HSE policy. Such a policy shift in this case would have significant implications for the legal framework for the management of asbestos across the built environment. Understandably for such a hazardous substance as asbestos, any proposed changes to how it is managed in the UK must be considered carefully.

While I appreciate the points that the hon. Member for Brent North has made on behalf of the right hon. Member for East Ham, I hope that that explains why the Government are not supporting new clause 36. I look forward to comments from them, should we have missed anything. I hope that the hon. Member for Brent North will consider withdrawing the new clause.

[Barry Gardiner]

I am grateful to the Minister for reading that into the record. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 37

Eligibility for enfranchisement

“(1) The LHRUDA 1993 is amended as follows.

(2) In section 3—

(a) in subsection (2)(a), after third ‘building’, insert ‘, or could be separated out by way of the granting of a mandatory leaseback on the non-residential premises to the outgoing freeholder’;

(b) after sub-paragraph (2)(b)(ii), insert ‘or

(iii) are reasonably capable of being managed independently or are already subject to separate management arrangements;’

(3) In section 4(1)(a)(ii), after ‘premises;’, insert ‘nor

(iii) reasonably capable of being separated out by way of the granting of a mandatory leaseback and reasonably capable of being managed independently from the residential premises;’”—(Barry Gardiner.)

This new clause would ensure that leaseholders in mixed-use blocks with shared services with commercial occupiers would qualify to buy their freehold.

Brought up, and read the First time.

[Barry Gardiner]

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

New clause 37 would ensure that leaseholders in mixed-use blocks with shared services with commercial occupiers would qualify to buy their freehold. We have covered this ground to a certain extent, and I do not wish to detain the Committee unduly.

I commend the Government for bringing forward the reforms that promised to liberate leaseholders in mixed-use buildings and developments, including the lifting of the 25% non-residential premises limit to 50%. However, with the advent of compulsory leasebacks on commercial space to the departing freeholder, there is now a workable mechanism to split out the commercial units and their management from the ownership and management of residential leasehold homes and the common parts for the other side of the building.

It is imperative to remove any other outdated impediments to freehold purchase faced by leaseholders of flats in mixed-use buildings, if the reforms to enfranchisement are to be successful on the ground. Without moving on shared services and the structural dependency rules that bedevilled the 1993 Act, many leaseholders in mixed-use blocks, who would otherwise stand to benefit from the proposed changes that the Government have put forward, could be instantly disqualified from exercising their enfranchisement rights to gain control of their building and their service charges because of a shared plant room or a car park that connects them to the commercial occupiers and that they had no hand in constructing. That seems unfair, especially given that developers are increasingly building flatted developments in which the flats have shared services with commercial units for matters of efficiency and cost.

Mixed-use schemes are proliferating in our constituencies. The issue of shared services, structural dependency and structural detachment will continue to be a major one for leaseholders seeking self-rule, so long as the Government do not cut the red tape in the 1993 Act and, relatedly, in the 2002 Act in relation to the right to manage. I look forward to the Minister’s considered response.

[Lee Rowley]

I am grateful to the hon. Member for Brent North for moving new clause 37. As he says, we have talked about the issue before, including on new clause 33, so I will not detain the Committee for more than a few moments. However, the brevity of my remarks does not in any way seek to diminish the importance of this discussion.

We agree with the overall ambition behind new clause 37; as the hon. Gentleman has graciously accepted, we are seeking to increase the non-residential limit. This is a discussion about whether the improvements that are already in the Bill should go any further. I hope that I have already articulated, in our debates on previous amendments and previous clauses, the reasons why we are not seeking to agree to that at this time. I hope that on this occasion the hon. Gentleman will agree to withdraw his amendment.

[Barry Gardiner]

We have indeed been over this ground. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 38

Right to manage: procedure following an application to the appropriate tribunal

“(1) The CLRA 2002 is amended as follows.

(2) After section 84, insert—

‘84A Procedure following an application to the appropriate tribunal

(1) Where an application is made to the appropriate tribunal under section 84(3) for a determination that an RTM company was on the relevant date entitled to acquire the right to manage the premises, the Tribunal may, if satisfied that it is reasonable to do so, dispense with—

(a) service of any notice inviting participation;

(b) service of any notice of claim;

(c) any of the requirements in the provisions set out in subsection (2); or

(d) any requirement of any regulations made under this part of this Act.

(2) Subsection (1)(c) applies to the following provisions of this Act—

(a) section 73;

(b) section 74;

(c) section 78;

(d) section 79;

(e) section 80;

(f) section 81.’”—(Barry Gardiner.)

This new clause would provide the appropriate tribunal with the discretion to dispense with certain procedural requirements where it is satisfied that it is reasonable to do so. It is designed to deal with cases where a landlord attempts to frustrate an RTM claim by procedural means.

Brought up, and read the First time.

--- Later in debate ---

[Lee Rowley]

I am grateful to the hon. Member for Brent North for tabling new clause 38. I understand that he seeks to reduce landlords’ ability to frustrate right to manage claims. We all share his view, and we also do not want leaseholders to fail on minor technicalities, but at the risk of disappointing his Conservative friend, we believe that there are good reasons for the procedural requirements in a right to manage claim. For example, standard requirements provide legal certainty for all parties. I recognise that there is a valid discussion to be had around the issue, but that is the position that the Government come down on. We are concerned about giving a broad, sweeping power in respect of disapplication.

There are also potential unintended consequences. All qualifying leaseholders are entitled to become members of the right to manage company, and no one person can be excluded for any reason. The legislation opens membership to all qualifying leaseholders. The procedural requirement to serve the notice inviting participation informs leaseholders of their rights to join the claim and become directors of the right to manage company. Providing discretion to the tribunal to disapply this could result in some leaseholders failing to receive adequate information about the claim and being denied such an opportunity. I am not saying that that is likely to happen; I am simply taking it to its logical extent. There are other potential areas where it would go. I am not saying that it is likely, but it is possible.

It is accepted that some landlords have sought to defend right to manage claims on the basis of minor, technical flaws in compliance with the procedural requirements. The tribunal, however, generally takes a common-sense, pragmatic approach to errors that are not critical or of primary importance. That should limit the scenarios in which there is a problem. Landlords will also have an added disincentive to raise vexatious disputes, as they will now pay their own litigation costs.

On the basis of both those points, I hope that the hon. Member for Brent North might be willing to withdraw his new clause and convince his new Conservative friend that it is not necessary at this time.

[Barry Gardiner]

I will press the new clause to a vote and leave it to the Minister to persuade his Conservative friends.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Barry Gardiner]

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

This new clause would set matters for the tribunal to consider when deciding whether to dispense with all or any of the requirements for landlords to consult tenants in relation to any major works. That is something that I am particularly concerned about, because in 2002 I sought to bolster transparency over the nature and costs of major works that leaseholders were paying for, and the troubles that they were experiencing in their blocks. I am also concerned because the freeholder that successfully neutered key provisions on major works is the same Daejan—then Daejan Holdings, part of the Freshwater Group—which over the years has caused absolute misery for many leaseholders in my constituency and in many other right hon. and hon. Members’ constituencies. It was one of the landlords whose behaviour saw me begin my campaign against the iniquities of leasehold back in the 1990s.

Since the Daejan v. Benson Supreme Court case of 2013, the factual burden on freeholders has been transferred to leaseholders. It was ruled that the conduct of the landlord is irrelevant, no matter how flagrantly it might have behaved in failing to adhere to the consultation requirements, unless it can be shown that the conduct caused actual prejudice. As a result of that decision, in many first-tier tribunal cases, it is now freeholders who are seeking dispensation from consultation requirements on major works. Hapless leaseholders are left trying to prove prejudice in the face of clear breaches of the legal requirements, and landlords, who of course are much better resourced, are able to game the system accordingly.

In Daejan, Lord Wilson issued a strong dissenting judgment, as did Lord Hope. Both thought, correctly, that what is reasonable should be left to the tribunal. They mentioned transparency and accountability, both ignored by the Supreme Court. In fact, Lord Wilson described the conclusion of the majority as subverting the intention of Parliament. I urge the Government to revisit their position on major works in the Bill and ensure that leaseholders have, at the very least, the same transparency and accountability that they were assured under the 2002 Act, before the Supreme Court interfered in 2013 with Daejan, fettered the tribunal’s discretion in this vital area and accordingly undermined leaseholders’ rights.

[Lee Rowley]

I am being tempted again to comment on the Supreme Court and the veracity of its decisions, but I will stick to the new clause. As the hon. Gentleman indicated, it seeks to amend the Landlord and Tenant Act 1985. We agree that there should be protections for leaseholders when their landlord is seeking to dispense with the requirements to consult on major works. Where a landlord has failed to comply with the statutory requirements, they must apply to the appropriate tribunal to dispense with the requirements to consult. Should they fail to consult and fail in any application for dispensation, the costs that they may pass on to the tenant are limited to a £250 threshold.

We believe that the appropriate tribunal is best placed to consider the circumstances of each application for dispensation. We would not wish to fetter the tribunal’s ability to consider a wide range of matters when deciding whether it is reasonable to dispense with the consultation requirements.

[Barry Gardiner]

What has happened here is that the whole weight of proof has been shifted by the Court’s decision. It has been shifted precisely against what was the legislative intent, which is why I think it is appropriate that the Minister seeks to reinstate what Parliament originally said it had decided and wanted to be the case, and ensure that the tribunal has the ability to exercise its judgment in that way.

[Lee Rowley]

Let me ask the hon. Gentleman whether he is willing to allow me to go away and look at this issue without any promises or guarantees. I am not across the level of detail that he obviously is, and I need to be in order to discharge the very legitimate questions that he has asked. If he is prepared to withdraw the new clause, I am happy to write to him, and if there is something that we need to take forward, I would be happy to look at it in future phases of the Bill.

[Barry Gardiner]

On that basis, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 40

Meaning of “accountable person” for the purposes of the Building Safety Act 2022

“(1) Section 72 of the Building Safety Act 2022 is amended in accordance with subsections (2) and (3).

(2) After subsection (2)(b), insert—

‘(c) all repairing obligations relating to the relevant common parts which would otherwise be obligations of the estate owner are functions of a manager appointed under section 24 of the Landlord and Tenant Act 1987 in relation to the building or any part of the building.’

(3) In subsection (6), in the definition of ‘relevant repairing obligation’, after ‘enactment’, insert

‘or by virtue of an order appointing a manager made under section 24 of the Landlord and Tenant Act 1987’.

(4) Section 24 of the Landlord and Tenant Act 1987 is amended in accordance with subsection (5).

(5) Omit subsection (2E).”—(Barry Gardiner.)

This new clause would provide for a manager appointed under section 24 of the Landlord and Tenant Act 1987 to be the “accountable person” for a higher-risk building.

Brought up, and read the First time.

--- Later in debate ---

In the same way, Parliament could not have intended to deprive leaseholders of cost protection rights when extending their lease under the BSA. I believe that Parliament could not have intended to deprive them of the long-cherished right to secure a section 24 manager, where there is an extensive fault against their freeholder proven in a court of law. It is absolutely imperative that the Minister acts on this.

[Lee Rowley]

I am grateful to the hon. Gentleman for outlining that in such detail. I will be brief and to the point. We are reviewing this, and I think that an important point has been raised. In the meantime, we have asked the Building Safety Regulator to review all higher-risk buildings that currently have a section 24 manager in place, with a view to considering whether an application for a special measures order should be made for any of the buildings impacted. On that basis, I hope that the hon. Member may withdraw the new clause until we have concluded the review.

[Barry Gardiner]

I want to press the new clause to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Barry Gardiner]

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

This new clause would implement recommendation 41 of the Law Commission’s report on enfranchisement, that the prohibition on leaseholders of three or more flats in a building being qualifying tenants for the purposes of a collective enfranchisement claim should be abolished. The Law Commission could not be clearer on this issue. It said:

“We remain firmly of the view that this rule–that a leaseholder of three or more flats in a building is not a qualifying tenant in respect of any–is ineffective in excluding investors from collective enfranchisement rights. It is easily avoided by sophisticated investors, and thus only penalises less well-informed leaseholders of multiple units. We do not think that there is any good justification for retaining the exclusion in its current form… Crucially, we think that removing the restriction will provide the opportunity to enfranchise to a number of leaseholders who should benefit from enfranchisement rights, but who currently do not do so. Take the building which we gave as an example in the Consultation Paper: one containing seven flats let on long leases, of which three are owned by the same person. This building is ineligible for collective enfranchisement, as there are only four qualifying tenants (and therefore the two-thirds requirement is not fulfilled). However, it may well be in the interests of the four qualifying tenants to carry out a collective freehold acquisition: indeed, the investor who owns the three other leasehold flats may also wish to participate. It may be asked why, from the point of view of the five owners in the building, it is desirable that they be prevented from acquiring the freehold jointly. In this case, the four owners of their individual flats would still have the largest say in the control of the building following the claim (assuming every owner participated).”

Removing the bar on leaseholders with three or more properties from qualifying for a collective enfranchisement is a Law Commission recommendation. It could be done easily and have the practical effect of ensuring that more leaseholders can acquire the freehold and gain control of their homes and service charges, meeting a key Government goal for this Bill.

I am aware that some freeholders buy up leases in a block using separate special purpose vehicle companies in order to make it harder for leaseholders to hit the 50% participation threshold and thwart enfranchisement bids. Meanwhile, innocent leaseholders who have three flats in their name as part of their retirement plan are instantly disqualified from participating in the freehold purchase. That is unfair, but it could be easily remedied by this amendment or another amendment were it to come from the Government.

[Lee Rowley]

The Government recognise that the Law Commission did not think that there was a justification for keeping the exclusion in its current form and recommended its removal, as the hon. Gentleman has indicated. However, there might be unexpected consequences if the exclusion is removed, and the Government need to proceed carefully. For example, removal of the restriction may spur investors and speculators to buy up blocks, which may not be in the interests of the remaining leaseholders and take properties out of the market that could otherwise be acquired by owner- occupiers. Investors would be able to buy multiple flats in a building in order to take control of the building following a collective acquisition claim.

Furthermore, the exclusion as it applies currently has the effect of limiting the circumstances that could result in one leasehold owner monopolising the freehold once it has been acquired. Leaseholders of a single flat may find that they escape the control of one freeholder to find that they are now subject to the control of a single owner of multiple flats, creating the same issues.

I recognise that the restriction has the effect of denying some leaseholders the right to collective enfranchisement, and there is no equivalent requirement when claiming the right to manage. However, the nature of the interest being acquired is different and the difference in approach is appropriate. I hope I can assure the hon. Member that the Government understand his concern. I hope he agrees, although I hear he might not, that the current restriction provides a level of protection for leaseholders. I ask him to consider withdrawing his new clause.

[Barry Gardiner]

I am grateful to the Minister for recognising the problem here. I urge him to consider coming back on Report with his own amendment to try to circumvent the other issues that he has rightly raised, which might counterbalance on the other side. On that basis, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 48

Right to participate in enfranchisement

“(1) The Secretary of State may by regulations make provision to enable qualifying leaseholders to buy a share of the freehold at a development where a collective enfranchisement has already taken place.

(2) Provision made under subsection (1) is to be known as a ‘right to participate’.”—(Barry Gardiner.)

This new clause would enable the Secretary of State to make regulations allowing those residential leaseholders whose unit qualified for a collective enfranchisement, but whose leaseholders were unable or unwilling to do so at the time, to exercise the right to participate in the enfranchisement upon payment of a proportionate sum.

Brought up, and read the First time.

--- Later in debate ---

[Barry Gardiner]

We were discussing the right to participate, and I was quoting the Law Commission, which stated that

“in the Consultation Paper, we proposed that a leaseholder who did not participate in a collective freehold acquisition should, at a later date, be able to purchase a share of the freehold interest held by those who did participate. We maintain our view that the policy has merit. Indeed, a clear majority of consultees were supportive of our provisional proposal.”

Additionally, the Law Commission believes that

“the existence of the right to participate”—

attaching to an individual leasehold unit—

“might even encourage leaseholders making a collective freehold acquisition claim to invite others to join in the first place, and might also be a partial solution to the ping-pong problem”,

as the Law Commission describes it; I will not go into detail about that. The Law Commission states that, unlike with the right to manage and the notice inviting participation, leaseholders

“proposing to make a collective enfranchisement claim are not obliged to invite all other leaseholders in the building to participate in the proposed claim, nor even to inform them of their intentions. This means that leaseholders can be excluded from the opportunity to exercise their enfranchisement rights, either inadvertently or deliberately.”

The Law Commission received various suggestions as to how leaseholders could be made aware that a collective freehold acquisition has taken place and therefore that the right to participate is available to them. The new clause seeks to give the Government the flexibility to bring forward—through either regulations or, preferably, their own amendments—some provision to remedy the situation. I look to the Minister for his advice.

[Lee Rowley]

The principle of a right to participate is sound, and I think we all agree on that across both sides of the Committee. However, as with many of the new clauses, there are practical issues with such a right, and we struggle to see a way that it is addressed through the Bill.

I will not detain the Committee for too long, but currently leaseholders who did not participate in a previous collective acquisition claim have no means to require the previous participants to allow them to join, as the hon. Gentleman outlined. There is an existing route around that for the non-participant leaseholders if they can agree with the participating enfranchised leaseholders to allow them to obtain a share in the ownership of the building through negotiation; however, enabling that through a statutory right is complicated. The Law Commission gave considerable thought to the issues and how they may be resolved, and, although it too agreed with the principle of such a right, it was not able to make a recommendation for the creation of the right to participate without separate and detailed work on the measure. Its report analysing the difficulties that arise is publicly available.

As set out by the Law Commission, a number of highly complex questions need to be resolved, including when and to whom the right should apply; whether to include former landlords in possession of a leaseback; the terms of participation; the premium payable; the cost of the claim; and any remedies available if damages are appropriate. Bluntly, they go to the core of an individual’s rights, so the whole framework for the regime needs to be in place in order to ensure certainty on who has those rights and how they can best be exercised in practice. As a result, while I understand and appreciate the sentiment behind the new clause, it is a broad power to set out a regime that is extremely complicated, and the Government are unable to accept it at this time, while accepting the principle and hoping that in the future we can make progress on it.

[Barry Gardiner]

I am grateful to the Minister for recognising the need to do something in this area and accepting that there is a problem here that it would be best to resolve. I simply point out that leasehold reform Bills tend to come infrequently before Parliament, and I urge him to come back at a later stage with his best endeavours to resolve the problem. On that basis, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 50

Control of boards of estate managers

“(1) Within six months of the passage of this Act, the Secretary of State must by regulations provide for—

(a) every estate manager (see section 39(3)) to be constituted such that a controlling majority on its board is held by an owner or lessor of a managed dwelling (see section 39(5));

(b) the requirement stipulated in paragraph (a) to be in place within two years of the sale or lease of the first managed dwelling.

(2) Regulations under subsection (1) may amend primary legislation.”—(Richard Fuller.)

This new clause would provide for the Secretary of State by regulations to oblige every estate management company to have a majority of residents on its board within two years of the sale or let of the first house or flat on the managed estate.

Brought up, and read the First time.

[Richard Fuller]

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

I am receiving some interesting guidance from the Government Whip that I should seek to speak at length on the new clause, which is contrary to all his earlier exhortations, which were rather of the flavour that I should shut up entirely. I am not getting any further guidance from the Whip, so I will go at my own pace.

New clause 50 is a suggestion to the Minister. We have discussed the general hope that people subject to estate management charges should have much greater control over their estate management companies. They potentially should have the right to self-manage and it should be much easier for them to change from one estate manager to another. At the moment it can take a considerable time for estate management companies essentially to be set up and/or for them to go through what is essentially a transfer to resident control. I think all members of the Committee know this, but I will just inform them that we have had a number of representations from people who have talked about how long they have had to wait, including someone who said that a family had to wait up to 13 years for the right to manage their own estate management company and endured poor service over that entire period.

As the Minister thinks about his options to bring forward on Report or in further deliberations improvements to the rights of people, the new clause suggests that, by law, within two years of the sale or lease of the first building a majority of the directors of the estate management companies should be residents of their community.

[Lee Rowley]

This is an interesting new clause that bears a few moments’ consideration, and I am grateful to my hon. Friend for tabling it. Obviously, the first challenge is the matter of Henry VIII powers. I will put that aside for the moment, but we have genuine concerns about whether the new clause would get past the Delegated Powers and Regulatory Reform Committee on the basis of whether it is proportionate.

--- Later in debate ---

[Richard Fuller]

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

Again, this new clause originates from some of the inbound traffic that we have received as we have considered the Bill. I seek clarification from the Minister about the extent of these changes. The Committee was advised by a number of citizens about the status of estate management companies that are written into the deeds or other legal documents that are signed upon purchase. One such citizen wrote:

“Our management company…is named in the TP1, so we have no rights to do this”—

that is, to essentially appoint their own managers.

This is a probing new clause: I just want the Minister to be clear about the impact of the Bill on individuals such as the person whom I just quoted. As a consequence of the Bill’s provisions, will they be able to change their estate management company, or is there some legal trick about the original documents that were signed on purchase that would mean they are not brought into the ambit of those new rights?

[Lee Rowley]

As my hon. Friend outlined, the new clause would introduce a requirement for the Government to assess the situation of homeowners with estate management companies explicitly named on their deeds within a three-month timeframe.

I am sympathetic to the concerns that my hon. Friend raised. I know that he recognises that this is a complex area and that there are detailed issues to be worked through. As well as being clear about the nature of the problem, there could be issues about defining the scope of estate management functions and what criteria need to be met. The Law Commission carried out a review of the right to manage for flats, but that is not always directly transferable to freehold estates. It will take some time to carry out a review, and we need to engage with people across the sector. Then, the CMA report is coming. None the less, I recognise my hon. Friend’s concerns that the comprehensive measures in the Bill do not go far enough, and I acknowledge his desire for the Government to go further. I am listening carefully to his concerns on this matter. On that basis, I hope that he might withdraw his new clause.

[Richard Fuller]

It is not actually clear that the Minister was addressing new clause 51 as I was expecting; that may be the fault of my hearing. I was seeking clarification about the TP1—transfer of part of registered title—form, which is used by developers when selling a house to explicitly name an estate management company that will be in situ. That may be the norm; I do not know. However, can the Minister clarify, if the way that it is originally set up is not the norm and it is a legal device, whether it has greater legal standing, and whether the rights of people for whom the estate management company is defined in form TP1 will be included in the rights that we are trying to establish with the rest of the Bill? If we introduce changes that increase the right to manage and so on, will they be covered? I may well have missed it, because the Minister is much more knowledgeable about the Bill than I am, even after all our deliberations. However, just to the specific point about the legal forms, will he consider bringing that in as part of this?

[Lee Rowley]

I want to double-check the valid points made by my hon. Friend. I will commit to writing to him on that specific point to make sure that we are covering in the way that he expects.

[Richard Fuller]

That is very kind of the Minister. With that assurance, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Schedule 1

Redress schemes: financial penalties

“Notice of intent

(1) Before imposing a financial penalty on a person under section (Financial penalties), an enforcement authority must give the person notice of its proposal to do so (a ‘notice of intent’).

(2) The notice of intent must be given before the end of the period of 6 months beginning with the first day on which the enforcement authority has sufficient evidence of the conduct to which the financial penalty relates.

(3) But if the person is continuing to engage in the conduct on that day, and the conduct continues beyond the end of that day, the notice of intent may be given—

(a) at any time when the conduct is continuing, or

(b) within the period of 6 months beginning with the last day on which the conduct occurs.

(4) The notice of intent must set out—

(a) the date on which the notice of intent is given,

(b) the amount of the proposed financial penalty,

(c) the reasons for proposing to impose the penalty, and

(d) information about the right to make representations under paragraph 2.

Right to make representations

2 (1) A person who is given a notice of intent may make written representations to the enforcement authority about the proposal to impose a financial penalty.

(2) Any representations must be made within the period of 28 days beginning with the day after the day on which the notice of intent was given to the person (‘the period for representations’).

Final notice

3 (1) After the end of the period for representations the enforcement authority must—

(a) decide whether to impose a financial penalty on the person, and

(b) if it decides to do so, decide the amount of the penalty.

(2) If the enforcement authority decides to impose a financial penalty on the person, it must give a notice to the person (a ‘final notice’) imposing that penalty.

(3) The final notice must require the penalty to be paid within the period of 28 days beginning with the day after the day on which the notice was given.

(4) The final notice must set out—

(a) the date on which the final notice is given,

(b) the amount of the financial penalty,

(c) the reasons for imposing the penalty,

(d) information about how to pay the penalty,

(e) the period for payment of the penalty,

(f) information about rights of appeal, and

(g) the consequences of failure to comply with the notice.

Withdrawal or amendment of notice

4 (1) An enforcement authority that gives a notice of intent or final notice may at any time—

(a) withdraw the notice of intent or final notice, or

(b) reduce an amount specified in the notice of intent or final notice.

(2) The power in sub-paragraph (1) is to be exercised by giving notice in writing to the person to whom the notice was given.

Appeals

5 (1) A person to whom a final notice is given may appeal to the First-tier Tribunal against—

(a) the decision to impose the penalty, or

(b) the amount of the penalty.

(2) An appeal under this paragraph must be brought within the period of 28 days beginning with the day after the day on which the final notice is given to the person.

(3) If a person appeals under this paragraph, the final notice is suspended until the appeal is finally determined, withdrawn or abandoned.

(4) An appeal under this paragraph—

(a) is to be a re-hearing of the enforcement authority’s decision, but

(b) may be determined having regard to matters of which the enforcement authority was unaware.

(5) On an appeal under this paragraph the First-tier Tribunal may quash, confirm or vary the final notice.

(6) The final notice may not be varied under sub-paragraph (5) so as to impose a financial penalty of more than the enforcement authority could have imposed.

Recovery of financial penalty

6 (1) This paragraph applies if a person fails to pay the whole or any part of a financial penalty which, in accordance with this Schedule, the person is liable to pay.

(2) The enforcement authority which imposed the financial penalty may recover the penalty or part on the order of the county court as if it were payable under an order of that court.

Proceeds of financial penalties

(1) Where an enforcement authority imposes a financial penalty under section (Financial penalties), it may apply the proceeds towards meeting the costs and expenses (whether administrative or legal) incurred in, or associated with, carrying out any of its functions under this Part of this Act.

(2) Any proceeds of a financial penalty imposed under section (Financial penalties) by an enforcement authority other than the Secretary of State which are not applied in accordance with sub-paragraph (1) must be paid to the Secretary of State.”—(Lee Rowley.)

This new Schedule, to be inserted after Schedule 8, would make further provision about the imposition of financial penalties under NC19.

Brought up, read the First and Second time, and added to the Bill.

Title

[Lee Rowley]

I beg to move amendment 28, in title, line 5, leave out “charges and costs payable by residential”

and insert

“the relationship between residential landlords and”.

This amendment is consequential on amendments to Part 3.

This is a consequential amendment to remove the reference to part 3 in the long title of the Bill. It ensures that it provides an accurate description of the Bill’s contents to reflect the impact of the measures the Committee has brought forward. That includes the amendments to enable the first-tier tribunal to vary or discharge an order to appoint a manager of a premises without an application.

Amendment 28 agreed to.

[Matthew Pennycook]

On a point of order, Sir Edward, may I take the opportunity to put on record our sincere thanks to you and your colleagues in the Chair for overseeing our proceedings over recent weeks; our hard-working Clerks for their assistance; the Doorkeepers and Hansard reporters for facilitating the Committee’s work; and officials in the Department and our own staff for their support? I also briefly thank all hon. Members who have contributed to the Committee’s deliberations and debates. It is not entirely unexpected, given the uncontentious nature of the Bill; nevertheless, we very much appreciate the generally constructive and good-humoured nature of our proceedings.

Finally, I thank the Minister for his thoughtful engagement with the arguments the Opposition have made in an attempt to improve this limited Bill. He has dutifully held the line in attempting to justify the decision to resist a large number of sensible and reasonable amendments. Nevertheless, I suspect we can look forward to seeing a number of them return with the Government’s seal of approval in the Bill’s remaining stages.

[Lee Rowley]

Further to that point of order, Sir Edward, I wish to put on record my thanks. I echo the thanks of the hon. Member for Greenwich and Woolwich to everybody who has been involved in the Bill, and I thank him and all colleagues here who have helped us get through this. I am grateful for colleagues’ time and also—even though I may not be in order in making this acknowledgment—I thank those in the Gallery who have taken the time to come here and listen. I am grateful to everyone for getting the Bill through this stage and I look forward to seeing everyone on Report.

[The Chair]

I thank both of you for those gracious words. The Opposition spokesperson warned me at the beginning that the Bill was as dry as dust. It is certainly very complicated and you have all done extremely well in a very complex part of the law. We should all be proud of ourselves. Order.

Bill, as amended, to be reported.

Teesworks Joint Venture

Lee Rowley Excerpts

Monday 29th January 2024 Commons Chamber

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

With permission, I would like to update the House on the independent review into the South Tees Development Corporation and the Teesworks joint venture, which the Government are publishing today, having received the final report last week.

Before turning to the specifics of the report, it is important that I remind the House of the significance and sheer scale of this project. Teesworks, in north-east England, is the United Kingdom’s largest industrial zone. Remediating and regenerating the former Redcar steelworks is a highly complex brownfield regeneration opportunity, the alternative to which is a massive liability to taxpayers in clean-up costs and an annual multimillion pound bill just to maintain a highly contaminated site. Most importantly, as Michael Heseltine said in his 2016 landmark report on the Tees valley, the site is also part of “a much bigger picture”, and one that provides an opportunity for regeneration that is unrivalled not only in size and scale, but in potential opportunity, as we are seeing with the development of the freeport. That is why it is too important to the communities of the north-east for Teesworks to be used as a political football.

Over the course of the last year, using parliamentary privilege, the hon. Member for Middlesbrough (Andy McDonald), who is not in his place, has made a series of allegations about Teesworks. This culminated in April and May 2023, when the hon. Member spoke, and I quote for the record, of the existence of “industrial-level corruption” and “dubious dealings”. These accusations are about the most serious that can be made. If true, they would almost certainly be criminal.

[Ian Lavery (Wansbeck) (Lab)]

On a point of order, Madam Deputy Speaker. The Minister has just said that my hon. Friend the Member for Middlesbrough (Andy McDonald) is not in his place. He should recognise that my hon. Friend has been through some serious surgery and has a proxy vote for the foreseeable future. Will he acknowledge that that is the case, instead of having a snide go at my hon. Friend?

[Madam Deputy Speaker (Dame Rosie Winterton)]

I thank the hon. Gentleman for his point of order. I had assumed that the Minister had informed the hon. Member for Middlesbrough (Andy McDonald) that he was going to refer to him, so I had also assumed that the Minister will have known of the circumstances.

[Lee Rowley]

indicated assent.

[Madam Deputy Speaker]

In that case, yes, the Minister might like to acknowledge that he recognises there is a reason why the Member is not in his place.

[Lee Rowley]

I am absolutely happy to acknowledge to all Members that the Member is not in his place for a reason. Equally, however, the Member made a series of statements previously and I am seeking to respond to those.

[Madam Deputy Speaker]

Order. That is not really—[Interruption.] Excuse me, but I can handle this, thank you. That is not really what I was referring to. I was just referring to the fact that there is a reason why the Member is not in his place, not the other points the Minister is making. Minister, do carry on.

[Lee Rowley]

These accusations are about the most serious that can be made. If true, they would almost certainly be criminal, and their mere existence threatens confidence in this immensely important, complicated and challenging project. At the request of the Tees Valley Mayor, an extraordinary independent review was launched by my right hon. Friend the Secretary of State for Levelling Up, Housing and Communities, to consider the allegations as well as the combined authority’s oversight role. Today we have the answers to the primary question about the extremely serious charges of corruption and illegality—they are not correct; they are untrue. For the avoidance of doubt, let me repeat that: no corruption, no illegality. There is no evidence to back up the worst of the allegations repeatedly thrown at the local parties managing the project, no referrals onwards to other bodies for further review, and no substance to the most serious of allegations.

In addition, and at the Secretary of State’s request, the panel has also made a series of constructive recommendations, including strengthening governance and increasing transparency. We welcome that oversight, as does the Mayor of the Tees Valley, who has confirmed that he intends, in principle, to accept all the recommendations relevant to him and his authority. For the two recommendations relevant to central Government, the Department will carefully consider how to support the continued success of mayoral development corporations across the country.

I know that colleagues in the Department for Environment, Food and Rural Affairs and His Majesty’s Treasury will also consider the recommendation regarding landfill tax. My right hon. Friend the Secretary of State has today written to the Tees Valley Mayor, asking that he responds to the panel’s recommendations, with an initial response within six weeks. My right hon. Friend will of course wait to review those proposals before deciding on further action, but the central point bears repeating: nothing was found by the reviewers to support the very serious allegations made.

This report has been a detailed and thorough piece of work, and I place on the record my great thanks to the three-strong panel for their thorough and well informed work over recent months. I thank Angie Ridgwell, chief executive of Lancashire County Council; Richard Paver, previously first treasurer of the Greater Manchester Combined Authority; and Quentin Baker, director of law and governance at Hertfordshire County Council. Copies of the review, and my right hon. Friend the Secretary of State’s subsequent correspondence with the Mayor and the panel, will be placed in the Library of the House.

Finally, I wish to remind right hon. and hon. Members about the rich heritage of Tees Valley. It has a proud industrial history and this Government are committed to giving it the proudest possible future, putting it front and centre of our mission to level up the country, and supporting all our regions to prosper and flourish by making sure that local people have projects they can champion. The independent review has cleared the Tees Valley Mayor and the combined authority of lurid allegations of corruption and illegality, and it has recommended improvements that I am confident will be driven by local stakeholders. We are delighted to support a project that is bringing huge benefits to the people of Teesside and the rest of the UK, and for all those reasons I commend this statement to the House.

[Justin Madders (Ellesmere Port and Neston) (Lab)]

I thank the Minister for an advance copy of the statement, but we know that a draft of this report has been floating around the Department since November, so why has it only surfaced today? How is it that the media were reporting the outcome of the report this morning, when it was only released by the Department at 4.20 this afternoon? Although we have only been given just over an hour to consider the 75-page report before coming to the Dispatch Box, it is immediately clear why the Government waited until the last possible minute to release it, because it is damning.

The issue has always been one of value for money, and on that the report shows that taxpayers’ money was not being spent in the way the public should expect. Let me quote directly from the report:

“The governance and financial management arrangements are not of themselves sufficiently robust or transparent to evidence value for money.”

On transparency it states:

“We found evidence of inaccuracies and omissions in reports which undermines decisions”,

and

“We did not see sufficient information provided to the Board to allow them to provide effective challenge and undertake the level of due diligence expected of a commercial Board.”

It also states:

“There is no oversight of Teesworks Ltd, despite requests from various combined authority members and Committees”.

Finally it states that

“there is not a robustness within the system. Inappropriate decisions and a lack of transparency which fail to guard against allegations of wrongdoing are occurring, and the principles of spending public money are not being consistently observed.”

Those are not minor, trifling concerns; they reveal a systemic and flawed decision-making process that hinders transparency and fails to show value for money. This scandal has exposed gaps in accountability, and serious questions remain about the lack of local democratic scrutiny throughout the process. It is now clearer than ever that that needs to be investigated by the National Audit Office.

It was an astonishing decision in the first place for the Government to ignore the calls for a fully independent investigation into the serious allegations that have arisen, not just from Labour Members but from the Tees Valley Mayor in question, three Select Committee Chairs and Members across the House. Even the NAO said that it was “willing and able” to carry out the probe. Instead, the Government hand-picked a panel to investigate only the most serious allegations.

I will ask the Minister three questions, in the hope that we can finally begin to uncover the answers necessary to draw this saga to a close. First, will he now refer the situation to the National Audit Office, not only to give the people of Teesside answers but to give the public confidence that it will never be repeated again? Secondly, will he assure the House that no one was prevented from providing evidence to the inquiry as a result of non-disclosure agreements? Finally, can he tell the House with confidence that the Teesworks project represents value for money?

Earlier this month, the Secretary of State, in evidence to the Business and Trade Committee, said that he wanted people

“to make a judgment on the basis of the facts.”

Well, these are the facts: a publicly owned asset has been turned into a cash machine for private investors, earning them at least £124 million so far. That eye-watering return required no investment and involved no risk on the part of private investors, and nobody else was given the opportunity to participate in the venture. The report does not change those facts—indeed, it confirms them—and no amount of spin from Government Members will change that, no amount of bluster will make this a good deal for the taxpayer, and nothing said today will change the view still held by many that something is seriously wrong in the Tees Valley.

[Lee Rowley]

I am grateful to the hon. Gentleman for his valiant attempt to try to move the discussion on. The basic facts are that Opposition Front-Bench Members asked for a review, and they got a review. They inferred that there were significant problems, and it has been proven comprehensively through an independent review that there was no corruption and there was no illegality.

The hon. Gentleman asked why the report only surfaced today. We received the final report last week. To support the transparency that hon. Members in the House seek, and the comprehensiveness they wish for, we have sought to get the report out as quickly as possible, and it is here today for people to comment on and to misrepresent if they so choose. It appears that some may choose to do so.

The hon. Gentleman quoted from the report. I am also happy to quote from the report. As I indicated in my statement, the serious allegations that were the genesis of the report have been proven to be incorrect. Where there are things that can be improved, that will happen, and the Mayor of Tees Valley has already indicated that he will do that. But it is important that we put this in context. The hon. Gentleman talked about governance, and at paragraph 22.3 the report says:

“The Board largely feel engaged and make unanimous decisions.”

At paragraph 11.3, it says:

“The Panel noted the largely positive assurances provided by internal audit.”

Paragraph 22.3 says that

“there is much that does follow due process”.

Most crucially, given that the whole challenge was about ensuring that the benefits of Teesworks come to the people of the north-east at the earliest possible opportunity, the report says clearly at paragraph 22.1 that

“much has been achieved in a relatively short space of time”.

That is thanks to the Mayor of the Tees Valley and the Conservatives in the north-east.

[Sir Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

I am pleased that the report has been published today and thank the Minister for his statement. Teesworks is critical for my constituents and the whole of Teesside, and the report confirms that for every £1 of public money that has been invested, the taxpayer will receive £9.50 back, and that is on the basis that only 17% of the site has been developed.

As my hon. Friend the Minister said, the hon. Member for Middlesbrough (Andy McDonald) alleged “industrial-scale corruption” in the House. He did so for overtly political reasons, which sadly Opposition Front-Bench Members have repeated today. Labour wants Teesworks to fail.

[Sir Simon Clarke]

Labour puts politics before people, and the furious denials of the hon. Member for Stockton North (Alex Cunningham) do nothing to disguise the fact that he and his colleagues have connived in making malicious allegations that this afternoon have been fundamentally proven to be false. The independent review confirmed that no illegality occurred. Does my hon. Friend agree that the hon. Member for Middlesbrough ought to apologise to the House, and to all those who were named in the report and falsely accused by him? Does he also agree that the hon. Member for Middlesbrough should resign for acting against the interests of the constituency that he serves and, indeed, against the interest of the whole Tees Valley?

[Lee Rowley]

My right hon. Friend speaks loudly for Teesside and his constituency. I will take the steer of Madam Deputy Speaker and keep my remarks solely to the statements made previously. The hon. Member for Middlesbrough stated clearly, on 20 April in this place, that there had been

“truly shocking, industrial-scale corruption on Teesside.”—[Official Report, 20 April 2023; Vol. 731, c. 383.]

In the same business questions session, he repeated “industrial-scale corruption”. A few days later, in another business questions, he referred to “dubious dealings”. Those remarks have proven to be incorrect, and I hope that he withdraws them as soon as he is able to do so.

[Alex Cunningham]

I apologise for my outburst, Madam Deputy Speaker.

Will the Minister join me in congratulating Mayor Houchen’s partners, Musgrave and Corney, for pulling off the business coup of the 21st century? Without spending a penny, they secretly acquired 90% of the shares in Teesworks, which has had hundreds of millions of pounds of taxpayers’ money invested in it. They have done multi-million-pound deals to lease it to others, including the combined authority, have made over £100 million in profit in just one year, and have secured control of the business development at Teesside airport when no one else got a look in.

That is all in the gift of Mayor Houchen, who, the report says very clearly, has failed on both governance and transparency—something I have said time and again. That is the accusation that I have made. Does the Minister accept that this is a terrible deal for the taxpayer and the people of Teesside? Will he now hand it over the NAO, as others have requested, so that all aspects of the business at Teesworks—not just those chosen by the Secretary of State—can be independently investigated?

--- Later in debate ---

[Lee Rowley]

Again the Labour party attempts to move the discussion elsewhere, and I will call it out every time. The report was set up because of extremely serious allegations of industrial-scale corruption, which have proven to be incorrect. The least that Labour Members could do when standing up to read their pre-prepared speeches is to acknowledge that they were wrong.

[Peter Gibson (Darlington) (Con)]

I thank the Minister for his statement, which will give my constituents the reassurance they need that Tees Valley Mayor Ben Houchen is doing things by the book and for the benefit of our region. The uncertainty and suspicion raised has been damaging to our region’s reputation and to investment prospects. The whole Tees Valley has benefited from Ben’s vision and leadership, which has led to jobs, investment and a renewed sense of Tees pride. Now that, thankfully, we have this report, does my hon. Friend agree that unfounded and scurrilous allegations should not be aired in this place? Does he further agree that Teesside is not well served by continually being talked down by the Labour party, and that those who have peddled damaging allegations should apologise?

[Lee Rowley]

My hon. Friend speaks up loudly for the north-east and his constituents. He is absolutely correct that this is a huge opportunity for the north-east, and about the transformative potential of Teesworks. He is also absolutely correct that it is the responsibility of all Members of the House to be cautious and careful in their language to ensure that those benefits are realised for the people who matter the most—the people of the north-east.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

Over the weekend, when the right hon. Member for Middlesbrough South and East Cleveland (Sir Simon Clarke) and I appeared on the excellent local media programme “Politics North”, it became obvious that Members on the Government Benches had an insight into the publication date and contents of the report, which Opposition Members did not. I am very glad that the report has been published, but to spin it as some kind of vindication of Mayor Ben Houchen is absolute nonsense. Given that is the spin that the Conservatives are going for, why will the Minister not demonstrate that Teesworks provides the value of money that he asserts by having an independent inquiry by the National Audit Office? The north-east gets little enough investment; we must make sure that every pound counts. Why can the National Audit Office not be allowed to demonstrate that?

[Lee Rowley]

I am grateful to the hon. Lady; I have the greatest respect for her, and she provides immensely important contributions in this place. But she will recognise, I hope, when we move away from the talking points, that there has already been a review, which was already independent and has already followed due processes—the same processes, by the way, that were followed for Labour-controlled Birmingham, when the council there lost £1 billion; the same processes that were followed with Labour-controlled Croydon, which lost hundreds of millions of pounds and had serious governance issues; and the same processes that were followed with Labour-controlled Slough, when it did something similar. If those processes were good enough and independent enough for Labour in those instances, when Labour was in charge of those authorities, why are they not good enough here? Is it simply because Labour is trying to make a party political point because an election is coming up?

[Paul Howell (Sedgefield) (Con)]

The hon. Member for Middlesbrough (Andy McDonald) clearly made comments that were not just wrong, but extraordinarily emotive and designed to do nothing other than undermine confidence in the tremendous investment work that has been done by the Conservative Tees Valley Mayor, Ben Houchen. Voices in this place can be hugely negative and can roll over to become hugely destructive when things are said in the way they were said by the hon. Member—or, indeed, when they are not said. I just do not get Labour’s position on business. NETPark in my constituency is fantastic; I have mentioned it more times than my predecessor did in the previous 12 years. Does the Minister think that Labour actually understands business, given that the Member responsible for this debate was on the shortlist to be the Chair of the Business and Trade Committee?

[Lee Rowley]

I am grateful to my hon. Friend—another example of speaking up for the north-east. He asked a hugely important question about the importance of business and private enterprise to our success and wealth creation in this country. It is vital that we support business in order to make the wealth that allows us to support the public services we all need. The transformative opportunities of things like Teesworks will ensure that the north-east has those public services and the taxpayer revenue needed to support them in the coming years and decades.

[Ian Lavery (Wansbeck) (Lab)]

The report was published in November ’23—published in nearly February ’24. Can the Minister explain the delay? I must say, there are suspicions that the report has been diluted. Can the Minister say whether the report has been altered because of discussions or communications between the author and the Government? Will he ensure—for the sake of transparency—that all communications between the author and the Department are published?

[Lee Rowley]

If I have misheard the hon. Gentleman, I apologise in advance, but I am pretty sure that he just said that the report was published in November 2023. That was not the case. The report was received by the Department last week, and we have published it within a week of receipt.

[Sir Robert Goodwill (Scarborough and Whitby) (Con)]

I wish to inform you that in line with the convention of the House, Madam Deputy Speaker, I informed the hon. Member for Middlesbrough (Andy McDonald) that I would be raising this matter, and we had quite an interesting exchange of text messages—but suffice it to say I wish him a speedy recovery.

I have to say, however, that the hon. Gentleman does have previous form on this issue. First, he ignored scientific evidence to try to prevent dredging in connection with the freeport development, and today we discover he has levelled vile, unfounded accusations of corruption and dishonesty at the Tees Valley Mayor. Does the Minister agree that jobs and economic development are more important to the people of Teesside—including those who live in Middlesbrough, incidentally—than scoring political points on the basis of incorrect and unfounded allegations? Does he share my disappointment that rather than apologising on behalf of their colleague, the Opposition Front Benchers are doubling down on some of these allegations, which have now been blown completely out of the water by the report?

[Lee Rowley]

My right hon. Friend is absolutely right: the report in front of us says explicitly that the accusations levelled at this project are not true. It is beholden on Members in this place, when they get things wrong, to say that that is the case; and it is vital that we ensure that this project gets going, keeps going, accelerates even further and gets the benefits for Tees Valley as soon as possible.

[Julie Elliott (Sunderland Central) (Lab)]

The report says:

“We did not see sufficient information provided to Board to allow them to provide effective challenge and undertake the level of due diligence expected of a commercial Board”?

Does the Minister think that is acceptable? Can he expect the people of Teesside to have confidence that decisions being taken in this way are in their best interests or will deliver best value for money? Is it not time to get the National Audit Office to look at the matter?

[Lee Rowley]

The hon. Lady needs to ensure that when she quotes from that report, she does so with completeness. It is also the case that paragraph 4.8 of the report says:

“we have sufficient evidence and consistency of views to form our conclusions as set out in the report.”

The hon. Lady was in this place a few months ago saying that the report would not be sufficient and referring to the pretence of an “independent” inquiry, which she is now quoting from. Labour Members cannot have it both ways. They cannot say that the inquiry does not work and then, when conclusions come out that they do not like, seek to disregard them.

[Grahame Morris (Easington) (Lab)]

May I pass on my best wishes for a speedy recovery to the good and hon. Member for Middlesbrough (Andy McDonald), and commend his bravery in raising this issue? Clearly, the Minister does not like use of the C-word, but he will be telling us next that the personal protective equipment contracts represented good value for money and that no dubious practice was involved in the awarding of those contracts—stretch the truth thin enough and people start to see through it.

I want to ask about value for money and scrap. Apparently, there are 500,000 tonnes of scrap metal on the site. Sales have so far raised £90 million, with £45 million going straight to private developers Musgrave and Corney, without any risk or investment themselves. How on earth does that represent good value for money? Will the Minister or the Secretary of State instruct the National Audit Office to begin a full value for money investigation into the goings-on at the Teesworks site?

[Lee Rowley]

The hon. Gentleman, again, is inferring continued corruption. This report said—

[Grahame Morris]

I did not!

--- Later in debate ---

[Lee Rowley]

The hon. Gentleman said “the C-word”. That is inferring corruption, which has been absolutely comprehensively disproven in this report. The hon. Gentleman then went on to talk about value for money and the financial position, which is important. It is vital we put on record that the liability of this site—a massive site, which had liabilities in the hundreds of millions of pounds, if not more, and was costing the best part of £20 million a year just to keep in its dirty state prior to any clean-up—was falling on the taxpayer in the main.

The only reason these changes and the joint venture have been brought forward is to transform the area for the good of the area in the long term. I note, once again, what happens when Labour Members do not like a report that they called for—when it does not have the conclusions that they asked for and does not get to the place they wanted it to. What do they do? They just call for another one.

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I am glad to hear that nothing illegal has happened, but sometimes in this world it is what is legal that really shocks us. Like me, the Minister probably remembers that when the Secretary of State for Levelling Up, Housing and Communities came before the Business and Trade Committee, he said that this freeport was a flagship for the policy. Yet paragraph 1.7 of the report concludes:

“a number of decisions taken by the bodies involved do not meet the standards expected when managing public funds.”

The firm was allowed to buy 100 acres of land at £1 an acre; it was given rights to sell scrap metal of £50 million; it then went on to sell the lease it had for, I think, about £93 million; and it has booked £124 million of profit in the course of two years. Surely there are lessons to be drawn about how we absolutely maximise value for money in what is still a novel and important policy. It is for that reason that it would benefit all of us in this House if the NAO was allowed to get to the bottom of the question of how we ensure that profits like these are not just extracted from the taxpayer.

[Lee Rowley]

The right hon. Gentleman has clearly read some of the report. I just want to draw his attention to some other elements of it. Paragraph 12.7 states:

“The project is described as the largest regeneration project undertaken in the UK covering thousands of acres of land. The project is complex and the JV between the public and private sectors brings the inevitable cultural tensions between the desire to move at pace unencumbered by bureaucracy as opposed to the expectations of accountability and transparency”.

The report itself says that there was a debate to be weighed up on that, but it also states in paragraph 6.14, on the very point about the involvement of business and regeneration, that there was “no obvious viable commercial” proposition for regenerating part of the land, and that the joint venture

“was critical to being able to reach agreement with the Thai Banks”

to start it in the first place. It was necessary, it has been done, and it will be transformative for the people of Tees Valley.

[Matt Western (Warwick and Leamington) (Lab)]

The Minister talks about this being a complex project, but I am not quite sure exactly how complex it is. As I see it, Teesworks reported a turnover of £143 million, on which it made a £50 million profit—a 35% return. The only similar return I have seen recently was Baroness Mone’s, for her personal protective equipment. Given the scale of what I think is a scandal and many view as a scandal, the public expect the NAO to undertake an independent report. I admire the Minister’s conviction, but will he not support an independent NAO report to corroborate and validate his own?

[Lee Rowley]

The hon. Gentleman appears to be questioning whether the site is complex. These are not my words, but the words of the review, which many of his colleagues have used, often out of context in the past half an hour, to throw accusations around the place. He stood up once before, on 7 June 2023, to indicate that he thought the project was “a scam”. He was not choosing his words carefully then and he is not choosing his words carefully now. He should consider whether he wants to withdraw any of them.

[John McDonnell (Hayes and Harlington) (Lab)]

I am choosing my words carefully. For past similar projects we have had NAO investigations after the event. Many of us have been disappointed by our own decision-making process of not producing reports soon enough. The issue here is that there are potential allegations of excess profits, so would it not be better to have the NAO vet the project with regard to excess profits at this stage, rather than run the risk of trying to learn lessons after the event?

[Lee Rowley]

I am grateful to the right hon. Gentleman for bringing that up. I repeat that we have just had an independent inquiry—an independent inquiry which went through a process that the Labour party, when last in government, set up. If the Labour party is so desperate to have an independent inquiry into the Tees Valley after one has already been completed, I would love to hear from them where their calls are for independent inquiries into Birmingham, Croydon, Slough and Liverpool, all areas where mistakes have been made by Labour administrations but which they do not want to talk about.

[Andrew Gwynne (Denton and Reddish) (Lab)]

The report into the Teesworks joint venture highlights gaps in the oversight and accountability of mayoral development corporations and such joint ventures. Given that the mechanisms of mayoral development corporations are being rolled out across England, will the Minister say what thoughts he and his Department have given to greater scrutiny and probity not just of the work of metro mayors, but in particular of the work of mayoral development corporations?

[Lee Rowley]

I am grateful to the hon. Gentleman for his question. Mayors and mayoral development corporations have the potential to be transformative for their areas, and both Conservative and Labour mayors have clearly made significant progress on that over the past decade or so. As I said in my opening remarks, we will carefully consider the recommendation that has been brought forward for the Department for Levelling Up, Housing and Communities, but it is absolutely important to remember—I will say it once more for the avoidance of doubt—that the charge was corruption and illegality and that has been proven to be incorrect. The report states that it is incorrect, and it is important that that is on the record and repeated again and again and again.

Leasehold and Freehold Reform Bill (Eighth sitting)

Lee Rowley Excerpts

Committee stage
Thursday 25th January 2024 Public Bill Committees

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

I beg to move amendment 46, in clause 26, page 42, line 19, leave out “, and subsection (2)”.

This amendment is consequential on NC6.

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

Government new clause 6—Notice of future service charge demands.

[Lee Rowley]

The amendment is consequential on Government new clause 6, which introduces a requirement for landlords to provide a future demand notice under section 20B of the Landlord and Tenant Act 1985 if the landlord has incurred costs and cannot issue a demand for those costs within 18 months. The new clause makes it clear that a future demand notice applies only in respect of variable service charges; as a result, there is no longer a need to include the reference to section 20B(2) in clause 26, which otherwise seeks to provide clarity on what measures apply to all service charges and what measures apply only to variable service charges. I commend the new clause to the Committee.

I turn to clause 26. It is important that all leaseholders have access to appropriate information on what they are paying for and the condition of their building. That will help them to determine whether their landlord is providing an adequate service or whether they are being overcharged. Many landlords already provide a good service; however, some do not, and that must change. The existing regime is geared up to protect leaseholders who pay variable service charges. There are some leaseholders who pay fixed service charges, and those leaseholders do not enjoy the same protections. Leaseholders who pay fixed charges have a right to receive a good-quality service, which means having a better understanding of how their funds are being used, as well as having access to key information on matters that are important to them, as we discussed before we adjourned.

Clause 26 extends part of the regulatory framework on the provision of information to cover leaseholders who pay fixed service charges. Subsection (2) amends section 18 of the Landlord and Tenant Act 1985 to create separate definitions of “service charge” and “variable service charge”. That enables the Government to provide clarity on which provisions in the 1985 Act apply only to variable service charges. Subsections (3) and (4) amend the 1985 Act to ensure that parts of the regulatory regime continue to apply only to leaseholders who pay variable service charges—that includes, for example, the ability to challenge the reasonableness of the service charge under section 19 of the Act. The measure will ensure that leaseholders paying fixed service charges are entitled to receive information of relevance to them. I commend the clause to the Committee.

I return to Government new clause 6. When section 20 major works are undertaken, landlords may require a leaseholder to pay for costs up front or pass on costs to the leaseholder once the work has been carried out. Where leaseholders are charged after work is completed, the leaseholder must be issued with a demand for payment within 18 months of the costs having been incurred or, alternatively, be notified in writing within the 18-month period that they will be liable to pay the costs in the future. Failure to meet one of those two conditions will mean that leaseholders are not liable.

There is no prescribed form or content of a notice under section 20B(2) of the Landlord and Tenant Act 1985, which has led to confusion regarding the meaning and effect of the section, and much case law has followed. It has also left leaseholders with uncertainty on whether they will be required to contribute, the amount of their contribution and when the demand for payment could be served; the new clause seeks to provide clarity on all of those. New clause 6 introduces new subsections (3) to (9) into section 20B of the 1985 Act, which will require landlords to specify the amount of costs incurred, the leaseholder’s expected contribution and the date by which the demand will be served. The intention is to give leaseholders certainty on costs that have been incurred by the landlord, their own individual liability and when they are likely to receive the demand.

The changes to subsections (2) and (3) require landlords to issue a future demand notice when they will be passing costs through the service charge more than 18 months after the costs have been incurred. Subsection (3) defines “future demand notice” as a notice in writing that relevant costs have been incurred, and that the leaseholder is required to contribute towards the cost by payment of a variable service charge. Subsection (4) sets out that the Secretary of State and Welsh Ministers can, by regulations, specify the form of the notice, the information to be included in it and the manner in which the future demand notice must be given to the leaseholder. Subsection (5) details that regulations by the Secretary of State and Welsh Ministers may specify that information to be included in the future demand notice should include an estimate of the costs incurred; an amount that the leaseholder is expected to contribute to those costs; and a date on or before which it is expected that the service charge will be demanded. We will work with landlords, managing agents and leaseholders to set out what a future demand notice may contain, to ensure that regulations require the right level of information.

Subsection (6) sets out that regulations may provide for a relevant rule to apply where the leaseholder has been given a future demand notice and the demand for payment is served more than 18 months after costs were incurred. Subsection (7) sets out the relevant rules and the leaseholder’s liability to pay the service charge where a future demand notice contains estimated costs, an expected contribution or an expected demand date. Subsection (8) also allows the landlord to extend the expected demand date in cases specified by regulations. That might be because of unexpected delays in completing the work, for example. The measures seek to provide leaseholders with more certainty on costs. I commend the new clause to the Committee.

Amendment 46 agreed to.

Clause 26, as amended, ordered to stand part of the Bill.

Clause 27

Service Charge Demands

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

I beg to move amendment 11, in clause 27, page 43, leave out line 12.

This amendment would remove provision for the appropriate authority to exempt certain categories of landlord from the requirements relating to service charge demands set out in subsection (1) of the clause.

Clause 27 replaces provisions in the 1985 Act with a new provision that imposes a simple requirement on landlords to demand payment of a service charge using a specified form, rather than, as is presently the case, in accordance with the terms under the lease in question—or, in the absence of any such provisions, in any manner that suits them. We very much welcome the clause, which should ensure that service charge demands and annual reports are provided to leaseholders in a standardised format. If it works well, the clause is likely to have the most widespread practical impact of any provision in the Bill, given that many hundreds of thousands of service charge demands each year will have to be in a prescribed form.

The clause will also ensure, by means of inserting proposed new section 21C into the 1985 Act, that where the demand for service charge payments is not in the specified form, containing the specified information and provided to the leaseholder in the specified manner, the lease provisions relating to late or non-payment do not apply to the charge in question, and there is no obligation to pay until they are met. There is also a new sanction for non-compliance, which we will consider in due course. The effectiveness of the provisions in the clause will ultimately rely on enforcement, but new section 21C should ensure that the majority of freeholders and managing agents comply with the requirement to issue a service charge in the standardised form.

We do, however, have two concerns about aspects of the clause. Amendment 11 addresses the first of those concerns, which relates to exemptions from the requirements being introduced. New section 21C(3) confers powers, by regulations subject to the negative procedure, on the appropriate authority to exempt certain landlords. We have reservations about the inclusion of such powers, because they could be used to exempt entire categories of landlords from the requirements set out in subsection (1), and thereby deny large numbers of leaseholders the benefits that they would otherwise secure as a result of their application. Amendment 11 simply deletes subsection (3)(a) to remove the power to provide exemptions from subsection (1) for certain types of landlords. We hope the Minister will consider accepting it. If not, we would be grateful for some clarity on what kind of landlords the Government believe might need to be legitimately exempted from the relevant requirements, and some reassurance that the power will be used sparingly and in an extremely limited manner.

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[Lee Rowley]

I thank the shadow Minister for his amendment. We will resist it for reasons that I will give, and I hope I can reassure him to the extent that he does not seek to push it to a vote. I am happy to give at least one instance of a good reason for exempting landlords now or in future: there are cases where it may be too costly or disproportionate to expect a landlord to provide this degree of information, or where doing so is unnecessary. An example that I was not aware of before I was told is a freeholder of two flats who resides in one of them; that is known as a Tyneside or criss-cross lease, which became common in the north-east of England in the 19th century. Given the limited number of people who live in there, and the reason for that structure, we would deem it unnecessary to provide this form, hence the ability to exempt.

However, to address the hon. Gentleman’s key point, notwithstanding individual exemptions, I am happy to place on record that once we have consulted, understood people’s views, taken on the broad range of views about this, and potentially found other things like criss-cross leases, we would expect any list to be very small indeed. We share the clear hope that the power will be used only where it is absolutely necessary, and certainly not to the extent that the hon. Gentleman fears. I hope that, on that basis, he may consider withdrawing his amendment.

[Matthew Pennycook]

I thank the Minister for that response. I was also unaware of criss-cross or Tyneside leases, although the Opposition Whip, my hon. Friend the Member for North Tyneside, indicated to me during the Minister’s remarks that she used to live in one, so she will have some familiarity with them. On the basis of the Minister’s response, and given the reassurances that he has provided, I am happy to withdraw the amendment. It is our hope that the measure will apply to very limited categories of landlord, and I think that the Minister indicated as much, so very few leaseholds will be exempt from the requirements. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Lee Rowley]

I beg to move amendment 47, in clause 27, page 43, line 24, after “1987” insert “(‘the LTA 1987’)”

This amendment and Amendment 54 align references to the Landlord and Tenant Act 1987 with other references to Acts.

[The Chair]

With this it will be convenient to discuss Government amendments 54 and 124.

[Lee Rowley]

Amendments 47 and 54 are required because of new clause 9, which amends the Landlord and Tenant Act 1987. They ensure that references to the Landlord and Tenant Act 1987 are aligned with other references to Acts, by adopting the abbreviated reference. Amendment 124 is consequential on amendments 47 and 54; it aligns references to the Landlord and Tenant Act 1987 with other references to Acts in the Bill. I commend these amendments to the Committee.

Amendment 47 agreed to.

[Matthew Pennycook]

I beg to move amendment 12, in clause 27, page 43, line 38, at end insert—

“(c) in section 48 (notification by landlord of address for service of notices), after subsection (3) insert—

‘(3A) Subsections (2) and (3) do not apply in relation to a written demand for payment of a service charge if section 21C of the Landlord and Tenant Act 1985 requires the demand to include information which subsection (1) also requires to be provided to the tenant.’”

This amendment would ensure consistency between the information requirements provided for by Clause 27 and specific contractual requirements set out in leases.

Amendment 12 addresses our second concern with clause 27, which relates to consistency between it and existing contractual requirements. This issue came to our attention purely as a result of written evidence—actually, to be precise, I think it was as a result of a blog post—from Mark Loveday of Tanfield Chambers. He drew attention to the fact that the amended provisions in this clause are likely to supplement, rather than replace, contractual requirements in some existing leases about the form of demands for payment. There is therefore potentially a risk of confusion and duplication. Mr Loveday also highlighted the overlap between provisions in the 1987 Act relating to the information to be furnished to tenants, and the fact that clause 23(4) does not disapply the information requirements of section 48 of the 1987 Act.

I throw my hands up: this is far from my most elegantly drafted amendment. It is simply an attempt to probe the Government on the consistency between the information requirements provided for by this clause and provisions in 1987 Act relating to specific contractual requirements set out in leases. I look forward to hearing the Minister’s thoughts on the amendment, and on the general need to ensure complete consistency between the measures being introduced by clauses 26 to 30 and those in the 1985 and 1987 Acts that set out the main limitations on variable service charges in residential leases.

[Lee Rowley]

I thank the hon. Gentleman for his amendment. The advice that I have received is that the amendment is unnecessary. Sections 47 and 48 of the 1987 Act already prescribe that landlords must give details of their name, and an address in England or Wales where they can be served with notices, when making a demand for rent or other sums, including service charges. Clause 27(4) provides clarity on the fact that if there is an overlap between information required under proposed new section 21C of the LTA 1985 and the obligations under the 1987 Act, proposed new section 21C takes precedence. For example, if the new standardised service charge demand form requires a landlord to give the same information as is provided under sections 47 and 48 of the 1987 Act, proposed new section 21C would take precedence, and failure to provide the information would be dealt with by the provisions of the proposed new section.

Critically, the new standardised demand form will not restrict the amount of information that must be provided with a demand. Landlords will be able to provide additional information on the demand form if they wish. That may include any information set out in the lease. Unless we have missed something, we believe that, for that reason, the amendment is unnecessary, and request that it be withdrawn.

[Barry Gardiner (Brent North) (Lab)]

I think the Minister referred to section 47 of the Landlord and Tenant Act 1987. Is he entirely confident that that is effective? I have a case in my constituency, in Wembley Central Apartments. The co-developers have sold on and on, and the owner is now in the Cayman Islands. The UK address to which one can apply is that of the managing agents, Fidum, but Fidum says, “We have asked our principals, and they say that they have asked their principals,” and it goes all the way to the Cayman Islands, and one gets nothing back. The leaseholders have been desperately trying to access the information for months. They have served the correct notice to the correct address in the UK, but they still cannot get the information that they require.

[Lee Rowley]

I recognise that in some instance it is an incredibly frustrating process to go through. As I know the hon. Gentleman will appreciate, this is a pretty technical element of policy. The assurances that I have received from officials and experts involved is that the legislation should cover those bases. There will always be challenges around finding people and going through operational processes. There will be challenges in finding people who do not want to be found easily, but ultimately the law is clear that they need to be found. From that perspective, I think that the law is sufficient. We do not think anything has been missed, but if something has, we will happily receive further correspondence and consider it.

[Matthew Pennycook]

I will be brief. My hon. Friend the Member for Brent North raises an interesting point. Can the Minister—if not now, then perhaps in writing—expand on whether, where a landlord has not complied with the relevant requirements, proposed new section 21C means that the provisions relating to late or non-payment do not apply? Does it provide that level of protection? The hope is that it does.

On the general point, I welcome the clarification and assurances that the Minister has provided. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause, as amended, stand part of the Bill.

[Lee Rowley]

Service charge demands are one of the most important ways in which leaseholders receive information from their landlord, as we have been discussing. Under current arrangements, landlords are required to issue any service charge demand in accordance with the terms of the lease, or otherwise in a manner that suits them. That has led to variable practice in the sector, which has often been to the detriment of the leaseholder, who then gets confused about what they are paying for and has to spend time chasing the landlord for more information.

Proposed new section 21C enables the Secretary of State and Welsh Ministers to prescribe a standard form and the information that it should contain. We will work closely with leaseholders, landlords and managing agents to ensure that we prescribe both the right information and the right level of detail. Proposed new section 21C(2) makes it clear that a failure to provide information in the new standard format will mean that the leaseholder does not have to pay the charge until the failure is remedied, and any provisions in the lease for non-payment will not apply. The Secretary of State will also have the power to create any exemptions if our work with stakeholders demonstrates that there is a good case for any landlord being excluded, either now or in the future.

Clause 27(2) omits existing legislation relating to obtaining information on a summary of costs, as well as other unimplemented legislation surrounding service charge demands. Those measures will be superseded by the provisions we are implementing in part 3 of the Bill, so it is not necessary to retain them. That measure, alongside others, should ensure that landlords provide relevant information to leaseholders, and I commend the clause to the Committee.

Question put and agreed to.

Clause 27, as amended, accordingly ordered to stand part of the Bill.

Clause 28

Accounts and annual reports

[Barry Gardiner]

I beg to move amendment 130, in clause 28, page 44, line 17, at end insert—

“(iii) a statement of all transactions relating to any sinking fund or reserve fund.”

This amendment would require the written statement of account which the landlord will be required to provide to a tenant to include a statement of all transactions relating to any sinking fund or reserve fund in which their monies are held.

This amendment would require the written statement of account, which the landlord will be required to provide to a tenant, to include a statement of all transactions relating to any sinking or reserve fund in which their moneys are held. Sinking or reserve funds in England and Wales contain literally millions of pounds. Even the smallest block of flats will have a fund of tens of thousands of pounds, yet leaseholders find that they cannot get information about what is happening with it. A landlord may be raiding it to meet their cash-flow problems, in the hope—which is not always fulfilled—of putting the money back later. If millions of pounds is held in a reserve account, leaseholders want to know what interest they may be earning on those funds or whether it is being quietly siphoned off by the landlord.

The amendment would require the written statement of account, which the landlord will be required to provide to a tenant, to include a statement of all transactions relating to any sinking or reserve fund in which their moneys are held. As colleagues will remember from the evidence session that we had before we started our line-by-line scrutiny of the Bill, Martin Boyd of LEASE—the Leasehold Advisory Service—and Andrew Bulmer of The Property Institute said that this provision was really important to include; indeed, it is now part of their voluntary code. They pointed out that it was originally included in the Commonhold and Leasehold Reform Act 2002 but was never brought into force.

The provision is particularly dear to me because it is what started my campaigning for leasehold reform 26 years ago. A group of leaseholders in Mountaire Court came to me and explained that they had each paid £23,000 to their landlord, who was the head leaseholder. They lived in a block of 30 flats, so the total was well over £600,000. They said that the head leaseholder had gone into liquidation and that their money had gone. At that point, the freeholder came to them and said that they were prepared to do some of the work. The leaseholders had been arguing that the work should be done. The freeholder then came to them and said, “Yes, we’ll do the roof and the windows, but we need you to pay us £6,000 each to do that,” in addition to the £23,000 they had already incurred. They came to me and asked, “What guarantee do we have that our moneys are not going to be filched away in the same way as the original funds?”

I tracked back through Companies House—I think there were 156 different companies, which were ultimately registered, through Daejan Holdings, to Freshwater—to find out that the head leaseholder, who had gone into liquidation, had signed form 397, which allowed Freshwater to take any moneys that were left with the head leaseholder. All that money had gone back to Freshwater, and there was no way of accounting for it. The debate that I held with the then Minister at that time started the campaign. He said, “This is outrageous. These moneys should be held in some sort of escrow account.” They were not, however, and the leaseholders had no access to what was happening. It is important that there is real accountability for reserve funds, because at the moment it is being held blind from the people who are paying the money.

[Lee Rowley]

I am grateful to the hon. Member for his amendment. When I was a councillor in a location not too far away from him a number of years ago, I had similar experiences with the challenges of sinking funds, so I completely appreciate the point he makes. The amendment would prescribe that landlords provide specific information to leaseholders. I agree that they should have access to relevant information. My pushback is merely about where we put this as opposed to what we do, subject to consultation. I am very sympathetic to many of the points he made.

Clause 28(2) does give the appropriate authority the power to prescribe other matters that should be included as part of a written statement of account. We need a consultation to give relevant parties the ability to debate and discuss that and give their views. We must ensure that it is proportionate and cost-effective, but once we have gone through that consultation, I think there is a strong case for ensuring that there is sufficient information as he has outlined to some extent.

[Barry Gardiner]

I am grateful to the Minister for what he has said, but the strongest protection would be to have it on the face of the Bill. Even when it was on the face of the 2002 Act, the Government never brought it into force. So this is not something we have not had previously. It is right there in legislation for a leaseholder to have access to this information, but we have never brought it in. What the Minister is suggesting is actually a regressive step, taking leaseholders further away by saying, “We’ll do it through secondary legislation now.”

I really do think it is important to have this on the face of the Bill. We know how Committees work. I know the Minister cannot accept the amendment now, but I would ask him to go away and come back on Report. If he comes back with his own amendment to achieve the objective, I will be delighted.

--- Later in debate ---

[Barry Gardiner]

Oh yes, I was intervening.

[Lee Rowley]

Thank you, Mr Efford. Would my hon. Friend the Member for Redditch like to intervene on me?

[Rachel Maclean]

I thank my hon. Friend the Minister. Perhaps he would like to ask whether, given his extensive history and detailed knowledge on the subject, the hon. Member for Brent North knows why those provisions were not brought in following the 2002 Act. Or perhaps the Minister would like to update us if he has that knowledge for the Committee.

[Lee Rowley]

Sadly, I confess to not having that knowledge from back when I was at university; I probably was not studying the right things. I appreciate the point from my hon. Friend the Member for Redditch that there has been an opportunity for this to be implemented under Governments of both parties and it has not been done. I am always happy to listen to the hon. Member for Brent North, and I do appreciate the point he is making. It is this Government’s intention to move forward with this, albeit through secondary legislation, which I know he has concerns about. I am happy to put that on the record on the assumption and hope, at least on the Conservative side, that we are in government when this happens. I hope he will not press his amendment.

[Barry Gardiner]

I will press the amendment to a vote because I think it is important that we have it on the record.

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[Matthew Pennycook]

I rise to speak to speak to amendments 13 and 14. As I think my hon. Friend the Member for Brent North just touched upon, clause 28 inserts new sections 21D and 21E into the 1985 Act to create a new requirement for a written statement of account to be provided by landlords within six months of the end of the 12-month accounting period for which variable service charges apply. It also places an obligation on landlords to provide an annual report to leaseholders. We welcome the clause, as did my hon. Friend the Member for Brent North, for the reasons discussed in the evidence sessions last week. The 2002 attempt to mandate a form of regular service charge accounts and statements was ultimately unsuccessful, with the replacement section 21 of the 1985 Act never brought into force. As a result, service charge processes remain unstandardised.

A staggering range of different procedures are being used across the country. Some leases specify the form that annual budgets and accounts must take, while others do not. Some require certification by the freeholder, managing agent, management company, accountant or auditor, while others do not. Some prescribe deadlines by which budgets or accounts must be produced and make adherence to those conditions a precedent to liability to pay a service charge, while others do not.

Clause 28 clearly seeks to overhaul this fragmented patchwork of arrangements by introducing the new section 21D, making annual accounts and certification by a qualified accountant a mandatory requirement and, through new section 21E, introducing a statutory duty to provide leaseholders with an annual report about their service charges. By introducing the mandatory requirements that it does, new section 21D(2) implies a term into leases of dwellings with variable service charge provisions.

In our view, the decision to imply terms raises a number of questions and concerns. First, do the implied terms of new section 21D replace any equivalent existing provisions in the lease? If not, landlords and managers will potentially be forced to prepare two sets of accounts: one under the existing terms of the lease and the other under the new implied terms in section 21D. Secondly, why are no express sanctions for non-compliance included in new section 21D? That point was raised by Amanda Gourlay in the Committee evidence sessions.

Given that the implied terms are not covered by the enforcement provisions in new section 25A—provided for by clause 30—surely it is not the Government’s intention to require leaseholders to apply for specific performance through the courts when it comes to this matter. Thirdly, despite the clause including no right to recover implied costs, there is a risk that some landlords will nevertheless seek to recover the extra costs of complying with these requirements through service charges. Can we be sure that leaseholders will not find themselves picking up the bill for complying with the new mandatory requirements? I would welcome the Minister’s response to each of those questions and concerns, in writing if he is not able to address each in detail today—they are very specific and technical.

Perhaps the more significant question that arises from the decision to imply terms by means of new section 21D is whether the landlord’s compliance with those terms will be treated by the courts and the tribunal as a condition precedent to the lessee’s obligation to pay their service charges. We believe it is important that it is made clear in the Bill that compliance with the implied terms in question is a condition precedent to the lessee’s obligation to pay their service charges and that, by implication, leaseholders are not required to pay if the landlord does not comply with the implied terms. Amendments 13 and 14 would have that effect, with the same desired outcomes as the welcome amendment 131, in the name of my hon. Friend the Member for Brent North, but without the tribunal potentially having to arrive at a judgment on the state of mind of the leaseholder who is withholding their charge. I hope the Minister will accept those amendments as a means of providing the necessary clarification.

[Lee Rowley]

I thank the hon. Members for Brent North and for Greenwich and Woolwich for their amendments.

Amendment 131, in the name of the hon. Member for Brent North, seeks to enable leaseholders to withhold payment of their service charges when accounts are not provided within six months. I absolutely agree with the sentiment that information must be provided in a timely manner, and that there have to be consequences for not doing so. However, the question is whether withholding the service charge is a proportionate and effective means of doing so; the effective question is whether the risk of doing so creates unintended consequences. For example, were a leaseholder to withhold payments in circumstances where it is found that section 21D had been complied with, that may render the leaseholder liable to pay their landlord’s litigation costs, depending on the terms of the lease. Withholding payments also creates consequences for other leaseholders and may eventually mean that works are not carried out. I recognise that that is not the intention or the point that the hon. Gentleman is making, but in the portion that we are looking at, it is important that we consider all potential unintended consequences.

Services of certified accounts will, for most landlords, be a necessary step for a landlord to identify whether they have spent more than estimated during the accounting period and, where the costs incurred during that period are more than was estimated, the landlord will wish to serve a further demand to recover the shortfall. It is in the landlord’s interest to do that, but I recognise that not all landlords act in a completely rational way or a way that necessarily follows logic. Should a landlord, however, fail to issue a demand for costs within 18 months of those costs having been incurred, then through new clause 6, the leaseholder would not be liable to contribute towards those costs at all.

I realise that that answer will probably not address every part of the concern expressed by the hon. Member for Brent North; it is the same as when I applied that logic to the amendment in the name of the hon. Member for Greenwich and Woolwich. However, I hope it demonstrates both that we are clear that it should be done—that there is a logic, an incentive and a rationale for it to be done—and that there is ultimately a cliff at the end of it, a cut-off point in the event that they do not do it. I hope that provides some assurances; I will see whether that is enough to tempt the hon. Member for Brent North to withdraw his amendment.

[Barry Gardiner]

I appreciate what the Minister has said about that cliff edge of 18 months. We have talked about cynicism in this Committee before, but let me tell the Minister what I believe may happen. I think a landlord who is withholding information will decide that they can now do so with impunity for 17 months and 28 days, and then they will serve the required information up on a plate. The provision is almost tempting them to do that. If the Minister is going to rely on that, rather than looking at the question again in further detail, I urge him to reduce that timeframe substantially. I will not put a figure on it—I do not say that it should be 12 months, or nine months—but it should be reduced substantially. However, I am very happy to withdraw my amendment in favour of amendment 13.

[The Chair]

That was an intervention; I will come back to you.

[Lee Rowley]

I am grateful to the hon. Gentleman for his comments in that regard. To save time, the same logic applies from our perspective to amendments 13 and 14, and I hope that at least in part reassures him—I will wait to hear his comments, but I encourage him to withdraw his amendment if it does.

[Barry Gardiner]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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[Lee Rowley]

We have already talked about this, but in summary, most landlords are required under the terms of the lease to provide leaseholders with a written statement of accounts. Where leaseholders feel they have not been provided with sufficient information, they may ask for a written summary of costs for the past accounting period or, if the accounts have not been made up, for the period of 12 months ending with the date of the request.

We know that the current arrangements, as we have just discussed, do not provide adequate statutory protection. Although many landlords provide their leaseholders with sufficient information, others fail to do so. Subsection (2) of clause 28 introduces two new measures to address that. Proposed new section 21D of the 1987 Act implies into leases a new requirement for landlords who charge variable service charges and manage blocks of four or more dwellings. The threshold reflects existing arrangements for the preparation of a summary of costs. We are placing an obligation on such landlords to provide a written statement of account to leaseholders within six months of the end of the 12-month accounting period. This statement must be certified by a qualified accountant.

[Matthew Pennycook]

The Minister provides me with the opportunity to get my justification in, but, without going through it, he can answer the question that underpinned amendments 13 and 14 by simply telling me whether the decision to imply terms, as new section 21D does, means that a landlord’s compliance with them is to be treated as a condition precedent to the lessee’s obligation to pay their service charges.

[Lee Rowley]

I am grateful to the shadow Minister for his question, and, because of its specifical legal and technical nature, I will write to him. I know that members of the Committee may wish to seek assurances about the word “arising”, which was referenced in evidence last week. I am happy to give the assurance that we will consult accountants on to how to present these service charge accounts, which I hope will mean that there is a process to ensure that any necessary clarification of particular terminology will be clear to those who operate within it.

[Rachel Maclean]

In the same evidence session, we also heard Amanda Gourlay’s concern about the nature of the accounts being mandated, and she said that it is not something that she would recognise as a set of accounts because it does not have a balance sheet or expenditure. I think the Minister said that a chartered accountant will have to sign off on them. Can he reassure members of the Committee that that will address the concern raised with us by Amanda?

[Lee Rowley]

I thank my hon. Friend for her question. Yes, that is my understanding, and, as part of the response in writing, we will clarify that.

To conclude, new section 21E places an obligation on landlords to provide an annual report in respect of service charges and other matters likely to be of interest to the leaseholder arising in that period.

[Barry Gardiner]

Could the Minister clarify a point for me? Obviously, there are different forms of accounts, such as short-form accounts and audited accounts. In what he is proposing, as I understand it, there is no compulsion to have an audit of the service charges shown in those accounts. The certified accounts happened in blocks already, but they are pretty meaningless because the freeholder appoints the accountants and tells them what form they want them in. Surely the key is having not just the accounts but the service charges audited as proper.

[Lee Rowley]

I am going to include that in my written response, too, because I know that the specifics of the definition of audit are quite different from other aspects of this question. My understanding is that we will prescribe in secondary legislation what needs to be provided. Given that an accountant will be a part of that, they will have to ensure that the audit conforms to their usual codes of practice. I will write on the specifics to ensure that I have given sufficient information.

[Richard Fuller]

As the Minister is contemplating what he will put in his letter, including a response to the hon. Member for Brent North, could I gently remind him that auditing is an expensive procedure? There will be a number of instances where these accounts might fall short of what would be required under existing Companies House legislation. There are some metrics and things out there that the Government could use, but he should bear in the mind the cost of auditing.

[Lee Rowley]

My hon. Friend is absolutely right. One of the reasons why I want to write is that I want to ensure that the specific elements and substantive parts of the concept of audit are represented to the Committee in the most accurate way. We have to strike a balance by ensuring that sufficient information is made available for decisions to be made, but equally we cannot create a process that is so involved, for what I am sure are very good reasons, that it would be disproportionate, and then create a whole heap of new consequences on the other side, which is what we are trying to avoid.

To conclude, new section 21E places an obligation on landlords to provide an annual report. For service charges, that report must be provided within one month of starting a 12-month accounting period, although it can be provided earlier if it is expedient to do so. Both new sections allow the Secretary of State, as we have already discussed, and Welsh Ministers to prescribe the detailed content in secondary legislation. We will work closely with interested parties when we come to do that. Subsections (3) and (4) make consequential changes to the definition of “qualified accountant” under sections 28 and 39 of the 1985 Act to reflect these new sections. I commend the clause to the Committee.

Question put and agreed to.

Clause 28 accordingly ordered to stand part of the Bill.

Clause 29

Right to obtain information on request

[Matthew Pennycook]

I beg to move amendment 15, in clause 29, page 46, line 19, at end insert—

“(3) Information specified for the purposes of section (1) must include accruals and prepayments and digital copies of service charge accounts.”

This amendment would ensure that regulations made by the appropriate authority must provide tenants with the right to accruals and prepayments and digital copies of service charge accounts.

As things stand, leaseholders only enjoy the right to request a summary of relevant costs and inspect supporting documentation in relation to such a summary. Barring a disclosure order made during tribunal proceedings, there are few direct means for leaseholders to secure relevant information. Clause 29 makes a series of changes to the 1985 Act to provide for a new stand-alone right for leaseholders to request information from their landlord, and we welcome it.

Precisely what such a right will entail will largely be set out in regulations that will presumably not only specify the relevant categories of information that can be requested and obtained, but the relevant timelines for compliance. We take no issue in principle with the detail being brought forward by statutory instrument—for obvious reasons—but we have tabled amendment 15 to ensure that the information that ultimately can be lawfully requested by leaseholders under clause 29 includes accruals and prepayments, as well as digital copies of service charge accounts.

We feel that statutory access to accruals and prepayments is vital because they are prepared on a true and fair basis and are necessary to understand most service charge accounts. The case for ensuring that service charge account information can be accessed by leaseholders in a digital format is, we hope, self-evident. I hope the Minister will consider accepting the amendment or, if he feels that he cannot, will at least provide the Committee with robust assurances that the relevant regulations will in due course specifically include accruals and prepayments and digital copies of accounts in the categories of information that can be requested.

[Lee Rowley]

I do not seek to detain the Committee, and I hope the hon. Gentleman will accept my short response. I am not disregarding the substantive points of the amendment, but some of them we have discussed before. I accept that this is an important area and we have to get it right. We must make sure that the information prescribed in the process works and is comprehensive enough for people to get a true understanding of what is going on and proportionate enough to make it meaningful and not incur unnecessary costs. I agree with the hon. Member that leaseholders should have access to the relevant financial information and that that information should be clearly understood and articulated so that people can derive decisions and comfort from it.

The Government prefer that the detail is prescribed in secondary legislation and are committed to consulting. It is fair to say that the details will be key parts of a discussion about the feasibility of inclusion in the final decision when it is made.

[Matthew Pennycook]

I welcome that response from the Minister. On that basis, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[Matthew Pennycook]

Arguably of more importance in ensuring that clause 29 is beneficial to leaseholders than the type of information that they will henceforth have the right to request and what form it is shared in is the need to protect them from excessive charges levied for providing that information. As it stands, subsection (4) of new section 21G of the Landlord and Tenant Act 1985 would allow person P to charge person R for the costs of doing anything required under new section 21F or this new section, while subsection (6) renders those costs relevant for the purposes of a variable service charge. In other words, new section 21F includes an implied right for landlords to recover the costs of supplying the relevant categories of information to leaseholders through the service charges, with penalties for non-compliance under clause 30.

We obviously do not take issue with the right to recover reasonable costs of complying with the mandatory requirements introduced by the clause, but there is an obvious risk, given everything we know about how some landlords in the market operate, that some will charge excessive fees for supplying that information. We have tabled amendment 16 to give the Secretary of State the power, just as the Bill provides for in other respects, to set prescribed amounts with a view to ensuring that leaseholders are not subject to unreasonable costs should they feel they need to request certain categories of information. I hope the Minister can understand the very simple point that the amendment is driving at and will consider accepting it.

[Lee Rowley]

I am grateful to the hon. Gentleman for moving amendment 16. He does not deny that landlords will incur a cost for answering information requests. The level of cost will vary, depending on the volume of information, the complexity, the period, the timeline and a number of other factors. There may be difficulties in obtaining all that information. Landlords may also incur a cost in chasing other people who hold the information required to answer a leaseholder’s request, notwithstanding our earlier conversations about the reasonableness of the costs for talking to other parties.

Given the variety of different scenarios, we start from a place in which it is very difficult to set a cap that would not create another unintended consequence somewhere else. None the less, I note the hon. Gentleman’s concern and am happy to confirm that we are listening very carefully on this matter, but I hope he might consider withdrawing the amendment.

[Barry Gardiner]

Amendments 132 and 133 would prevent a landlord from recovering the cost of complying with a requirement to provide information imposed by new sections 21F and 21G of the 1985 Act, which is very much in line with what my hon. Friend the Member for Greenwich and Woolwich said.

Given that the Government are rightly focusing on reducing costs to leaseholders, these amendments would ensure that a landlord cannot charge leaseholders for giving them information about their home and their charges. We do not charge voters or taxpayers for complying with freedom of information requests, so I am not clear why there should be a distinction here. Many requests and information transfers will now be made electronically. The days when people had to go to the office to pull out hordes of receipts are, I hope, a thing of the past. These requests and transfers should not involve a great deal of expense.

Again, I do not want the Minister to think I am a cynical chap, because I am not, but I know what will happen. There will be the same hierarchies that we talked about earlier. Landlords will create arm’s length companies to hold this information in tiers and categories, and they will charge for providing information at each level. That is what they do. We have to understand that it is not a mistake or one bad apple. Many landlords adopt this practice as a way of securing revenue. Painful though it is to admit that our fellow citizens do this sort of thing to each other, they do. We are passing this legislation to try to protect people.

[Lee Rowley]

I will not detain the Committee, because my response will be similar to the one I gave to the hon. Member for Greenwich and Woolwich.

We accept the broad point made by the hon. Member for Brent North but, for the reasons I outlined previously, we think it would be difficult to do this. There is at least an argument that proportionality has to be considered. However, I am happy to confirm that we are listening very carefully. On that basis, I hope the hon. Member for Greenwich and Woolwich may be willing to withdraw amendment 16.

[Matthew Pennycook]

I appreciate what the Minister has said, both about the variety of circumstances that need to be covered and about the difficulties with imposing a flat cap. I take on board what he said about the Government listening carefully.

I am minded to press the amendment to a vote purely to indicate how strongly we feel about this issue. The thrust of the five provisions is, “Let’s increase transparency and let’s increase the enforcement measures,” all ultimately to ensure that leaseholders have a better ability to bear down on unreasonable costs, and it is of great concern to us that while we are trying to do that, we are opening up other routes whereby unscrupulous landlords can start to introduce unreasonable costs in relation to the very things that we are trying to clamp down on. We will press the amendment to a vote simply to put on the record our concern in respect of leaseholders needing some protection—even if it is not a flat cap—from unreasonable costs being passed on through this mechanism.

Question put, That the amendment be made.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

As I outlined in relation to clause 28, the Government accept that the current arrangements do not provide adequate statutory protection. In addition to the measures set out in clauses 26 to 28 to drive up transparency, clause 29 introduces new provisions to enable leaseholders to request information from their landlord or a third party who holds relevant information. Subsection (2) introduces proposed new section 21F of the Landlord and Tenant Act 1985, which sets out provisions that enable leaseholders to receive information on request. That information may relate to

“service charges, or…services, repairs, maintenance, improvements, insurance, or management of dwellings.”

One example might be a stock condition report for the building. Landlords will be obliged to provide information that they have in their possession, and where they need to ask another person for it, that person is required to do the same.

Proposed new section 21G provides further details on information requests under section 21F. It allows a leaseholder to request that they inspect a document and make and remove a copy of the information. Section 21G also provides that landlords may not charge the leaseholder for providing facilities for access, although they can charge for the making of copies. Alternatively, the landlord can pass the reasonable costs of any inspection through the service charge. This section allows the Secretary of State and Welsh Ministers to specify the time period for providing such information, circumstances in which that period may be extended and how the information is to be provided.

Proposed new section 21H provides that where the lease is assigned, the obligation to provide the information requested under section 21F must still be complied with. However, the person obliged to provide the information is not required to provide the same information in respect of the same dwelling more than once.

Question put and agreed to.

Clause 29 accordingly ordered to stand part of the Bill.

Clause 30

Enforcement of duties relating to service charges

[Matthew Pennycook]

I beg to move amendment 19, in clause 30, page 49, line 15, leave out “damages” and insert “penalties”.

This amendment, together with Amendments 20 to 25, would make clear that the sum to be paid to the tenant in circumstances where a landlord failed to comply with duties relating to service charges is a punishment rather than a recompense for loss to the leaseholder thus ensuring it is not necessary to provide proof of financial loss. See also Amendments 17 and 18.

[Matthew Pennycook]

Clause 30 substitutes existing section 25 of the 1985 Act, which includes penal provisions dealing with any failure to comply with the relevant provisions, with proposed new section 25A, which decriminalises the sanctions and applies a new enforcement regime. The new enforcement regime will allow a tenant to apply to the appropriate tribunal in instances in which their landlord did not demand a service charge payment in accordance with section 21C under clause 27, failed to provide a report in accordance with section 21E under clause 28, or failed to provide information in accordance with sections 21F and 21G under clause 29. The tribunal will have the power to issue an order that the landlord comply with the relevant provision within 14 days and that they pay a fine of up to £5,000 to the applicant, or other consequential orders.

We welcome the new enforcement regime, but we have three main concerns about how it will operate in practice. With amendments 19 to 25, we seek to address the first of those concerns, which is our fear that the use throughout clause 30 of the term “damages” may imply that leaseholders are required to provide proof of financial loss for the tribunal to order that the landlord pay a fine for failing to comply with one or more of the modified requirements introduced in clauses 27 to 29. The risk that the tribunal takes that view, and thus stipulates that proof of financial prejudice is required, is real, as we have seen with the reforms made to section 20 of the 1985 Act. We tabled this group of amendments to encourage the Government to consider replacing “damages” throughout the clause with “penalties” to make it explicit that an order for failing to comply with requirements under sections 21C, 21E, 21F or 21G of the 1985 Act requires no proof of financial loss on the part of leaseholders. I look forward to hearing the Minister’s thoughts.

[Lee Rowley]

I thank the hon. Gentleman for amendments 19 to 25, with which, as he indicated, he seeks to adds clarity that any sums paid to the leaseholder where there is a failure to comply are a punishment rather than a recompense for loss. As the Committee is aware, clause 30 will replace the existing and ineffective enforcement measures for failure to provide information with new, more effective and more proportionate measures. That includes allowing the leaseholder to make an application to the appropriate tribunal in cases where landlords have failed to provide the necessary service charge information.

It is the Government’s view that the tribunal is the appropriate body to handle such disputes and to determine whether the landlord has failed in their duties, and whether subsequently they are required to pay damages to the leaseholder. In reaching its decision and ordering that damages be paid, the tribunal need only be satisfied on the balance of probabilities that the landlord breached the relevant section. If a financial penalty were applied, the appropriate tribunal would need to be satisfied beyond reasonable doubt that the landlord had breached the relevant section.

While I understand the hon. Gentleman’s point on the use of the term “damages”, I am advised that its use does not mean that evidence of financial loss is required. Therefore, in aggregate, we consider that financially recompensing the affected leaseholder by way of the payment of damages is both a suitable incentive for the leaseholder to bring the application and a suitable deterrent for landlords, while aligning with the tribunal’s powers.

[Richard Fuller]

The Minister speaks quickly and is knowledgeable about this matter; I just want to put it into everyday speak that the rest of us can understand. I think that the intention behind the Opposition’s amendment is to be clear that there is a difference between penalties and damages. They do not want the burden of proof to be on leaseholders, in this case, and there is tremendous merit to that. Whatever we put into law has to be accessible to people. I think the Minister said that if we change the word from “damages” to “penalties”, that would raise the hurdle. Can he assure us of his objection to the proposed amendment in everyday speak,? As the Bill is drafted, the hurdle will be lower, and there will be no burden of proof on the leaseholder for the penalties/damages to take effect.

[Lee Rowley]

As best as I understand it, the situation is exactly as my hon. Friend describes. The threshold is lower, and therefore the provisions are more proportionate, and evidence of financial loss is not required. On that basis, I hope that the hon. Member for Greenwich and Woolwich will withdraw the amendment. I will come to amendment 134 in due course.

[Barry Gardiner]

Amendment 134 would enable a tribunal to order the remedy of a breach in respect of, and damages to be paid to, a leaseholder affected by a breach revealed by an application to the tribunal, even if the leaseholder is not party to the application. Let me explain why that is appropriate. In an estate in my constituency, Chamberlayne Avenue and Edison Drive, FirstPort was the estate manager. It failed in the case that went to the leasehold tribunal, which was brought by one member of the estate. The tribunal quite correctly found in favour of the leaseholders. However, everybody else on the estate was equally affected, and they are now all having to bring a separate tribunal case against FirstPort in order to receive the same benefits and relief. It seems to me that where that is the case, it would make sense for the tribunal to be able to instruct the landlord that where there has been a failure affecting all the leaseholders, they should remedy that breach to all the leaseholders, not just the one who brought the case, if there are damages.

I was heartily gratified by the explanation that the Minister and the hon. Member for North East Bedfordshire gave about “damages” not being the legalistic sense of damages, because I was beginning to worry that the second part of my amendment might fall foul of exactly what my hon. Friend the Member for Greenwich and Woolwich said. However, if we want to free up and speed up the tribunal system, that would be one way of doing so that would afford great relief to the very many people trapped in that situation.

[Lee Rowley]

I thank the hon. Gentleman for his amendment, which he has just outlined. The Government are sympathetic to the intention of the amendment. It is not that we do not understand the point that he has made or the point that he articulated in relation to Chamberlayne Avenue; where freeholders behave badly, it should apply across the board, and that is the kernel of the point he makes. The challenge—and I am sorry to be difficult about it—is that, as I know the hon. Gentleman will appreciate, there is a potential ramification to asking a tribunal to make a read-across from one case to every other one. Even though it is highly likely that it will apply to all or almost all of those cases, there is the difficulty of creating the link that makes the assumption that it must apply. For that reason, we do not think we can accept the amendment, although I am sympathetic to the point made by the hon. Gentleman.

[Barry Gardiner]

I am grateful to the Minister, because it is really good to know that he will consider those points further. Let me therefore make a suggestion: if the tribunal were given powers through secondary legislation on estate cases where the matter is remedying something about the estate that applies equally to everybody, it should be obvious to the tribunal that anybody living on that estate is equally affected.

Let me give an example. If the managing agent, FirstPort, says that it has mended a fence, and it has charged everybody for mending that fence, but it is found that it did not mend the fence and it was not its fence to mend—this is the actual case. Everybody on the estate received those charges, and everybody on that estate was due therefore to be compensated for them. That will happen in some cases, but I accept what the Minister says. Would it make sense to consider giving the tribunal the power to instruct the managing agent to remedy the breach for any of those similarly affected, such that, if they did not, there was an additional penalty when that case was brought to the subsequent tribunal to prove that they were affected?

[Lee Rowley]

I am happy to ask the Department to look into that in further detail. I have no personal understanding of whether that would be possible or reasonable and proportionate and not have a series of other consequences, but it is reasonable to look into it further.

[Matthew Pennycook]

Briefly, I welcome what the Minister said on the issue of damages versus penalties. It could be another word than “penalty”, but I hope the point that the amendment tried to make was understood. I am not certain, because I, like him, do not have expertise in the area, whether “damages” could be misinterpreted by a tribunal, notwithstanding what he said. I encourage the Minister to go away and ensure that the reassurance he has given—it is on the record and can be referred to, which is helpful—is understood and cannot be misinterpreted. I think we share the same end: this must be punishment rather than recompense, and leaseholders cannot be expected to provide proof of financial loss. If, as the Minister has indicated, that is the shared intention, I am happy to ask leave to withdraw the amendment, but I hope he will go away and reassure himself further that the tribunal can have no confusion on that point. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[Richard Fuller]

I am tempted to frame page 25 of today’s amendment paper, because it includes the shadow Minister’s amendment 17, which would increase the penalties from £5,000 to £30,000, and my amendment 142, which would increase them from £5,000 to £50,000. I thought it was usually the Conservative party that is pro-business and tries to keep costs on business low, but then I recalled that these penalties apply to people doing something wrong, and of course the Labour party is always soft on criminals.

Seriously, though, the shadow Minister and I have a clear intent, which I am sure is shared by the Minister. A lot of the measures in this part of the Bill are trying desperately to unpick complicated things and rebalance them in favour of people who own their own home but do not run a large business, or people with small financial interests, where there are 30 or 40 of them against one person with a significant financial interest that covers all those people. In trying to rebalance things here, we all want to ensure that these measures are as effective as possible and that there is enough encouragement to ensure that the good practice the Government want to see can be done effectively.

The concern that I share with the shadow Minister is that the current levels of penalties just look like a cost of doing business. [Interruption.] Indeed! The hon. Member for Brent North has just slapped himself on the wrist, which is probably how many businesses will see it.

Can I gird the Minister’s loins and encourage him to take up his shield and his sword of righteousness in defence of individual leaseholders and say, “This amount is too low. We shall change the legislation. This party and this Government stand to make the intent of what we will do to truly bite on those who are doing wrong”?

[Lee Rowley]

I am grateful to my hon. Friend the Member for North East Bedfordshire and the hon. Member for Greenwich and Woolwich for tabling their amendments. I share their basic conceptual desire, and that of other Committee members, for people or organisations that have done the wrong things to be held to account. There should be penalties that recognise that they have done the wrong thing. The challenge is always going to be where we draw the line.

I recognise that there are multiple parts of the menu on offer. Notwithstanding the very valid points that have been made, it is important not to lose sight of the fact that the Government are doubling the number from £2,500 to £5,000. Individual right hon. and hon. Members will take different views throughout this process and beyond on whether that is proportionate or whether it should be higher or lower. We think we have struck a proportionate balance.

I will add to the record, for consideration, the importance of the potential for unintended consequences. The response will quite rightly be that it will ultimately be for the tribunal to determine how much to apportion and how to use any changed option. There is a scenario in which the potential penalty on the freeholder, or the party being taken to the tribunal, becomes so great and the hazard becomes so visible that the freeholder starts to oppose it with even more objections, difficulties and the like.

I am making quite a nuanced argument, and Members may feel that I am overthinking this, but we have to be cautious not inadvertently to create a process that emboldens freeholders to fight even harder because of the potential hazard and because they feel that they may be exposed to a fine larger than would be reasonable and proportionate. However, I take the point about the challenge of setting the penalty in the right place. The Government’s view is that the increase from £2,500 to £5,000 is a step forward. That is what we are proposing to this Committee. As a result, we will resist the amendments.

[Matthew Pennycook]

To clarify whether my reading of proposed new section 25A(5) of the Landlord and Tenant Act 1985 is right, is the penalty a single amount that is shared, or an amount per challenge? This is important.

--- Later in debate ---

[Lee Rowley]

I apologise for not covering that point; I intended to do so. It is £5,000 per challenge. There is the ability to bring forward multiple challenges. Should that be the case, similar amounts of damages may be awarded.

[Richard Fuller]

Sorry, I am such a pedant, but “per challenge” could relate to person A making the challenge that report x was not done on time, and then person B making the challenge that report x was not done on time. Do those two challenges count as two separate challenges because they are brought by two different people, although they are for the same objection, or as one challenge because they are for the same objection, although they are presented by two different people?

[Lee Rowley]

They are two separate challenges. If a challenge goes to the tribunal and it is deemed that a penalty should apply, for whatever reason or whatever poor behaviour, and a penalty of up to £5,000 is apportioned, and then another person makes the same claim about exactly the same instance, one would logically expect the tribunal to allocate the same penalty. Multiple challenges get multiple fines.

[Barry Gardiner]

Could the Minister elaborate on something? Where a group of leaseholders brings the challenge—let us say that 30 leaseholders in the block all club together and bring the challenge—is it one challenge that pays one set of £5,000, or is it 30 challenges that pay £5,000 each? Otherwise, we risk leaseholders bringing one challenge and then everybody thinking, “Okay, if I’ve got to, I will now do it,” and making the same challenge over and over again, clogging up the tribunals. That is not what we want. If they all come together and make that application, surely they should all get the damages that the tribunal feels is proportionate.

[Lee Rowley]

The hon. Gentleman is making a number of important points. As it is currently structured, one challenge of n people gets up to £5,000; if it is multiple challenges of one person or n people within challenge 2, challenge 3 or challenge 4, that would be £5,000. As it is structured at the moment, one challenge equals £5,000, irrespective of the number of people within that challenge.

[Barry Gardiner]

Does the Minister appreciate that that could lead to a situation in which we are multiplying challenges unnecessarily?

[Lee Rowley]

I absolutely appreciate the point that has been made. There is a balance to be struck here. Obviously we will need to go through the justice impact test, or whatever it is called, to check the volume of challenges that would potentially come into the tribunals system as a result of the changes in the Bill. Again, it is about trying to balance those very challenging concepts, making sure that there is a penalty—it is important to recognise that the penalty is doubling—but also that people have the ability to choose to do things or not do things. I know that members of this Committee will have different views about how to structure that balance.

[The Chair]

Order. We are getting a bit conversational in the exchanges we are having. Can Members make either interventions or speeches, please? It is difficult to follow what is going on up here.

--- Later in debate ---

[Lee Rowley]

I beg to move amendment 48, in clause 30, page 50, line 14, leave out subsections (4) and (5).

This amendment is consequential on Amendment 123.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Lee Rowley]

Amendment 48 is consequential on amendment 123, which we discussed in our debate on part 2. Amendment 123 ensures that the Bill is clear for the reader by grouping a set of related amendments that are consequential to section 26 of the Landlord and Tenant Act 1985, which clarifies that the provisions of amendment 29 do not apply to tenants of public authorities.

Clause 30 will introduce new, more effective and more proportionate enforcement measures to replace existing ineffective measures. Subsection (2) will repeal the existing enforcement provisions under section 25 of the 1985 Act, which allow a local housing authority or leaseholder to bring proceedings against the landlord in the magistrates court. This measure proved an ineffective deterrent and has hardly been used.

Subsection (3) will insert a new section 25A into the 1985 Act. It sets out routes to redress. Proposed new section 25A(2) sets out measures for situations in which landlords have failed to provide the information required to be included within the annual report or have failed to provide the service charge demand form in the prescribed format. When those circumstances apply, the leaseholder may make an application to the appropriate tribunal. The tribunal may order that the landlord must serve a demand for payment using the correct form under section 21C or provide a report in accordance with section 21E within 14 days of the order having been made. It can also order that the landlord pay damages to the leaseholder.

Proposed new section 25A(3) sets out measures for where the landlord has failed to provide information on request. In such circumstances, the leaseholder may make an application to the appropriate tribunal. The tribunal may order that the information is provided within 14 days, or that the landlord pays damages to the leaseholder, or both.

Proposed new section 25A(5) provides that the damages payable to leaseholders must not exceed the £5,000 figure that we have just debated. Proposed new section 25A(6) will confer powers on the Secretary of State and Welsh Ministers to amend this amount to reflect changes in the value of money, if they consider it expedient to do so. Proposed new sections 25A(7) to (10) contain measures to ensure that landlords cannot pass through service charge demands that they have been ordered to pay nor draw on service charge moneys held in trust and hence seek to reclaim their losses. I commend the clause to the Committee.

Amendment 48 agreed to.

Clause 30, as amended, ordered to stand part of the Bill.

Clause 31

Limitation on ability of landlord to charge insurance costs

Amendment made: 49, in clause 31, page 50, line 24, leave out from beginning to “insert” in line 25 and insert

“After section 20F of the LTA 1985”.—(Lee Rowley.)

This amendment is consequential on Amendment 51.

--- Later in debate ---

[Matthew Pennycook]

I will be fairly brief, because my hon. Friend covered a lot of detail. He is right to do so, because these are important clauses. We welcome the intent behind them, and we think they have the potential to address a very serious problem that has plagued leaseholders across the country for many years. Not just those in buildings with fire safety defects who have seen their insurance premiums soar in the aftermath of the Grenfell fire, but across the board, we are seeing leaseholders face unreasonable and in many cases extortionate buildings insurance commissions that the property managing agent, landlords and freeholders have charged through the service charge. We discussed this in our evidence sessions last week. The Financial Conduct Authority’s report of September last year on the subject of insurance for multi-occupancy buildings found evidence of high commission rates and poor practice, which were “not consistent” with driving fair value to the customer.

The FCA also found—I put this question to one of the witnesses in our evidence sessions, because I find it quite staggering—that the mean absolute value of commissions more than doubled between 2016 and 2021 for managing agents and freeholders of buildings with fire safety defects. Put simply, in far too many instances, managing agents, landlords and freeholders have been gouging leaseholders in this area with impunity. In practice, the effectiveness of this clause will hinge almost entirely on whether the definition of “excluded insurance costs” is sufficiently tightly drawn, and how we define “permitted insurance payments” for the purposes of specifying what payments can be charged.

I appreciate fully that the Minister will be bringing the necessary detail forward through regulations and we will scrutinise them very carefully when that happens. My right hon. Friend—sorry, just hon. Friend, but it is only a matter of time—the Member for Brent North is right to try to strengthen the clauses, because although the permitted insurance payments must be attributable to a permitted insurance, there is nothing on the face of the Bill to ensure that they or the cost of providing information in relation to them is reasonable to the leaseholders. As far as we understand the clause, there is no guarantee that leaseholders will be able to transparently scrutinise quotes or the agreed contract. We fully support my hon. Friend’s amendments 151 to 153, 157, and particularly new clause 41, which attempt to address some of these omissions and deficiencies. I hope the Minister will give them due consideration.

Specifically on my hon. Friend’s amendment 136, clause 32 introduces a new duty to provide specified insurance information to leaseholders. Again, it will be for regulations to fill out the detail about how the new duty will operate in practice, but I would like to briefly probe the Minister on it. During our evidence session with Matt Brewis of the Financial Conduct Authority, it became clear that although the FCA’s new rules mandate that a contract of insurance must be provided by an insurer or broker to the freeholder, and although the leaseholder will be able to write to the insurer to request a copy of the contract, there is nothing that we can see in either the FCA’s rules or the Bill as drafted that will permit a leaseholder to know who that insurer is in the first place. I would like to press the Minister, as my hon. Friend has, to confirm that the Government’s intentions when regulations are made under this clause is for the specified information to include a copy of the contract with the relevant insurer.

While we are considering these two clauses, I would like to take the opportunity to raise a separate concern, which I do not believe is covered by my hon. Friend’s amendments, in relation to proposed new section 20H of the Landlord and Tenant Act 1985, as provided by clause 31 of this Bill. This proposed new section would introduce a new right to claim where excluded insurance costs are charged. Again, this has the potential to provide leaseholders with effective means of redress, but its efficacy depends on how it is implemented. I would be grateful if the Minister could confirm that there is no specific requirement for any damages awarded under this proposed new section to credit the service charge accounts of leaseholders not party to the claim, or any service charge fund generally. It stands to reason that if one has been affected—and this follows from the debate we had on a previous clause—the rest of the leaseholders in the building will be too. If so, could the Minister look at how the regime operates to ensure that all leaseholders that have paid excluded costs are reimbursed in the same manner as the claimant?

[Lee Rowley]

I turn first to amendment 151, in the name of the hon. Member for Brent North. As someone who has held the building safety portfolio in my Department for the past 16 months, one of my greatest frustrations is that we have not yet made the progress that I would like to see, and that I am sure we would all like to see, with regards to insurance for buildings that have been affected by cladding, having made good progress on lending and other areas.

I think we have made some progress, and the willingness of a number of brokers to come together and voluntarily cap what they are willing to take is a step forward; I would like to see other brokers doing the same. I would also like to see an industry-led solution to be brought forward for those with the greatest exposures at the earliest possible opportunity. That is something I outline to the Association of British Insurers, and other insurers, on a very regular basis—with varying degrees of frustration and emphasis. I hope we will see movement on that in the very near future.

That is a broad discussion about a more specific issue—I will turn shortly to the amendments we are currently debating—although I hope that highlights my interest in this area and my desire to get this right not just for people with remediation and cladding issues, but for the broader community of leaseholders in general. On that basis, I hope that both the hon. Members for Brent North and for Greenwich and Woolwich will appreciate that we have similar ambitions in making sure that transparency in this area is as effective as it can possibly be, and that we ensure the appropriate outcome so as to improve things from where they are at the moment.

I turn to the amendments, specifically amendment 151. We believe that clause 31, which inserts proposed new section 20G into the Landlord and Tenant Act 1985, already achieves the intent behind the amendment by providing powers that allow the appropriate authority to specify the permitted insurance costs that can be passed through the service charge to leaseholders.

From discussions held with the insurance sector itself, and with the FCA, we know that the value chain is a complicated one. Some buildings rely heavily on the reinsurance market—we have seen that increasingly with remediation issues—using a broker for access, and some do not. Some place insurance with numerous insurers splitting the risk, whereas others only use one—the hon. Member for Brent North may know this from his previous engagement with the industry.

Clause 31 is designed to constrain unreasonable costs in all scenarios by defining a payment and allowing us to then separate these costs as either permitted or excluded. Although I understand the intent of the hon. Member for Brent North, the Government’s concern about amendment 151 is that in seeking to tighten the provisions, it may have pulled the strings a little too tightly and become too narrowly focused on certain elements. I hope the hon. Gentleman will consider withdrawing his amendment as a consequence.

Again, although I have great sympathy for the sentiment behind amendment 135, I hope the transparency provisions already in the Bill will help in this regard. Once implemented, they intend to enable leaseholders to have access to details of the policy and the total amount of remuneration being taken on their building's insurance placements. This can be used for a legal challenge if costs have not been reasonably incurred. Our concern with the amendment is the potential for delays in the placement of insurance, which could result in a lapse in cover to the material risks of the building. There also may be instances—although I hope it would be a minor number of cases—where three quotes cannot be obtained, as much as that is possibly unlikely to occur.

We seek to focus the legislation on ensuring that those buildings have insurance that works, with a balance that is appropriate and supported by regulatory changes brought in by the FCA. On the basis of that explanation, I hope the hon. Member for Brent North will withdraw his amendment.

I will address amendments 152 and 153 together. Again, we have are similar ambitions, aspirations and intent, but again, there is a question of narrowness through the amendments, and our view remains that clause 31 will allow full scrutiny of what is to be a permitted insurance payment. The intention is for that to be both through consultation and then subsequently set out in regulations through the affirmative procedure, which will allow hon. Members to debate measures and highlight if there is a better way of doing it. I hope that, with those reassurances, the hon. Member for Brent North may be willing to withdraw the amendments.

Amendment 137 seeks to introduce a reasonable test to permitted buildings insurance costs. At the heart of clause 31 is the need for any costs passed on to leaseholders relating to the placement or management of buildings insurance to be fair and transparent. That is the whole point of it. Section 19 of the Landlord and Tenant Act 1985 already requires for those costs to have been reasonably incurred and for a reasonable service to have been provided. We have obviously seen a whole heap of bad behaviour in this sector; I accept that that is the case. Within the sector, there is ubiquitous use of commissions with poor or no underlying connection to the work undertaken, and I hope that some of the progress made through the Bill will hopefully reduce that.

I do not believe that the amendment would sufficiently protect leaseholders. We seek very clear requirements in the secondary legislation for how permitted insurance fees will be calculated, and that their reasonableness be included in that. We will consult on the measures in due course, and I hope that, with those reassurances, the hon. Member for Brent North will withdraw his amendment.

I turn to clauses 31 and 32, which address insurance, before turning to some further Opposition amendments. Several actors in the procurement of buildings insurance each seek to make a profit in return for their role in supplying insurance, whether they be brokers, managing agents or landlords, who can all take commissions, and that all adds to the overall cost.

Currently, as we have discussed, leaseholders do not have to be made aware of these commissions, and that can hinder the ability of leaseholders to challenge unfair costs. Inflated premiums can be paid through the service charge because there is a lack of transparency and knowledge about what is happening. Clause 31 seeks to ban the placer of insurance on residential leasehold properties from receiving any form of commission that is passed on to leaseholders as a cost, and instead uses a transparent handling fee that must be proportionate to the value of the work done.

Proposed new section 20G provides that excluded insurance costs cannot be charged and enables the Secretary of State and Welsh Ministers to prescribe a permitted insurance payment, which will be the only payment that can be charged. The detail of calculating the fee is to be set out in affirmative secondary legislation, and we will work with stakeholders across the industry and in this place to support that.

Proposed new section 20H sets out what happens should the ban be breached. There is an ability to apply to the tribunal in England and the leasehold valuation tribunal in Wales. It also removes the presumption that leaseholders have to pay their landlord’s legal costs when challenging poor practices, as we talked about earlier. If the tribunal determines that the legislation has not been complied with, damages can be paid. That will be a minimum of the commission taken or the unlawful insurance handling fee, but it will not exceed three times the level of the commission or fee.

Proposed new section 20I outlines the right of the landlord to obtain a permitted insurance payment. The section clarifies how all costs for placing and managing insurance incurred by the landlord must then be charged to the leaseholder. Transparency reforms in the Bill will require the placer of insurance to disclose information about the decision-making processes when purchasing buildings insurance on behalf of leaseholders.

Amendments 154 and 155, tabled by the hon. Member for Brent North, seek to stipulate how the insurance contract is to be provided to leaseholders. We have been working already with the FCA on that area, and it has already produced a number of reports and changed its regulations. The changes allow leaseholders to receive their policy documents and information about the charges within their overall premium. Those changes are important to ensure that the relevant information is available, but they do not remove the necessity for the landlord to supply that information as the placer of the insurance. The amendments tabled by the hon. Member for Brent North remove the focus on the landlord’s responsibility to undertake that activity. Clause 32 is designed to complement the work of the FCA and to provide the powers necessary to ensure that landlords supply the information that will enable leaseholders to scrutinise. With those assurances, I hope that the hon. Member will not press the amendments to a vote.

--- Later in debate ---

[Barry Gardiner]

I am grateful to the Minister for the way in which he is engaging with the issue and for the points he has made. Given that it would be possible to relay the insurance contract electronically, will it be possible for secondary legislation to stipulate that any additional layers of complexity would be outwith the permitted costs? The Minister will see that I keep coming back to that theme, because unfortunately landlords add additional layers of complexity. We need to be sure that, where it is possible to do something simply, it is not permissible to recover the cost of doing it not simply, if I can put it that way.

[Lee Rowley]

The hon. Gentleman raises an important point. I will not try to solutionise in Committee, given the inherent dangers doing so from the Government Front Bench. We have committed to consulting, and there will be lots of experts and interested parties who will want to engage in that. As the hon. Gentleman suggests, transfers of data in an electronic form do not necessarily involve a substantial amount of time or effort, albeit that the provision and creation of the data in the first place may do. Those are exactly the kinds of things that we will want to talk about as part of the consultation, as and when it comes. On that basis, I hope that the hon. Member will consider not pressing amendments 156 and 157.

Amendment 138 seeks to require that charges made of parties where they request information from the landlord are reasonable, and I agree with the sentiment. Reasonableness is already required through section 19 of the Landlord and Tenant Act 1985. As I indicated in relation to amendment 137, reasonableness is not in itself a guarantee that costs will be constrained and proportionate, especially where the test is reliant on the assessment of normal behaviour across the sector. The Government would seek to deal with this area in secondary legislation, to ensure that the priorities of transparency and proportionality are in place. On that basis, I hope that the hon. Member will consider not pressing his amendment.

Before I conclude, I have two further points. Clause 32 confirms the importance of the intention of transparency, which is behind the Bill. The clause places a duty on landlords and managing agents that compels them to proactively provide information on building insurance to leaseholders. That should help leaseholders to better understand what they are paying for, and give them information they need to scrutinise that and take appropriate action, should that be necessary. The required information will be specified in the regulations, but it is anticipated that it should detail the insurance policy that is purchased, including a summary of the cover such as the risks insured, excess costs, premium costs and any remuneration received by the insurance broker. We also anticipate that it will include details of all alternative quotes obtained from the market and any possible conflicts of interest that arose during the procurement process.

Subsection (2) will insert new paragraph 1A into the schedule to the 1985 Act to allow leaseholders to request further information from landlords or managing agents. This could include full contractual documentation and policy wording, as well as the declaration of technical information that may have shaped the eventual premium price. We hope that giving leaseholders this improved information will allow them to challenge the reasonableness of their policy costs, if required. We expect that it will change landlord behaviour by making sure they are more price conscious, as it will be clearer that their movements are being watched. This will ensure that they do not try to pull a fast one on their leaseholders when it comes to insurance.

New paragraph 1B imposes a duty on third parties to provide landlords with any specified information requested within the specified period. Under paragraph 1A landlords will be obliged to provide information that is in their possession, and under paragraph 1B, where a landlord needs to ask another person for that information, that other person will also be required to provide the information within the specified timescales. Again, those timescales will be detailed in secondary legislation.

Clause 32 places requirements on landlords for how the handling fee that will replace insurance commissions will be disclosed to leaseholders. Again, this seeks to ensure greater transparency and allow more scrutiny where the charges are unreasonable.

Under paragraph 1C of the schedule to the 1985 Act, a leaseholder may make an application to the appropriate tribunal if their landlord fails to comply with the requirements under paragraphs 1A and 1B. I commend the clause to the Committee.

Finally, new clause 41 would preclude landlords from undertaking regulated insurance activity on behalf of a broker. Although I understand the sentiment behind this new clause, I hope the hon. Member for Brent North will recognise that the underlying point behind clauses 31 and 32, on which I hope we all agree, is transparency and fairness. These clauses will require the disclosure of fees charged for any work, as I have just indicated. We will prescribe what is a permitted cost that can be collected through the service charge, which should ensure that commissions that bear no connection to the work undertaken will not be permitted. It should also ensure that key documentation is provided.

[Barry Gardiner]

The Minister said that all the costs of the broker will have to be disclosed, which is absolutely right. However, where the landlord is operating under the provisions of the Financial Services and Markets Act 2000, he or she would be indistinguishable from that brokerage company and, therefore, the leaseholder will not be able to ascertain what was done by the broker and what was done by the landlord operating under the licence of the broker. What will be revealed is simply “the brokerage.” Unless we can unravel that, we will never get to the issue of kickbacks. As we saw with the Canary Riverside case before Christmas, those kickbacks can be frighteningly large—£1.6 million for one block. The disaggregation of what is the landlord qua broker and what is the broker qua broker is really important.

[Lee Rowley]

I will try to reassure the hon. Gentleman. I think we both agree on the intention behind full transparency and clarity, so that things are not being hidden in the “value chain,” to use a terrible expression from my previous life.

The secondary legislation for clause 31 will seek to define the permitted insurance costs, and we will consult specifically on issues around regulated insurance activity. I hope that secondary legislation will cover some of the hon. Gentleman’s points and allow him, and others with concerns, to make their case. We can then determine how best to approach it.

With that, I hope the hon. Gentleman will consider withdrawing his amendment.

[Barry Gardiner]

There is good news and bad news, Mr Efford. The good news is that I am content to withdraw amendments 135, 137, 154, 155, 136, 156, 157 and 138, but I wish to press amendments 151, 152, 153 and 157 to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Lee Rowley]

We know that there is currently a lack of transparency around administration charges and that leaseholders can face high administration charges. Administration charges must be reasonable, but this can be difficult to determine due to the lack of clarity surrounding them. As a result, leaseholders are often reluctant to challenge the reasonableness of administration charges at the appropriate tribunal.

Clause 33 inserts new paragraph 4A into schedule 11 to the Commonhold and Leasehold Reform Act 2002. It will require landlords to publish an administration charge schedule. A revised schedule must also be published if a landlord revises the administration charges. The Secretary of State and Welsh Ministers will be able to prescribe the form and content of the schedule, and how it is to be provided to a leaseholder, in regulations. If a landlord has not complied with the provision of publishing an administration charge schedule, a leaseholder may make an application to the appropriate tribunal. The tribunal may order that the landlord provide an administration schedule within 14 days and pay damages of up to £1,000 to the leaseholder. This measure seeks to increase transparency, and I commend the clause to the Committee.

[Matthew Pennycook]

As the Minister has just made clear, clause 33 amends the 2002 Act to create a new duty on landlords to publish administration charge schedules. We welcome it but, as with clauses 31 and 32, the effective functioning of the new requirement will depend on details such as the form and content of the schedule and how it should be published, all of which is to be set out in future regulations.

I have two specific questions for the Minister. The first largely mirrors my concern about the provisions in clause 31 relating to damages. If a tenant claims damages as a result of a breach of the requirements in new paragraph 4A of the 2002 Act, is it not likely that other tenants will have been similarly affected by the failure to publish an administration charge schedule? If it is the case that the damage provisions relate only to the claimant, will the Minister look at how the regime operates to ensure that all leaseholders who may have paid costs, other than in accordance with new paragraph 4A of the 2002 Act, are reimbursed in the same manner? It is a recurring theme, but it is worth putting on the record that it applies to clause 33 as well.

Secondly, along with other measures in the Bill that add new provisions for when a leaseholder is liable to pay a charge—in this instance, where an administration charge has been levied that has not appeared for the required period on a published administration charge schedule—how do the Government intend to make leaseholders aware of their new rights in this respect and in various other places throughout the Bill? Will he consider mandating that freeholders must furnish all leaseholders with an updated “how to lease” guide?

[Lee Rowley]

I am grateful to the hon. Gentleman for his questions. I will write to him on the answers or the process by which he can get them.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.

Clause 34

Limits on rights of landlords to claim litigation costs from tenants

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clause 35 stand part.

New clause 3—Prohibition on landlords claiming litigation costs from tenants—

(1) Any term of a long lease of a dwelling which provides a right for a landlord to demand litigation costs from a leaseholder (whether as a service charge, administration charge or otherwise) is of no effect.

(2) The Secretary of State may, by regulations, specify classes of landlord to which or prescribed circumstances in which subsection (1) does not apply.

(3) In this section—

“administration charge” has the meaning given by Schedule 11 of the Commonhold and Leasehold Reform Act 2022;

“dwelling” means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, or outhouses and appurtenances belonging to it or usually enjoyed with it;

“long lease” has the meaning given by sections 76 and 77 of the Commonhold and Leasehold Reform Act 2002;

“service charge” has the meaning given by section 18 of the Landlord and Tenant Act 1985;

“landlord” has the meaning given by section 30 of the Landlord and Tenant Act 1985.

This new clause would prohibit landlords from claiming litigation costs from tenants other than under limited circumstances determined by the Secretary of State.

[Lee Rowley]

We know that leaseholders can be deterred from challenging costs, or the services that their landlord provides, at court or tribunal for fear that they will also be charged their landlord’s legal costs. The ability of the landlord to charge litigation costs will depend on whether the lease allows for that. That can mean that leaseholders have to pay litigation costs even if they win. Currently, the onus is on leaseholders to make an application to the relevant court or tribunal to limit their liability to pay those costs.

Clause 34 seeks to flip that presumption, and instead requires landlords to apply to the relevant court or tribunal for permission to recover their litigation costs from leaseholders, whether as an administration charge or through the service charge. It does that by inserting proposed new section 20CA into the Landlord and Tenant Act 1985 relating to litigation costs passed through the service charge, and inserting proposed new paragraph 5B into the Commonhold and Leasehold Reform Act 2002 regarding litigation costs recovered as an administration charge.

In the future, a landlord’s litigation costs will not be payable by a leaseholder unless the landlord has successfully applied to the relevant court or tribunal for an order. The relevant court or tribunal may make such order where it considers it just and equitable in the circumstances. We have also taken a power to set out matters that the relevant court or tribunal must consider when making an order on an application. We will carefully consider the detail of these matters with stakeholders, including the tribunal.

Where the landlord is applying to pass on their litigation costs through the service charge, they will be required to specify each individual leaseholder they are seeking to recover their costs from. We have sought to further protect leaseholders by ensuring that a lease, contract or other arrangement has no legal effect if it seeks to disapply this legislation. These measures will prevent leaseholders from being charged unjust litigation costs by their landlord, and will remove barriers to leaseholders holding their landlord to account. I commend the clause to the Committee.

On clause 35, at the moment landlords can charge the costs of a legal dispute to leaseholders. This is an imbalance, as landlords are in a better position to seek legal representation and are more frequently represented than leaseholders at hearings. We understand that there is no other area of law where the parties start from such an unequal position. Clause 35 gives leaseholders a new right to apply to the relevant court or tribunal to claim their litigation costs from their landlord. It does that by implying a term into all leases, ensuring greater balance between landlords and leaseholders with regard to litigation costs. On a leaseholder’s application, the relevant court or tribunal may make such an order if it considers it just and equitable in the circumstances. We have also taken a power to set out matters in regulations that the relevant court or tribunal must take into account when making an order.

Clause 35 also makes it clear that any costs that a landlord is ordered to pay to a leaseholder are considered to be litigation costs incurred by the landlord. As such, if the landlord wants to recover such costs through the service charge or as an administration charge, they will need to apply to the court or tribunal under clause 34.

In addition, we have taken a power to describe which “relevant proceedings” will be subject to the leaseholder’s right to seek their costs. This is to help align the leaseholder’s rights with the right to costs that landlords currently enjoy. We have further protected the leaseholder’s right to recover litigation costs by ensuring that a lease, contract or other arrangement has no legal effect if it disapplies this legislation. I commend the clause to the Committee.

New clause 3 seeks to disapply terms in a lease that allow a landlord to recover their legal costs from leaseholders. It also allows exceptions for certain types of landlord to be set out by the Secretary of State in regulations. Currently, landlords are able to recover their litigation costs from leaseholders, and we absolutely agree that unjust litigation costs should not be incurred.

There may, however, be legitimate cases where a landlord may need to seek their litigation costs from a leaseholder—for example, where a leaseholder has breached their lease in a way that is affecting the other residents in the building, or where non-payment of a charge is limiting the upkeep or repair of the building. In these cases, where landlords have exhausted other means of addressing the dispute, we would want them to feel able to address such issues and be able to recover their litigation costs, if that is justified. That is why we have included measures in the Bill to rebalance the system, but we do not necessarily believe that we should go further at this time. We hope that the Bill takes a proportionate approach. I hope that I have reassured the hon. Member for Greenwich and Woolwich that we are committed to ensuring a fair approach, and that he will withdraw the new clause.

--- Later in debate ---

We all have doubts about the balance of power, and we recognise that landlords should be able to protect their interests, if they are decent and behave well. At this point, however, I want to hear something from the Minister to reassure me.

[Lee Rowley]

My hon. Friend has a huge amount of expertise and knowledge in this area. I am grateful to her for all her work in preparing for our discussion today. I am very happy to talk to her in more detail on this subject. She is absolutely right to articulate that progress must be made, and we must ensure that the correct balance is struck. I know that she will appreciate that there is a balance to strike, rather than there being movement in only one direction, but I appreciate the points that she made. I am happy to talk to her further outside the Committee, and I hope to provide her with the assurances that she seeks.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 36 sets out general provisions that apply to regulation-making powers under the Landlord and Tenant Act 1985. Subsection (2) introduces a new section 37A, which sets out the procedure applicable to statutory instruments. It provides clarity on what is meant by regulations that are subject to the negative procedure and those that are subject to the affirmative procedure. Subsection (3) inserts a new definition of “appropriate authority” into section 38A of the 1985 Act. That defines the Secretary of State as being the appropriate authority in England, and Welsh Ministers the appropriate authority in Wales. I commend the clause to the Committee.

Question put and agreed to.

Clause 36 accordingly ordered to stand part of the Bill.

Clause 37

Part 3: consequential amendments

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Government amendments 125 and 126.

Schedule 8.

Government new clause 8—Appointment of manager: power to vary or discharge orders.

[Lee Rowley]

Clause 37 introduces schedule 8, which concerns a number of consequential amendments to the 1985 Act and other Acts of Parliament arising from the provisions of part 3 of the Bill. We will address those consequential amendments when we come to schedule 1, and I commend the clause to the Committee.

Government amendment 125 is a consequential amendment on new clause 8, which ensures that the tribunal has the ability to vary or discharge orders it makes under leasehold legislation on its own as well as on request. Government amendment 126 clarifies that a repeal of a section in the Housing (Wales) Act 2014 is to be done in both the English and Welsh language texts of the Act. I commend those amendments to the Committee.

Schedule 8, as introduced by clause 37, sets out the consequential amendments arising from the provisions of part 3 of the Bill. Part 1 of the schedule sets out the specific consequential amendments to the 1985 Act to take account of the changes in clause 36. In many cases, it makes changes to the regulation-making powers to confirm that the Secretary of State has powers to make regulations in England, and that Welsh counterparts do in Wales. It also clarifies which regulation-making provisions in the Act are subject to the negative procedure or the affirmative procedure. Part 2 of the schedule sets out consequential amendments to other Acts of Parliament to reflect the new measures introduced by part 3 and the omission of existing measures. The schedule seeks to provide clarity on regulation-making powers and to ensure that other Acts of Parliament reflect the new measures provided in part 3 of the Bill. I commend the schedule to the Committee.

Turning to new clause 8, sections 21 to 24 of the Landlord and Tenant Act 1987 provide a remedy for leaseholders in circumstances where there is significant management failure. Under current arrangements, leaseholders may apply to the first-tier tribunal to ask it to make an order to appoint a manager, who will be responsible for carrying out functions specified in the order rather than by the landlord or an agent acting on their behalf. The manager will be accountable to the tribunal, but once an order has been issued, the tribunal may only vary or cancel it if an interested party asks it do so. The current arrangements are, in the Government’s view, too restrictive and limit the tribunal’s authority to act if there is already an existing order in place.

New clause 8 makes a minor amendment to section 24 of the 1987 Act and gives the tribunal the ability to take action on its own as well as on request. That means that, where there is a possible overlap between orders, the tribunal can amend an existing order, if necessary, of its own accord. The discretion to amend an order will be constrained. The tribunal must be satisfied that, in all cases, any variation or discharge is just and convenient, and would not result in the recurrence of the same problems that led to the order being made in the first place. I commend new clause 8 to the Committee.

Question put and agreed to.

Clause 37 accordingly ordered to stand part of the Bill.

Schedule 8

Part 3: Consequential Amendments

Amendments made: 121, in schedule 8, page 132, line 9, at end insert—

“13A The LTA 1985 is amended in accordance with paragraphs 14 to 14B.”

This amendment is consequential on Amendment 123.

Amendment 122, in schedule 8, page 132, line 10, leave out “of the LTA 1985”.

This amendment is consequential on Amendment 121.

Amendment 123, in schedule 8, page 132, line 18, at end insert—

“14A In section 26 (exception for tenants of certain public authorities)—

(a) in subsection (1)—

(i) for the words from ‘Sections 18 to 25’ to ‘do not apply’ substitute ‘Sections 18 to 25A do not apply’;

(ii) for ‘, in which case sections 18 to 24 apply but section 25 (offence of failure to comply) does not’ substitute ‘(but see subsection (1A));

(b) after subsection (1) insert—

‘(1A) The following sections do not apply to a service charge payable by a tenant under a long tenancy of a landlord referred to in subsection (1)—

(a) section 20H (right to claim where excluded insurance costs charged);

(b) section 20K (right to claim where costs charged in breach of section 20J);

(c) section 25A (enforcement of duties relating to service charges).’

14B In section 27 (exception for rent registered and not entered as variable), for the words from

‘Sections 18 to 25’ to ‘do not apply’ substitute ‘Sections 18 to 25A do not apply’”.

This amendment would consolidate the consequential amendments to section 26 of the Landlord and Tenant Act 1985 required by virtue of clauses 30 and 31 and NC7 into a single paragraph of Schedule 8.

Amendment 124, in schedule 8, page 132, line 21, leave out “Landlord and Tenant Act” and insert “LTA”.

This amendment is consequential on Amendments 47 and 54.

Amendment 125, in schedule 8, page 132, line 35, at end insert—

“(ca) in section 160 (third parties with management responsibilities), omit subsection (4)(d);”.

This amendment is consequential on NC8.

Amendment 126, in schedule 8, page 133, line 22, after “(anaw 7),” insert

“in the English language text and in the Welsh language text,”.—(Lee Rowley.)

This amendment would clarify that section 128 of the Housing (Wales) Act 2014 is to be repealed in both the English and Welsh language texts of that Act.

Schedule 8, as amended, agreed to.

Clause 38

Application of Part 3 to existing leases

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 38 makes clear that the new provisions introduced by this part of the Bill extend to leases entered into before the date the section comes into force. This provides clarity that the provisions in part 3 apply to existing, as well as new, leaseholders, but only from the date the relevant section comes into force. I commend the clause to the Committee.

Question put and agreed to.

Clause 38 accordingly ordered to stand part of the Bill.

Clause 39

Meaning of “estate management” etc

[Lee Rowley]

I beg to move amendment 52, clause 39, page 66, line 8, at end insert—

“(e) a charge payable by a unit-holder of a commonhold unit to meet the expenses of a commonhold association.

(9A) For the purposes of subsection (9)(e)—

(a) “unit-holder”, “commonhold unit” and “commonhold association” have the same meaning as in Part 1 of the CLRA 2002 (see section 1(3) of that Act);

(b) the expenses of a commonhold association include the building safety expenses of the association (within the meaning given in section 38A of the CLRA 2002).”

This amendment would exclude charges in respect of the expenses of a commonhold association from the definition of “estate management charge” for the purposes of Part 4.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Lee Rowley]

Amendment 52 amends clause 39(9) of the Bill to clarify that any payment by a commonhold unit owner to a commonhold association is not to be regarded as an estate management charge. It is a clarificatory amendment to ensure that sums payable to a commonhold association that provides services to the common parts that it owns are not covered by part 4 of the Bill.

Turning to clause stand part, part 4 of the Bill creates a new regulatory framework to protect homeowners living on those estates where services are managed privately rather than by local authority. We know that that has been a growing trend and that homeowners on those estates have very few rights in that regard. We are determined to change that and empower homeowners to hold estate management companies to account on how they spend money and on the quality of the services they provide.

Clause 39 sets out key definitions that have effect for part 4 of the Bill. They have been drafted with the intention of providing clarity on what is and is not being regulated, and to avoid creating loopholes. For example, subsection (2) defines what is meant by estate management; subsection (3) defines an estate manager; subsection (6) defines a relevant obligation; subsections (8) and (9) define what is meant by and what is excluded from the definition of an estate management charge; and subsection (10) defines relevant costs. In aggregate, this clause helps to provide the key definitions for measures and will inform the regulatory framework in part 4, which we will discuss in due course.

Amendment 52 agreed to.

Clause 39, as amended, ordered to stand part of the Bill.

Clause 40

Estate management charges: general limitations

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 40 sets out general limitations with regard to estate management charges. Subsection (1) states:

“A charge demanded as an estate management charge is payable…only to the extent that the amount of the charge reflects relevant costs”—

in other words, purely the costs associated with estate management—and cannot be used to fund wider activities. This means that not every cost incurred by an estate manager is chargeable; an example would be if costs arose from the award of damages against the estate manager or an activity outside the estate by the estate manager that is not regulated. Those costs cannot be passed on.

Subsection (2) goes on to set out more detailed circumstances in which costs that are relevant costs may cease to become relevant costs and hence not payable or only partially payable.

[Richard Fuller]

I want to probe a bit more, because of the speed with which we shot through clause 39—with your leave, Chair, I am sure you will find this in order, because clause 40 also relates to relevant costs. Clause 39(10) says that relevant costs,

“in relation to a dwelling, means costs which are incurred by an estate manager in carrying out estate management for the benefit of the dwelling or for the benefit of the dwelling and other dwellings.”

As the Government were considering clauses 39 and 40, the general limitations on what might be a relevant cost, what consideration did the Minister or the Government give to the fact that there are some costs that might be covered within that general limitation that, for some people, are covered by payments they make through their council tax? Therefore, in certain circumstances it may be the case that people are paying twice for the same services covered by what are defined as estate management running costs.

[Lee Rowley]

I am grateful to my hon. Friend for his point. He tempts me, at this relatively late hour, to get into an extremely important conversation that we will come to in the coming days. With his leave, I will limit my response to acknowledging his broader point, which is potentially broader than simply the discussions here on this Bill. Having listened to the evidence given to the Committee last week, I recognise that this is a key area that those impacted by estate management charges would like to debate further. I know that we will come to this in due course. I am putting that down as a marker for further discussion—I am not sure if I can satisfy him with the discussion, but I will put down a marker for it none the less.

To conclude on clause 40, specifically, subsection (2) refers to the provisions in clauses 41 to 43, which cover the requirement for the reasonableness of estate management costs and broader consultation requirements. Clause 40 provides clarity that not all costs incurred by estate managers may be passed on and sets out circumstances when even chargeable costs are not payable. I commend the clause to the Committee.

Question put and agreed to.

Clause 40 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mr Mohindra.)

Leasehold and Freehold Reform Bill (Seventh sitting)

Lee Rowley Excerpts

Committee stage
Thursday 25th January 2024 Public Bill Committees

[Matthew Pennycook]

It is a pleasure to continue our line-by-line consideration of the Bill with you in the Chair, Mr Efford. For the sake of probity, I declare once again that my wife is the joint chief executive of the Law Commission, whose reports on leasehold and commonhold reform I will continue to cite throughout my remarks.

Part 2 of the Bill makes changes to other rights of long leaseholders. Four of its five clauses are concerned with improving the right to manage, but as we touched on briefly at the end of the Committee’s previous sitting, clause 21, which brings schedule 7 to the Bill into effect, makes provision for a new enfranchisement right to buy out the ground rent and vary it permanently to replace the relevant part of the rent with a peppercorn rent, without having to extend the lease.

We welcome the intent of the schedule. The reform will ensure that leaseholders can enjoy reduced premiums and secure nominal ground rent ownership of their properties without the need to go through the challenge and expense of repeated lease extensions. In the Law Commission’s final report on enfranchisement rights, it considered in great detail whether there should be a range of lease extension rights in order to provide greater flexibility than is currently afforded to leaseholders as a result of the provisions in the Leasehold Reform, Housing and Urban Development Act 1993 that require them simultaneously to extend the terms of their lease and to extinguish their ground rent.

The rationale for providing greater flexibility in this area is that in allowing leaseholders to choose either only to extend their lease or only to extinguish their ground rent, leaseholders could avoid paying the landlord the value of the remainder of the original terms and the deferral of the reversion, with the result that premiums would be reduced accordingly.

While taking into account the clear benefits that greater flexibility would provide for in terms of reduced premiums, the Law Commission, in its reports, clearly wrestled with whether it was sensible to recommend a more nuanced approach to lease extension rights. It did so, because of the complexity that the availability of different lease extension options would inevitably create, and the corresponding opportunities that such complexity would present to unscrupulous landlords who might seek to take advantage of those leaseholders unable to access costly professional advice about the best choice to make from the available options.

Without doubt, allowing for choices other than a uniform right to a fixed additional term at a nominal ground rent will make the statutory right to a lease extension more complicated. I will return shortly to the implications of clause 21 and the schedule in that regard. However, on the principle of allowing for greater choice, the Law Commission ultimately decided that despite the increased complexity that it would engender, leaseholders who have a lease with a long remaining term should, on payment of a premium, be entitled to extinguish the ground rent payable under the lease without extending the terms of it.

The commission felt, rightly in our view, that that right is likely to be utilised mainly by those with relatively long leases who are subject to onerous ground rent provisions, or those with relatively long leases and ground rents that are not definitionally onerous but still entail, for a variety of reasons, a significant present or future financial burden. In such cases, even if the premium payable is not significantly reduced, the prescribed capitalisation rates provided for by schedule 2 to the Bill should make valuations simpler and enable the change to be made by means of a simple deed of variation, rather than a deed of surrender and regrant, as required to extend the terms of a lease now.

The schedule implements the Law Commission’s recommendation for that right to extinguish the ground rent only. As I have made clear, we support it. We have, however, moved the amendment, which would delete the Government’s proposed 150-year threshold, to press the Minister on the reason or reasons for which the Government have decided to confer that right only on leaseholders with leases with an unexpired term of more than 150 years.

To be clear, we understand fully the argument made by those who believe that the right to extinguish a ground rent without extending a lease should only be conferred on those with sufficiently long leases—namely, that the premium for the reversion increases significantly as the unexpired period of the lease reduces, and leaseholders with leases below a certain threshold should therefore be, in a sense, compelled to peppercorn their ground rent and to extend at the same time by means of the reduced premiums that clauses 7 and 8 of the Bill should enable.

However, what constitutes a sufficiently long lease for the purposes of conferring this new right is ultimately a matter of judgment. The Law Commission recommended that the threshold should be set at 250 years on the basis that the reversion is of negligible value at that lease length. The Government chose not to accept that recommendation and instead are proposing a threshold of 150 years. The Minister may provide us with a different answer in due course, but we assume the reason they did so is simply that this will make the new right to extinguish a ground rent available to many more leaseholders.

However, if that is the case, it obviously follows that setting a threshold of, say, 125 years or even 100 years would make it available to even more of them. The argument against doing so is that leaseholders with leases below a certain threshold should be, in effect, compelled to extend their lease at the same time as peppercorning their rent because not doing so would, in many cases, disadvantage them.

However, that obviously raises more fundamental questions, such as whether it should be up to leaseholders to navigate the wider range of options that will be made available to them if and when this Bill receives Royal Assent, and whether the fact that some leaseholders with relatively short leases may either advertently or inadvertently disadvantage themselves by extinguishing without extending their lease should mean that everyone below the 150-year threshold is prohibited from enjoying the new right introduced by the schedule.

Even assuming one believes it is the role of Government to set a long-lease threshold, it is not entirely clear to us why the Government have alighted on 150 years given that there could be all sorts of reasons why someone with a lease shorter than such a term might want to only buy out their rent, including simply that they are unable to afford the premium required to secure a 990-year lease. As such, we would like the Minister to justify in some detail, if he could, why the Government alighted on a 150-year threshold as opposed to either the Law Commission’s proposal of 250 years or a lower threshold that would give many more leaseholders the right to extinguish their ground rent. We would like to ask him to consider whether, as we believe on balance, there is a strong case for simply deleting the 150-year threshold entirely, given that the “remaining years” test that applies is inherently arbitrary. I hope the Minister will give amendment 6 serious consideration, and I look forward to his thoughts on it.

While we are considering this schedule, I also want to probe the Minister again on the Government’s intentions in respect of the recently closed consultation on restricting ground rent for all existing leases, and specifically how any proposals arising from that consultation will interact with this schedule given that it provides a right to peppercorn ground rents in existing leases. As I made clear when we briefly considered this matter in relation to clauses 7 and 8, I am obviously not asking the Minister to provide this Committee with an advanced indication of what the Government’s formal response to that consultation will be. However, we remain of the view that this Committee needs to know, if the Government ultimately do choose to enact any of the five options for intervention that were consulted upon, what the implications are for the provisions that are currently in the Bill that we are being asked to approve today.

On Second Reading, the Secretary of State was quite clear that at the conclusion of the consultation, the Government would

“legislate on the basis of that set of responses in order to ensure that ground rents are reduced, and can only be levied in a justifiable way.”—[Official Report, 11 December 2023; Vol. 742, c. 659.]

As members of the Committee will know, he was also open with the Levelling Up, Housing and Communities Committee prior to Second Reading about the fact that his favoured approach would be a peppercorn rent—in other words, option 1 from the consultation. I am conscious that many people across the country who bear leaseholders no ill will whatever have invested, almost uniformly on advice and in good faith, in freehold funds. I have constituents who have invested, for example, in time investments and other such funds that have invested in freehold properties. However, I personally share the Secretary of State’s preference not least because, while ground rents exist even at relatively low levels, they will be a major impediment to the widespread adoption of commonhold.

There is a more fundamental issue with ground rents that we need to grapple with. As we have discussed already, over the past two decades, the consequence of the kind of investment we have seen is a system increasingly focused on generating assets by gouging leaseholders through ground rents that are, in historical terms, high to start with and that escalate over the terms of the lease. Leaseholders who worked hard to purchase their own homes and did so in good faith are being asked to pay ever more money for no clear service in return and many are experiencing considerable financial distress and difficulties selling their property, all to sustain the income streams of third-party investors.

Unregulated ground rents of this nature in existing leases cannot be justified. Although we do not discount the risks involved in any of the five options outlined in the consultation, Labour is clear that the Government must act to protect leaseholders from ground rent exploitation and that they should be courageous in determining which of the consultation proposals should be enacted.

All that said, we obviously cannot pre-empt the consultation in question. What is important for the purposes of considering schedule 7, and clause 21, is that we get a clear answer from the Minister as to what the potential implications of any response would be for leaseholders. Specifically, will the schedule have to be revisited should the Government ultimately choose to enact one of the five options in the consultation? Are we correct in assuming that clause 21 and the schedule will have to be overhauled, if not removed from the Bill entirely, in that scenario? If not, how will the Government ensure that the various measures are aligned? It is a hypothetical question, as I am sure the Minister will indicate, but it is entirely reasonable, given that we are being asked to approve the inclusion of the schedule in the Bill. On our reading of the ground rent consultation, the schedule could entirely change the implications; indeed, it may well have to be removed entirely to ensure that the Bill is consistent. On that basis, I hope the Minister will give us a bit more detail. He gave us some on Tuesday, but we need a little more detail on that point.

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

I am grateful for the comments from the hon. Member for Greenwich and Woolwich, and for his amendment. I will say a few words in general before turning to some of his specific questions.

As he indicated, the ground rent buy-out right enables leaseholders with very long leases to buy out their ground rent on payment of a premium, without having to extend their lease. A leaseholder with a very long lease who does not need an extension may want to buy out the ground rent without extending the lease, but others may wish to do it in a different way.

I appreciate the hon. Member’s points about the amendment, and I understand why he is seeking to extend the right to vary one’s lease to as many leaseholders as possible, so I will try to answer some of his questions. Inevitably, as he indicated, there is essentially an arbitrary decision to take on any number, because moving it up or down would change the provision slightly and incrementally each time, so there is an element of having to put a finger on the scale. As he said, the right is an implementation of the Law Commission’s recommendation 3(2), which suggested that it should be available for leaseholders with 250 years remaining, but the Government have indicated that they want to set the term at 150 years. The reason given by the Law Commission for making this right available only to those with very long leases, which the Government support, is to limit it to leaseholders who are unlikely to be interested in, or do not need, a lease extension.

Making the right available to all leaseholders, irrespective of their term remaining, would mean that leaseholders who will need a lease extension at some point might opt first to buy out only the ground rent, but would need to extend their lease in due course. That would potentially disadvantage leaseholders in two ways. First, as the term on the lease runs down, the price on the lease extension accelerates. Secondly, a leaseholder who buys out their ground rent first and later extends the lease will pay two sets of transaction costs. It is entirely legitimate to say, “That is the choice of individuals,” and I have some sympathy with that argument. On balance, however, the Government recognise that there is a series of things within leasehold law that are permissible but not necessarily advantageous for some groups and sectors. By moving further in this regard, we might inadvertently create another one, which future iterations of Ministers and shadow Ministers might debate removing.

I should make it clear—the hon. Member knows this—that it is not the case that leaseholders with fewer than 150 years remaining do not have the right to buy out their ground rent: they buy out their ground rent when they extend their lease or buy the freehold, and that buy-out will also be subject to the cap. However, the right to buy out the ground rent without extending the lease is for leaseholders with 150 years or more remaining, for the reasons I have given.

Turning to some of the hon. Member’s specific points, the ultimate number is a matter of judgment, and we determined that setting the term at 150 years would offer the right to an incrementally larger group of people. We think that is a reasonable place to be. I accept that others may choose a different number, but that is the number we are proposing in the substantive part of the Bill. I also appreciate his point about the outcome of the consultation being the missing piece of the jigsaw puzzle at the moment.

I will not go through my multiple previous caveats around that, because he acknowledged at least one of them. Recognising that I will not be able to answer all of this, it may be that—subject to the outcome of the consultation—changes are needed. I cannot, however, pre-empt that, and we will have to cross that bridge when we came to it. I realise that is not the ideal place to be, but given that we all share the aim of trying to move this as quickly as possible, I hope it is an acceptable position to move forward from. We can return to it in due course should we need to.

--- Later in debate ---

[Rachel Maclean]

I apologise, Mr Efford. I was not quick enough on my feet. Thank you for calling me, and it is a pleasure to serve under your chairmanship.

I thank the Minister for his comprehensive answer to the shadow Minister’s questions. My point is somewhat in the same vein, and I am very much thinking of the witnesses we had from the National Leasehold Campaign, who talked about this point in quite a bit of detail. Their concern was about having to pay to buy out the ground rent. Of course, there are a number of elements, factors and variables dependent and contingent on the outcome of the consultation. There are people who might be watching this thinking, “Well, when will I actually know how much it is going to cost me?” A year can go by and they may tip over that threshold. Can the Minister give a bit of clarification to those leaseholders who have been trapped for so long and want to see some light at the end of the tunnel? What signpost can he give on when this right will apply to them and how much they will have to pay if they want to exercise their individual right to have their ground rent reduced to a peppercorn?

[Lee Rowley]

I am grateful to my hon. Friend for raising that point. She is absolutely right that this matter is important to a number of people, and that it is important that we provide the greatest transparency at the earliest opportunity. I hope she will forgive me for not being able to answer her very valid question directly. We are dependent on an appropriate and detailed review of the consultation, which is necessary—for some of the reasons we talked about on Tuesday—given its importance to a number of parts of the sector and others. We need to allow that to conclude, hopefully as swiftly as possible, and then we need to get it through this place and our colleagues in the other place, who can often slow us down. Hopefully, that will happen as soon as possible.

--- Later in debate ---

[Lee Rowley]

I beg to move amendment 79, in schedule 7, page 120, line 3, leave out from “to” to end of line 4 and insert

“—

(a) the landlord under the qualifying lease, and

(b) any other party to the qualifying lease.”

This amendment expands the range of persons to whom a rent variation notice must be given to include persons who are party to the lease (but are not a landlord).

[The Chair]

With this it will be convenient to discuss Government amendments 80 to 88, 99 and 100, 102 to 104, 106, 118 and 120.

[Lee Rowley]

These amendments mostly simplify and clarify the provisions in schedule 7.

Amendment 79 will expand the range of persons to whom a rent variation notice must be given, which should now include persons who are part of the lease but not landlords. Amendment 80 applies where a tenant is bringing a lease extension or a freehold acquisition claim. It sets out that the tenant cannot bring a ground buy-out claim while the preceding claim is still in play, because they do not need one and their ground rent will be bought out by the other enfranchisement claim.

Amendment 81 provides that a variation notice must specify the proposed premium and any variations to the lease consequential on the rent. Amendment 82 provides, first, that where a leaseholder has a ground rent buy-out claim and sells their lease, they may pass on the claim to the buyer, and secondly that where a ground rent buy-out claim has been brought and a landlord sells the reversion, the claim is binding on the purchasing landlord.

Amendment 83 applies where a rent variation notice and collective enfranchisement notice, where the leaseholder is not participating, are coincident on the same premises, irrespective of which was served first. It provides that the rent variation notice is suspended while the collective enfranchisement notice is current. It also provides that the landlord must inform the leaseholder of its suspension and must likewise inform the leaseholder if that suspension is later lifted because the enfranchisement claim has ceased to have effect. Amendment 84 provides that the landlord must specify an address at which notices can be given.

Amendment 85 makes technical amendments to remove unnecessary wording. Amendment 86 provides that the landlord must respond to the proposed premium and any variation to the lease consequential on the reduction of the rent in a variation notice in the counter-notice.

Amendment 87 makes technical amendments to remove unnecessary wording. Amendment 88 makes provision for the landlord or leaseholder to apply to the tribunal to determine the case where the landlord does not admit the leaseholder’s right to a peppercorn rent or disputes the rent to which it applies, consequential variations or the proposed premium.

Amendments 99, 100, 102 and 103 all make minor clarifications concerning circumstances when a variation notice ceases to have effect. Amendment 104 removes a provision for reviving suspended claims.

Amendment 106 provides for commutation following a ground rent buy-out, and the obligations and rights of superior landlords. It also provides for the sharing of copies of rent variation notices among landlords, and the application of superior landlords to the tribunal. A landlord in receipt of a rent variation notice must share a copy with anyone they believe to be a superior landlord and is liable for damages for any loss suffered by others should they fail to do so. Likewise, a superior landlord in receipt of a copy must share it with anyone else they believe to be a superior landlord, with the same consequences where there may be non-compliance. Amendments 118 and 120 are consequential on amendment 104. I commend the amendments to the Committee.

Amendment 79 agreed to.

Amendments made: 80, in schedule 7, page 120, line 5, leave out from “notice” to end of line 7 and insert

“is of no effect if it is given at a time when—

(a) a lease extension notice,

(b) a lease enfranchisement notice, or

(c) another rent variation notice,

which relates to the qualifying lease has effect.

(2A) Paragraph 3A makes provision about the suspension of a rent variation notice.”

This provides that a rent variation notice may not be given if another such notice is already in effect; and changes the provision dealing with cases where there is a current claim for collective enfranchisement under the LRHUDA 1993.

Amendment 81, in schedule 7, page 120, line 15, at end insert—

“(4A) A rent variation notice must also specify—

(a) the premium which the tenant is proposing to pay for the rent reduction, and

(b) any other variations which need to be made to the lease in consequence of the reduction of the rent in accordance with this Schedule.”

This requires a rent variation notice to specify the tenant’s proposals for the premium payable for the reduction in rent and for consequential changes to the lease (eg. relating to rent reviews in the lease).

Amendment 82, in schedule 7, page 120, line 20, leave out sub-paragraphs (6) to (8) and insert—

“(6) Where a rent variation notice is given, the rights and obligations of the tenant are assignable with, but are not capable of subsisting apart from, the qualifying lease or that lease so far as it demises qualifying property (see paragraph 2(5) and (6)); and, if the qualifying lease or that lease so far as it demises qualifying property is assigned—

(a) with the benefit of the notice, any reference in this Schedule to the tenant is to be construed as a reference to the assignee;

(b) without the benefit of the notice, the notice is to be deemed to have been withdrawn by the tenant as at the date of the assignment.

(7) If a rent variation notice is the subject of a registration or notice of the kind mentioned in sub-paragraph (5), the notice is binding on—

(a) any successor in title to the whole or part of the landlord’s interest under the qualifying lease, and

(b) any person holding any interest granted out of the landlord’s interest;

and any reference in this Schedule to the landlord is to be construed accordingly.”

This deals with the effect on a rent variation notice of an assignment of the lease or the reversion.

Amendment 83, in schedule 7, page 120, line 41, at end insert—

“Suspension of rent variation notices

3A (1) This paragraph applies if conditions A and B are met.

(2) Condition A is met if—

(a) a rent variation notice is current at the time when a collective enfranchisement notice is given, or

(b) a collective enfranchisement notice is current at the time when a rent variation notice is given.

(3) Condition B is met if—

(a) the rent variation notice relates to premises to which the claim for collective enfranchisement relates, and

(b) the tenant under the lease to which the rent variation notice relates is not a participating tenant in relation to the claim for collective enfranchisement.

(4) The operation of the rent variation notice is suspended during the currency of the claim for collective enfranchisement; and so long as it is so suspended no further notice may be given, and no application may be made, under this Schedule with a view to resisting or giving effect to the tenant's claim for a peppercorn rent.

(5) Where the operation of the rent variation notice is suspended by virtue of this paragraph, the landlord must, not later than the end of the relevant response period, give the tenant a notice informing the tenant of—

(a) the suspension, and

(b) the date on which the collective enfranchisement notice was given, and

(c) the name and address of the nominee purchaser for the time being appointed in relation to the claim for collective enfranchisement.

(6) The landlord must give that notice—

(a) as soon as is reasonably practicable, if a rent variation notice is current when a collective enfranchisement notice is given; or

(b) before the end of the period for responding specified in the rent variation notice in accordance with paragraph 4(7), if a collective enfranchisement notice is current when a rent variation notice is given.

(7) Where, as a result of the claim for collective enfranchisement ceasing to be current, the operation of the rent variation notice ceases to be suspended by virtue of this paragraph—

(a) the landlord must, as soon as possible after becoming aware of the circumstances by virtue of which the claim for collective enfranchisement has ceased to be current, give the tenant a notice informing the tenant that the operation of the rent variation notice is no longer suspended as from the date when the claim for collective enfranchisement ceased to be current;

(b) any time period for performing any action under this Schedule (including the response period) which was running when the rent variation was suspended begins to run again, for its full duration, from and including the date when the claim for collective enfranchisement ceased to be current.

(8) In this paragraph—

“claim for collective enfranchisement” means the claim to which the collective enfranchisement notice relates;

“collective enfranchisement notice” means a notice under section 13 of the LRHUDA 1993 (notice of claim to exercise right to collective enfranchisement).”

This provides for a rent variation notice to be suspended at any time when a claim for collective enfranchisement is current, and the tenant is not participating in the collective enfranchisement.

Amendment 84, in schedule 7, page 121, line 9, at end insert

“and which also specifies an address in England and Wales at which notices may be given to the landlord under this Schedule.”

This requires a counter-notice to specify an address for service for the landlord.

Amendment 85, in schedule 7, page 121, line 13, leave out “qualifying”.

This is a technical amendment which removes unnecessary wording.

Amendment 86, in schedule 7, page 121, line 19, at end insert

“and must also give the landlord’s response to the proposed premium, and any other consequential variations to the lease, specified in the rent variation notice in accordance with paragraph 3(4A).”

This requires the landlord to respond to the tenant’s proposals for the premium and consequential changes to the lease (see Amendment 81).

Amendment 87, in schedule 7, page 121, line 29, leave out “qualifying”.

This is a technical amendment which removes unnecessary wording.

Amendment 88, in schedule 7, page 121, line 36, leave out paragraphs 5 and 6 and insert—

“Application to appropriate tribunal where claim or terms not agreed

5 (1) This paragraph applies if the landlord is given a rent variation notice by the tenant.

(2) If the landlord gives the tenant a counter-notice before the end of the response period which disputes—

(a) that the tenant had the right to a peppercorn rent,

(b) that the right applies to the rent in respect of which it is claimed,

(c) the amount of the premium which the tenant is proposing to pay, or

(d) the consequential variations of the lease proposed by the tenant,

the landlord or tenant may apply to the appropriate tribunal to determine the matters in dispute.

(3) Any application under sub-paragraph (2) must be made before the end of the period of 6 months beginning with the day after the day on which the counter-notice is given.

(4) If the landlord does not give the tenant a counter-notice before the end of the response period, the tenant may apply to the appropriate tribunal to determine—

(a) whether the tenant has the right to a peppercorn rent,

(b) what rent that right applies in respect of,

(c) the amount of the premium which the tenant is to pay, or

(d) the variations of the lease that are to be made.

(5) Any application under sub-paragraph (4) must be made before the end of the period of 6 months beginning with the day after the last day of the response period.”—(Lee Rowley.)

This provides for the Tribunal to have jurisdiction where the tenant’s claim for a peppercorn rent or the terms of lease variation are not agreed by the landlord.

[Lee Rowley]

I beg to move amendment 89, in schedule 7, page 123, line 12, after “tenant” insert

“, and any other party to the qualifying lease,”.

This requires any third parties to a lease to join in variation of the lease to reduce the rent payable.

[The Chair]

With this it will be convenient to discuss Government amendments 90 to 94.

[Lee Rowley]

Again, these amendments mostly simplify and clarify the provisions in schedule 7.

Amendment 89 will require the new third parties referred to in amendment 79 to join in any variation of a lease. Amendment 90 removes reference to, and therefore the existence of, a payment period within which the leaseholder must pay the ground rent buy-out premium to the landlord after a rent variation notice has become enforceable.

Amendment 91 provides that a rent variation notice becomes enforceable once all aspects have been agreed or determined by the tribunal. Amendment 92 is consequential on amendment 91 and provides for a better description of the required rent variation.

--- Later in debate ---

[Lee Rowley]

I beg to move amendment 95, in schedule 7, page 123, line 43, at end insert—

“Reduction of rent under intermediate leases

7A (1) This paragraph applies if, at the time when a rent variation notice is given, there are one or more qualifying intermediate leases.

(2) For the purposes of this paragraph a lease is a ‘qualifying intermediate lease’ if—

(a) the lease demises the whole or a part of the property to which the rent variation notice relates,

(b) the lease is immediately superior to—

(i) the lease to which the rent variation notice relates, or

(ii) one or more other leases that are themselves qualifying intermediate leases,

(c) relevant rent is payable under the lease, and

(d) that relevant rent is more than a peppercorn rent.

(3) The landlord or the tenant under a qualifying intermediate lease may, by giving notice to the relevant landlord or landlords before the variation of lease to which the rent variation notice relates, require the rent payable under the qualifying intermediate lease to be reduced in accordance with sub-paragraphs (6) to (8).

(4) If—

(a) under sub-paragraph (3) the rent under a lease is required to be reduced in accordance with this paragraph, and

(b) that lease is superior to one or more other qualifying intermediate leases,

the rent payable under the other qualifying intermediate lease or leases is also to be reduced in accordance with sub-paragraphs (6) to (8).

(5) The landlord and tenant under a qualifying intermediate lease must vary the lease—

(a) to give effect to a reduction of the rent in accordance with sub-paragraphs (6) to (8), and

(b) to remove any terms of the lease which provide for an increase in the rent, or part of the rent, so reduced.

(6) If the whole of the rent under a qualifying intermediate lease is relevant rent, the rent under that lease is to be reduced to a peppercorn rent.

(7) If only part of the rent under a qualifying intermediate lease is relevant rent—

(a) that part of the rent is to be reduced to zero, and

(b) the total rent is to be reduced accordingly.

(8) But the amount of the reduction in a person’s rental liabilities as tenant is limited to the amount of the reduction in the person’s rental income as landlord; and here—

(a) ‘reduction in a person’s rental liabilities as tenant’ means the reduction in accordance with sub-paragraph (6) or (7) of the rent payable by the person as tenant under the qualifying intermediate lease;

(b) ‘reduction in that person’s rental income as landlord’ means the amount (or total amount) of the relevant reduction (or reductions) in rent payable to that person as landlord of one or more other reduced rent leases.

(9) In this paragraph—

‘reduced rent lease’ means—

(a) the lease to which the rent variation notice relates, or

(b) a qualifying intermediate lease;

‘relevant landlord’ means—

(a) the landlord under the qualifying lease, and

(b) any superior landlord who must be given a copy of the rent variation notice in accordance with paragraph 9D or 9E;

‘relevant reduction’ means—

(a) in relation to the lease to which the rent variation notice relates, a reduction resulting from that tenancy being varied in accordance with the other provisions of this Schedule;

(b) in relation to a qualifying intermediate lease, a reduction resulting from this paragraph.

‘relevant rent’ means rent that has been, or would properly be, apportioned to the whole or a part of the property to which the rent variation notice relates.”

This provides for rent to be reduced (commuted) under leases that are superior to the lease in respect of which a rent variation notice is given under Schedule 7 .

Like amendment 106, amendment 95 provides for commutation following a ground rent buy-out, and the obligations and rights of superior landlords. Amendment 95 provides for commutation for ground rent buy-out and the provision is identical to the commutation provision for lease extensions.

As we have discussed, commutation is the process by which a reduction in the rent of the inferior occupational lease—in this case, by a ground rent buy-out—triggers a reduction in the rent of intermediate leases sitting between the most inferior lease and the freehold. The amendment provides that, if commuted, the relevant rent payable by a tenant of an intermediate lease will be reduced to a peppercorn, but the reduction in rent payable by a tenant of such an intermediate lease must not exceed the reduction in the rent they receive as a landlord of an intermediate lease. I commend the amendment to the Committee.

Amendment 95 agreed to.

[Lee Rowley]

I beg to move amendment 96, in schedule 7, page 124, line 9, at end insert—

“(2A) An order under this paragraph may appoint a person to execute the variation of the lease on behalf of a party to the variation; and a variation executed in consequence of such an order has the same force and effect (for all purposes) as if it had been executed by that party.”

This authorises the Tribunal to appoint a person a execute the variation of a lease on behalf a party (eg. if they are absent or unco-operative).

[The Chair]

With this it will be convenient to discuss Government amendments 97 and 98.

[Lee Rowley]

Again, these amendments mostly simplify and clarify the provisions in schedule 7.

Amendment 97 provides that in the event that there is a failure to vary the lease in response to an enforceable variation notice, an application made to the tribunal for enforcement must be made within four months of the date that that notice became enforceable. Amendment 96 provides that the tribunal may appoint a person to vary the lease on the landlord’s behalf.

Amendment 98 provides that where the tribunal is satisfied that the landlord is missing and that the leaseholder has the right to a peppercorn rent, it may make an order to vary the lease and appoint someone to vary the lease on the landlord’s behalf. I commend the amendments to the Committee.

Amendment 96 agreed to.

Amendments made: 97, in schedule 7, page 124, line 11, leave out from first “of” to end of line 12 and insert

“four months beginning with the day on which the rent variation notice becomes enforceable (within the meaning of paragraph 7).”

This changes the period within which an application under paragraph 8 may be made.

Amendment 98, in schedule 7, page 124, line 12, at end insert—

“Missing landlord or third party

8A (1) On an application made by the tenant under a qualifying lease, the appropriate tribunal may make a determination that the landlord under, or another party to, a qualifying lease cannot be found or their identity cannot be ascertained.

(2) The following provisions of this paragraph apply if the appropriate tribunal makes such determination.

(3) The appropriate tribunal may make such order as it thinks fit including—

(a) an order dispensing with the requirement to give notice under paragraph 3 to that landlord or other party, or

(b) an order that such a notice has effect and has been properly served even though it has not been served on that landlord or other party.

(4) If the appropriate tribunal is satisfied that the tenant has the right to a peppercorn rent, the tribunal make such order as it thinks fit with respect to the variation of the qualifying lease to give effect to that right.

(5) An order under sub-paragraph (4) may appoint a person to execute the variation of the lease on behalf of a party to the variation; and a variation executed in consequence of such an order has the same force and effect (for all purposes) as if it had been executed by that party.

(6) Before making a determination or order under this paragraph, the appropriate tribunal may require the tenant to take such further steps by way of advertisement or otherwise as the court thinks proper for the purpose of tracing the person in question.

(7) If, after an application is made under this paragraph and before the lease is varied to give effect to the right to a peppercorn rent, the landlord or other party is traced—

(a) no further proceedings shall be taken with a view to a lease being varied in accordance with this paragraph,

(b) the rights and obligations of all parties shall be determined as if the tenant had, at the date of the application, duly given the rent variation notice, and

(c) the appropriate tribunal may give such directions as it thinks fit as to the steps to be taken for giving effect to the right to a peppercorn rent, including directions modifying or dispensing with any of the requirements of this Schedule or any regulations.”

This enables the Tribunal to deal with the situation where the landlord or third party to a lease cannot be found or identified.

Amendment 99, in schedule 7, page 124, line 15, after “landlord” insert

“, before the lease is varied in pursuance of the rent variation notice,”.

This clarifies that a notice of withdrawal can only be given before the lease is varied.

Amendment 100, in schedule 7, page 124, line 17, leave out from “is” to end of line 17 and insert

“varied in accordance with the notice”.—(Lee Rowley .)

This provides that rent variation notice ceases to have effect when the lease is varied in accordance with the notice.

[Lee Rowley]

I beg to move amendment 101, in schedule 7, page 124, line 19, leave out paragraph (c) and insert—

“(c) a lease enfranchisement notice or lease extension notice which relates to the qualifying lease is given;”.

This is consequential on Amendment 119.

[The Chair]

With this it will be convenient to discuss Government amendments 117 and 119.

[Lee Rowley]

Again, these amendments mostly simplify and clarify the provisions in schedule 7.

Amendment 101 provides that where a leaseholder has made a ground rent buy-out claim but, before the claim is settled, later makes an extension or acquisition claim, the ground rent buy-out claim ceases to have effect. Amendment 117 provides that the regulatory powers given to the Secretary of State by paragraph 12 are subject to the negative procedure.

Amendment 119 will insert a definition of “lease enfranchisement notice” as a notice for a freehold acquisition for a house or collective enfranchisement for a flat, and a definition of “lease extension notice” as a notice for a lease extension for a house or flat. Those definitions support amendments 80, 101 and 83. I commend the amendments to the Committee.

Amendment 101 agreed to .

Amendments made: 102, in schedule 7, page 124, line 21, leave out paragraph (d) and insert—

“(d) any order setting aside the notice is made by the appropriate tribunal or a court;”.

This is a technical amendment to correct the reference to kind of order that would be made.

Amendment 103, in schedule 7, page 124, line 22, at end insert—

“(da) the appropriate tribunal determines on an application under paragraph 5 that the tenant does not have the right to a peppercorn rent;

(db) the period of six months mentioned in paragraph 5(3) or (5) ends, where the application mentioned there could be made, but is not made before the end of that period;

(dc) the period of four months mentioned in paragraph 8(3) ends, where the application mentioned there could be made, but is not made before the end of that period;”.

This sets out additional circumstances in which a rent variation notice ceases to have effect.

Amendment 104, in schedule 7, page 124, line 28, leave out from “effect,” to end of line 16 on page 125 and insert

“except for any obligation arising under any provision of the LRA 1967 or the LRHUDA 1993 that applies by virtue of paragraph 11.”—(Lee Rowley.)

This clarifies which obligations continue after a rent variation notice ceases to have effect.

[Lee Rowley]

I beg to move amendment 105, in schedule 7, page 125, line 16, at end insert—

“Tenant’s liability for costs

9A (1) A tenant is not liable for any costs incurred by any other person as a result of the tenant’s exercise of the right to a peppercorn rent, except as referred to in—

(a) sub-paragraph (4),

(b) paragraph 9B (liability where claim ceases to have effect), and

(c) paragraph 9C (liability where tenant obtains the variation of the lease).

(2) A former tenant is not liable for any costs incurred by any other person as a result of the former tenant’s claim to the right to a peppercorn rent, except as referred to in sub-paragraphs (4) and (5).

(3) A lease, transfer, contract or other arrangement is accordingly of no effect to the extent it would provide to the contrary.

(4) A tenant or former tenant is liable for costs incurred by another person in connection with proceedings before a court or tribunal if—

(a) the court or tribunal has power under this Schedule or another enactment to order that the tenant or former tenant pay those costs, and

(b) the court or tribunal makes such an order.

(5) A former tenant is liable for costs incurred by a successor in title to the extent agreed between the former tenant and that successor in title.

(6) In this paragraph and paragraphs 9B and 9C—

“claim” includes an invalid claim;

“former tenant” means a person who was a tenant making a claim to the right to a peppercorn rent, but is no longer a tenant.

Liability for costs: failed claims

9B (1) A tenant is liable to the landlord for a prescribed amount in respect of non-litigation costs if the tenant’s claim ceases to have effect by virtue of paragraph 9(1), unless it ceases to have effect by virtue of—

(a) paragraph 9(1)(b), or

(b) paragraph 9(1)(e) because of the application of section 55 of the LRHUDA 1993.

(2) For the purposes of this paragraph—

(a) “prescribed” means prescribed by, or determined in accordance with, regulations made—

(i) in relation to England, by the Secretary of State;

(ii) in relation to Wales, by the Welsh Ministers;

(b) “non-litigation costs” are costs that are or could be incurred by a landlord as a result of a claim under this Schedule other than in connection with proceedings before a court or tribunal;

(c) where a claim ceases to have effect by virtue of a person who was a tenant assigning their lease without assigning the claim under paragraph 3(6), “tenant” includes that person.

(3) A statutory instrument containing regulations under this paragraph is subject to the negative procedure.

Liability for costs: successful claims

9C (1) A tenant is liable to the landlord for the amount referred to in subsection (2) if—

(a) the tenant makes a claim to the right to a peppercorn rent,

(b) the rent is reduced in consequence of the claim,

(c) the premium payable by the tenant for the variation of the lease is less than a prescribed amount,

(d) the landlord incurs costs as a result of the claim,

(e) the costs are incurred other than in connection with proceedings before a court or tribunal,

(f) the costs incurred by the landlord are reasonable, and

(g) the costs are more than the premium payable.

(2) The amount is the difference between—

(a) the premium payable by the tenant, and

(b) the costs incurred by the landlord, or, if those costs exceed a prescribed amount, that prescribed amount.

(3) In this paragraph “prescribed” means prescribed by, or determined in accordance with, regulations made—

(a) in relation to England, by the Secretary of State;

(b) in relation to Wales, by the Welsh Ministers.

(4) A statutory instrument containing regulations under this paragraph is subject to the negative procedure.”

This provides for a tenant’s liability for costs incurred by other persons in connection with a claim for a peppercorn rent .

This amendment applies the reformed cost regime to ground rent buy-out claims. The amendment makes cost provisions for the ground rent buy-out right. These match the cost provisions for lease extensions for houses and flats. There is a general no-costs rule, but a tenant may be liable for fixed costs if their claim fails, and may be liable for a fixed amount of costs, which would be charged by reducing the value of the premium, if the ground rent buy-out claim is a prescribed low-value claim. A tenant cannot be required to give security for costs. I commend the amendment to the Committee.

Amendment 105 agreed to.

Amendment made: 106, in schedule 7, page 125, line 16, at end insert—

“Duty of landlord to give copies of the rent variation notice to superior landlords

9D (1) This paragraph applies if the landlord is given a rent variation notice by the tenant.

(2) The landlord must give a copy of the rent variation notice to any person whom the landlord believes is a superior landlord.

(3) But that duty does not apply if the landlord has been notified under paragraph 9E(5)(b) that a copy of the rent variation notice has been given to that person.

(4) The landlord must comply with that duty as soon as reasonably practicable after—

(a) being given the rent variation notice, or

(b) forming the belief that a person is a superior landlord (if that is after the rent variation notice was given).

(5) If the landlord gives a copy of the rent variation notice to a person under sub-paragraph (2), the landlord must, together with the copy, give that person the names of—

(a) all of the persons to whom the landlord has given a copy of the notice under this paragraph, and

(b) any other persons that the landlord is aware have been given a copy of the notice.

(6) If the landlord fails to comply with a duty in this paragraph, the landlord is liable in damages for any loss suffered by any other person as a result of the failure.

Duty of superior landlord to give copies of the rent variation notice to other superior landlords

9E (1) This paragraph applies if a superior landlord is given a copy of a rent variation notice under paragraph 9D or this paragraph.

(2) The superior landlord (the “forwarding landlord”) must give a copy of the rent variation notice to any person whom the forwarding landlord believes is a superior landlord.

(3) But that duty does not apply if the forwarding landlord has been notified under paragraph 9D or this paragraph that a copy of the rent variation notice has been given to that person.

(4) The forwarding landlord must comply with that duty as soon as reasonably practicable after—

(a) being given the copy of the rent variation notice, or

(b) forming the belief that a person is a superior landlord (if that is after the copy of the rent variation notice was given).

(5) If the forwarding landlord gives a copy of the rent variation notice to a person under sub-paragraph (2), the forwarding landlord—

(a) must, together with the copy, give that person the names of—

(i) all of the persons to whom the forwarding landlord has given a copy of the notice under this paragraph, and

(ii) any other persons that the forwarding landlord is aware have been given a copy of the notice;

(b) must notify the landlord that the forwarding landlord has given the copy to that person.

(6) If the forwarding landlord fails to comply with a duty in this paragraph, the forwarding landlord is liable in damages for any loss suffered by any other person as a result of the failure.”—(Lee Rowley.)

This requires notice of a claim for a peppercorn rent to be given to superior landlords.

[Lee Rowley]

I beg to move amendment 107, in schedule 7, page 125, line 18, leave out paragraph 10.

This is consequential on Amendment 109.

[The Chair]

With this it will be convenient to discuss Government amendments 108 to 116.

[Lee Rowley]

These amendments concern the provisions of the Leasehold Reform, Housing and Urban Development Act 1993 as they apply to the right. Previously, provisions applying to ground rent buy-out claims on houses and flats were in separate paragraphs of the schedule: paragraphs 10 and 11, respectively. Amendment 109 amends paragraph 11 so that the provisions therein apply to claims on both houses and flats. Consequently, amendment 108 will change the title of paragraph 11 accordingly, and amendment 107 will remove paragraph 10.

Amendments 114 and 116 will amend the provisions of the 1993 Act that apply to the ground rent buy-out right, so that the provisions are properly carried across. Amendments 113 and 112 make a provision in relation to mortgages that applies to lease extensions under the 1993 Act, so that it applies appropriately to ground rent buy-out claims.

Amendment 115 will add a provision for dealing with inaccurate rent variation notices, to the effect that small inaccuracies do not invalidate the claim. Amendment 110 will require the leaseholder to pay off arrears of rent or service charges prior to a ground rent buy-out. Amendment 111 will ensure that the provisions in amendment 110 refer correctly to the ground rent buy-out premium. I commend the amendments to the Committee.

Amendment 107 agreed to .

Amendments made: 108, in schedule 7, page 127, leave out line 1 and insert

“Provisions of the LRHUDA 1993 that apply for the purposes of this Schedule”.

This is consequential on Amendment 109.

Amendment 109, in schedule 7, page 127, line 4, leave out from first “Schedule” to end of line 5 and insert

“(whether in its application to a house or flat)”.

This provides for paragraph 11 to apply to all claims under Schedule 7, not just to claims where the qualifying lease is of a flat (and so it means that paragraph 10 is longer needed).

Amendment 110, in schedule 7, page 127, line 19, first column, leave out “and (4)” and insert “(a) and (c)”.

This alters the provision in section 56 of the LRHUDA 1993 which is applied to Schedule 7.

Amendment 111, in schedule 7, page 127, second column, leave out line 19 and insert

“The reference to any premium and other amounts payable by virtue of Schedule 13 has effect as a reference to the required premium payable under paragraph 7 of this Schedule”.

This modifies the wording of section 56 of the LRHUDA 1993 in its application to Schedule 7.

Amendment 112, in schedule 7, page 127, line 24, first column, leave out

“(1), (2), (5), (6) and (7)”

and insert “, except for subsection (4)”.

This alters the provision in section 58 of the LRHUDA 1993 which is applied to Schedule 7.

Amendment 113, in schedule 7, page 127, line 24, second column, insert

“A reference to the new lease has effect as a reference to the deed of variation of the lease”.

This modifies the wording of section 58 of the LRHUDA 1993 in its application to Schedule 7.

Amendment 114, in schedule 7, page 127, leave out lines 28 to 31.

This removes provision of the LRHUDA 1993 which no longer needs to apply to Schedule 7.

Amendment 115, in schedule 7, page 128, line 10, at end insert—

[Lee Rowley]

Schedule 7 will confer on leaseholders a right to buy out their ground rent without extending their lease. As the premium payable will be subject to the 0.1% cap on ground rent, this measure will be especially helpful for leaseholders with high or escalating rents. Paragraph 2 sets out that leaseholders who qualify for a lease extension will have this right as long as their remaining term is at least 150 years. Community housing leases and home finance plan leases are excluded, as they were from the Leasehold Reform (Ground Rent) Act 2022. Leaseholders may not qualify for lease extensions because they have a lease of Crown land, or because they do not satisfy the low rent test in the Leasehold Reform Act 1967. Such leaseholders will qualify for the new buy-out right.

Paragraphs 3 to 7 set out procedural arrangements for leaseholders and their landlords. They provide that the right is exercised by serving a rent variation notice on the landlord, including time limits for responses and arrangements for either party to apply to the tribunal if they so wish. The premium payable is the same as the term portion of the lease extension premium set out in schedule 2, and is subject to the ground rent cap. It is the capitalised value of the rent payable for the remainder of the lease.

Paragraph 8 provides that where the lease is not varied to provide that the future rent is a peppercorn rent, the leaseholder or landlord can apply to the tribunal. The tribunal shall decide whether it should be varied and, if it should, can appoint a person to execute the variation in place of the landlord. Paragraph 9 sets out the circumstances in which a rent variation notice ceases to have effect. A claim can be revived if it ceased to have effect due to a later extension or acquisition claim, where the later claim ceases to have effect.

Paragraph 10 sets out details of how the schedule applies in relation to the lease of a house; paragraph 11 does the same in relation to the lease of a flat. Finally, paragraph 12 gives various enabling powers to the Secretary of State, including giving effect to the rights, making provisions about notices and amending the details of how the schedule applies to the lease of a house or a flat.

Question put and agreed to.

Schedule 7, as amended, accordingly agreed to.

Clause 22

Change of non-residential limit on right to manage claims

[Barry Gardiner]

I beg to move amendment 129, in clause 22, page 38, line 21, leave out “50%” and insert “75%”.

This amendment would allow leaseholders with a higher proportion of commercial or non-residential space in their building to claim the Right to Manage.

--- Later in debate ---

[Lee Rowley]

I am grateful to the hon. Member for tabling the amendment. He is correct that, as with many of these instances, there are balances to be struck. While I will argue for a different balance from the one he outlined, I accept, understand and acknowledge that a number of different cases can be made in this discussion.

As the hon. Member indicated, the Bill already includes a provision to increase the limit from 25% to 50%, following the Law Commission’s extensive investigation. We believe that the increase to 50% seeks to strike a proportionate balance. He made a valid point about issues in a minority of cases, and we will not use extreme cases as a reason. However, there is the potential—this is why we have landed on 50%—to unfairly prejudice the interests of landlords and commercial tenants, for example, where a minority of leaseholders take over the management of a building that is predominantly commercial.

As I said, I recognise that there is a balance to be struck, but on the basis of the progress that is being made, which I am grateful to the hon. Member for acknowledging, 50% is where the Government would prefer to land, and that is what we are proposing.

[Barry Gardiner]

If the Minister casts his mind forward to the next two amendments, which seek to give the Secretary of State the authority to determine the limit, and should the Minister indicate that, in the future, the Secretary of State would almost certainly not determine it to be less than 50%—as the Government have already proposed—then I just might be persuaded to withdraw my amendment.

[Lee Rowley]

I am grateful to the hon. Gentleman for his comments. We are sticking with what we have suggested, but I hope he will consider withdrawing his amendment none the less. I will just say a few words on our reasons for sticking with what propose in clause 22. We have been clear that we want to improve access to right to manage—I think that view is shared across the House—and we accept that the current limit of 25% of floor space is not proportionate. Therefore, through this clause, we are seeking to increase the non-residential limit from 25% to 50%, as has been discussed. That replicates clause 3 on collective enfranchisement, recognising that this is not a debate about collective enfranchisement on a specific clause.

For the reasons that we have outlined, 50% is the place where the Government have landed, and where we feel is most proportionate. We hope that it will mean that more leaseholders in mixed-used buildings can take over the management responsibilities of their properties. I commend the clause to the Committee, and I hope that the hon. Gentleman will consider withdrawing his amendment.

[Barry Gardiner]

I am grateful to the Minister for his response; he is courteous, as ever. I just point out that the all-party group on leasehold and commonhold reform, co-chaired by the Father of the House, the hon. Member for Worthing West (Sir Peter Bottomley), also made the recommendation that the Government look again at this issue. I am prepared to throw my weight behind amendments 26 and 27, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn .

--- Later in debate ---

[Matthew Pennycook]

I rise to speak to the amendments in my name and that of my hon. Friend the Member for Weaver Vale. I do so making almost entirely the same argument as that made by my hon. Friend the Member for Brent North. [Interruption.] No, I am hoping for a very different response from the Minister to it.

As was made clear in a previous debate, this clause operates in precisely the way that clause 3 does in relation to collective enfranchisement claims: by making changes to the non-residential limit to the right to manage—and we welcome it. The clause will enact recommendation 7 of the Law Commission’s final report on exercising that right.

Although I take the point made by my hon. Friend the Member for Brent North about the use of extreme outlier cases to undermine an argument, we accept the Law Commission’s broad argument that abolishing the non-residential limit entirely could cause problems in a number of cases for certain landlords and commercial tenants. But as the Law Commission very clearly concluded, the current limit is

“an unwarranted impediment to the RTM, given that it can prevent premises which are mostly residential from qualifying.”

We think it is right that the Bill seeks to increase that limit, and we hope that doing so will bring a greater number and variety—that is important—of premises into the right to manage and therefore help to boost the number of leaseholders who decide to take over the management function of their buildings.

As with the non-residential limit for collective enfran-chisement claims, the threshold is inherently arbitrary, but we feel—here my hon. Friend is absolutely right—that we need to address the fact that 50% will leave large numbers of leaseholders shut out from the right to manage. He made the case for a 75% threshold, and I think that has a lot of merit. We sought to be slightly less prescriptive; instead, much in the way that we argued for powers to be put in the Bill for Ministers to further amend the non-residential limit for collective enfranchisement, we propose to give a degree of flexibility to the non-residential limit on right to manage claims, so that any future changes to increase it—and only to increase it—do not require primary legislation.

We want to be slightly more flexible, or less prescriptive, than my hon. Friend for the following reasons. First, we can imagine a range of scenarios in which we would need to look at the 50% threshold in terms of internal floor space. We also think, as with collective enfran-chisement claims, that a future Government may wish to look at the entire criteria afresh—I am thinking of cases of the right to manage, for example, where we might consider whether there are better metrics for determining the residential nature of a building. It is notable that, although the Law Commission ultimately recommended retaining the use of floor space as the metric, it explored in great detail a comparison between the values of the residential and non-residential parts as a way into this. A future Government may therefore wish to look at the criteria afresh, so we sought to give the Secretary of State that power.

We think that that is entirely sensible, as we did when we argued for earlier amendments. It would be by regulation subject to the affirmative procedure, to give this House the chance to give any change due scrutiny, but we think it is a sensible principle to build some flexibility into the Bill.

I expect the Minister will resist the amendment, for the reasons that he previously resisted a similar amendment on collective enfranchisement. I will therefore probably not press the amendment to a vote. However, I think we will have to come back to the issue later, because on both collective enfranchisement and right to manage, the Government are being somewhat stubborn in saying that the 50% sticks and that future primary legislation, which could be many years away, is the only way to look at it afresh. I hope that the Minister will give the amendment serious thought.

[Lee Rowley]

I am grateful for the comments and questions from the hon. Members for Greenwich and Woolwich and for Brent North. As they anticipated —I may be becoming too conventional—I will resist the amendment. Again, this is about where primary legislation stops and secondary legislation begins, and the Opposition are right to test us on that. It is perfectly legitimate for people to take different views on where that starts and stops, and we know that our colleagues in the other place caution us, where we can be cautioned, not to take too many Henry VIII powers. We are undertaking a self-denying ordinance to not take an additional Henry VIII power today, on the basis that this is of sufficient magnitude, albeit recognising the challenges that have been outlined, that it should be in the Bill and be clear, and that any appropriate changes should come through similar processes. For that reason, although I understand the rationale for it, and I am always happy to listen to the underlying points, the Government will not support the amendment.

[Matthew Pennycook]

I will not labour the point, but I put on record that I look forward to the Minister standing up at some future point in what remains of his tenure and arguing for the absolute necessity of a Henry VIII power in one or other respect. It will come, but obviously not on this occasion. As I said, we will have to come back to this matter, but we will reflect on how best to do so. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 22 ordered to stand part of the Bill.

Clause 23

Costs of right to manage claims

Amendment made: 45, in clause 23, page 39, line 30, at end insert—

“(8) See also sections 20CA and 20J of the Landlord and Tenant Act 1985, which prevent costs in connection with a claim under this Chapter being recovered by way of a variable service charge (within the meaning of section 18 of that Act).”.—(Lee Rowley.)

This amendment is consequential on NC7 .

--- Later in debate ---

[Lee Rowley]

I thank the shadow Minister for the amendment. Again, while I understand and acknowledge the underlying intent behind it, and share his inclination to reduce the cost for leaseholders to exercise the rights to form a company and bring a claim, we will not accept the amendment today for reasons that I will explain. It is perfectly clear that, and I think we will all accept this across the Committee, up until now the situation has been balanced in favour of landlords, who have been able to recover their process costs from leaseholders at times. The Bill will change that, as has been acknowledged, and will significantly broaden the cases in which each party will be required to bear their own costs. However, it is important that we take steps to protect landlords from unfair costs.

On amendment 7, the Government judge that it would be unfair if a landlord were required to meet their own process costs where a right to manage claim is withdrawn or ceases to have effect as a direct result of unreasonable conduct from the RTM company. The power for the tribunal to order payment of costs for such ceased claims also includes protections for leaseholders. The landlord will not be entitled to costs automatically and it will be necessary to make an application to the tribunal for an order to that effect. If the tribunal does not consider that costs should be payable, it can decline to make an order. I note that the shadow Minister acknowledged that in his initial remarks.

In aggregate, and with that in mind, my and the Government’s view is that, while the cost regime must change, if the amendment were passed, it would expose freeholders to the risk of facing burdensome and unfair costs. I ask the shadow Minister, if he is willing, to withdraw the amendment.

Turning to clause 23 itself, as has been indicated, leaseholders bringing forward a right to manage claim currently face unknown and potentially significant costs. That is because, under current rules, they must meet reasonable costs of a landlord as well as their own costs, and the costs of others often run into thousands of pounds. Those costs—also known as non-litigation costs—include professional services, surveyors, accountants and insurers from which a landlord may incur costs as a result of the claim. Clause 23 seeks to help by removing the requirement for right to manage companies and their leaseholder members to contribute towards those non-litigation costs, meaning that both parties to a claim will bear their own. It does so by replacing the existing cost regime in the 2002 Act.

A requirement that landlords should bear their costs means that they have an incentive to keep costs down, which hopefully reduces some of the issues that the shadow Minister highlighted, and to process claims quickly because they will not be able to pass those costs on to leaseholders bringing forward the claim, potentially reducing the overall cost for both landlords and leaseholders. To protect landlords from frivolous right to manage claims, the clause includes an exception, so landlords can claim costs where the claim has been withdrawn, abandoned, struck out or otherwise ceases, or where a RTM company has acted unreasonably. Under those circumstances, as has been outlined, the landlords can apply to a tribunal.

To reduce existing obstructions to the process, the clause amends the 2002 Act to ensure that a person complying with the duty to provide information cannot withhold supplying a copy of a document to a right to manage company on the basis that they are waiting to receive a reasonable fee. However, the right to manage company will still be liable for reasonable cost of a person complying with that duty.

The clause also removes the current one-way cost shifting rule for litigant costs, which means that only landlords can currently claim the litigation costs from the RTM company, if they are successful. It is only fair that parties to litigation should bear their own costs, and that is the change that has been made.

Finally, the clause prevents landlords from passing costs on to leaseholders via the service charge. We believe that, in aggregate, these measures will reduce uncertainty in making a right to management claim by making sure that each side to a claim bears their own costs. I commend the clause to the Committee.

[Alistair Strathern (Mid Bedfordshire) (Lab)]

I rise briefly to support the comments from my hon. Friend the Member for Greenwich and Woolwich. Although I welcome much of the Minister’s message about removing some of the deterrents to taking on the right to manage on estates, having spoken to a number of residents and campaigners in my constituency, I know that if the clause is not removed it will continue to be a real deterrent and to expose them to a risk of significant financial liability that they would be poorly placed to take on. I know the Minister has already set out that he is unwilling to support the amendment today, but I hope that the Government will reflect on whether they might be willing to come back to the point to ensure there is no unnecessary deterrent to leaseholders in obtaining the right to manage effectively.

--- Later in debate ---

[Lee Rowley]

The tribunal needs the power to order compliance with obligations under the Commonhold and Leasehold Reform Act 2002. Clause 24 amends section 107(1) of that Act to enable the tribunal to make an order requiring a person who has failed to comply with the requirement on them to address that failure and comply with the requirement within the time set out in the order. The clause also provides that where an order other than an order to pay money has been made by the appropriate tribunal, a person may apply to the county court for the enforcement of the order, or the tribunal may transfer proceedings to the county court for the enforcement of the order. If the tribunal makes an order for compliance, it will be enforceable by the county court in the same way as if it were an order of the county court itself. The clause also inserts a signpost to a general provision in the 2002 Act about the enforcement of tribunal decisions and to provisions in the Tribunals, Courts and Enforcement Act 2007 about the enforcement of an order to pay a sum of money. The measures will allow the appropriate tribunal and courts to exercise their proper enforcement function. I commend the clause to the Committee.

Question put and agreed to.

Clause 24 accordingly ordered to stand part of the Bill.

Clause 25

No first-instance applications to the High Court in tribunal matters

Question proposed, That the clause stand part of the Bill.

[Lee Rowley]

Clause 25 complements clause 24 by removing the risk that the change of jurisdiction for right to manage disputes to the tribunal will be circumvented through applications being brought in the High Court instead in the first instance. The clause prevents such applications being brought in the High Court. The tribunal already has exclusive jurisdiction over proceedings, and it is well placed to take over proceedings concerning the compliance with the right to manage provisions in the 2002 Act in the same way that they do for the acquisition of the right to manage. The clause does not prevent an appeal of the decision of the tribunal to the High Court or the jurisdiction of the High Court to consider judicial review claims. The measure will make the determination of disputes clearer, help to reduce costs and ensure that disputes are handled by judges with specialist knowledge. I commend the clause to the Committee.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

Clause 26

Extension of regulation to fixed service charges

[Matthew Pennycook]

I beg to move amendment 10, in clause 26, page 42, leave out lines 12 and 13.

This amendment would ensure that the statutory test of reasonableness would apply to fixed service charges.

In considering part 3 of the Bill, we move away from provisions that draw on recommendations made by the Law Commission across its leasehold enfranchisement and right to manage reports from 2020 and instead turn to other Government proposals on the regulation of leasehold. The first five clauses in this part concern service charges in residential leases. The Government’s stated objective in including the clauses in the Bill is to improve the consumer rights of leaseholders by requiring freeholders or managing agents acting on their behalf to issue service charge demands and annual reports in a standardised format and a more transparent manner so that leaseholders can more easily assess—and, in theory, challenge—any unreasonable or erroneous charges.

We very much welcome the intent of the clauses. While much of the detail will await the statutory instruments required to bring them into force, the clauses have the potential to improve tangibly what is without doubt one of the most contentious and, for leaseholders, injurious aspects of the feudal leasehold tenure. My office receives scores of complaints, literally on a weekly basis, from leaseholders in my constituency who believe that when it comes to the setting of their service charges, they have been subjected to unreasonable costs; costs artificially inflated as a result of outright error, such as the duplication of charges for the same service; large periodic increases that are rarely justified; or abusive practices, such as the deliberate misuse of funds. Even when leaseholders do not believe that there is a specific problem with their service charge amounts, my experience talking to many thousands of them over the years in Greenwich and Woolwich is that most nevertheless feel that they are not particularly aware of or informed about what their charges are spent on or what their future liabilities might be.

That may well be a trend that is particularly prevalent in constituencies such as my own that contain a significant number of new-build leasehold flats, but my team and I increasingly find—as I am sure other hon. Members find in their own caseloads—that a sizeable proportion of the work we do involves simply demanding from freeholders and managing agents, on behalf of leaseholders pushed to the financial brink, a detailed breakdown of service charge costs. We are then frequently required to assist individual leaseholders or informal groupings of them in probing the relevant freeholder or managing agent on the justification for individual charges, and more often than not we expose discrepancies or charges levied for services that are not provided as a result.

Given that a Member of Parliament is involved in those cases, most freeholders, head lessees or managing agents will, in such circumstances, ensure that the aggrieved leaseholders are reimbursed, thus avoiding the need for them—[Interruption.] My hon. Friend the Member for Brent North laughs, but we have had success on occasion, once the relevant error is exposed. In those circumstances, it avoids the need for the leaseholders in question to take the matter to tribunal, with the detrimental implications that the current cost regime entails. However, many —perhaps most—do not, instead relying on the barriers that leaseholders face in going to tribunal to ensure that the unjustified costs are still paid and not challenged. I would wager that, in the scenario that I just set out, I am not alone among Members of the House in dealing with service charge disputes of that kind on a regular basis. To my mind, that is a clear indication that the current service charge regime is woefully failing to adequately serve leaseholders or protect their interests. The Opposition take the view that there is a cast-iron case for making changes to the regime, with a view to ensuring that service charges are levied in a more appropriate, transparent and fair way.

--- Later in debate ---

[Lee Rowley]

I thank the hon. Member for his amendment. Even though I will not be accepting it today, it raises an important question and he is right to allow us to debate it. We absolutely recognise that leaseholders who pay fixed service charges do not have the same rights of challenge as leaseholders who pay variable service charges—that is accepted and understood—but it is also the case that there are good reasons for that.

As the hon. Member indicated, the main sectors where fixed charges exist are the retirement and social housing sectors, where households are often on limited and fixed incomes, as I do not need to explain to the Committee. Leaseholders, especially those on low incomes, who pay a fixed service charge have certainty about that charge, whereas those who pay variable service charges do not. Landlords benefit from not having to consider tribunal applications but, in return, they should have a clear imperative to provide value for money.

If we were to grant the right to challenge fixed service charges in a similar way to how variable service charges can be challenged, there would be some operational and practical challenges, which is one of the reasons why we will not agree to the amendment today. For example, if landlords underestimate costs in one year, but overestimate them in another, is it feasible and reasonable to be able to challenge the reasonableness only in the year in which the costs are overestimated? Should a reciprocal ability to challenge or to recover the balance of an underestimated cost in a year, on the basis that it would be reasonable to do so, not be proposed? Landlords might move away from employing fixed service charges and switch to variable service charges, which could have unintended consequences.

Fundamentally, I share the hon. Gentleman’s view that there are challenges in all parts of service charges, and so there will be challenges within fixed service charges. The whole point of other elements of the Bill is to provide transparency and visibility of the reasoning for charges being made. For the reasons I have outlined, we are not of the view that this extension should be made for fixed charges.

[Eddie Hughes (Walsall North) (Con)]

I want to pick up on the shadow Minister’s point about ambiguity. There is no definition of what exactly would constitute a fixed charge, so there is the opportunity for flexibility or the law of unintended consequences. Given the lack of opportunity for subsequent challenge, a landlord might choose to move a charge from one column to the other. When the Minister said he would not accept the amendment today, did he mean he would give this point some further consideration in the future, or was he just being polite?

[Lee Rowley]

I am grateful to my hon. Friend for his question. Notwithstanding the tone of my responses, given the Committee’s interest I will happily write to it to make sure there is clarity on that point. I hope that, as a general and broad macro point, my comment still stands.

[Barry Gardiner]

The Minister has yet again confirmed his reputation for being reasonable. Can I probe him on the point about reasonableness? Many leaseholders complain that there is an amount in their service charges, which they may think is either reasonable or unreasonable, for a particular service, but when they enquire about the service provider, they find that it is in fact their landlord under another name. They then pay not only the cost of that arm’s length contractor providing the service, but a 15% service charge on top of it. Many people would feel that this is another rentier practice that landlords are using. I appreciate that the issue does not relate specifically to amendment 10, but I would very much like to get the Minister’s thoughts about the reasonableness of that practice on record.

[Lee Rowley]

I am grateful to the hon. Gentleman for raising that point. He articulates another example of good law being used in a way that is, in my view—without talking about individual incidents—both unintended and inappropriate. I am not a lawyer, and do not seek or have any desire to be one, but as I understand it, there is a concept of reasonableness within the legal domain based on an Act from a number of years ago. Hopefully that helps to answer part of his question, at least from a structural perspective. On the variable service charge side, without talking about individual instances, that kind of instance is a clear example of where those impacted would be able to go through the process of challenging it, which I think would be very sensible. If I were a leaseholder, I might be very tempted to do that, unless the charge could be justified in a different way. On the fixed service charge side, although I accept that there is the potential for these kinds of challenges, conceptually that needs to be balanced with the fact that when the contract was entered, an agreement was made to consent to that amount, for whatever reason—good or otherwise. That is why we are pursuing this. However, I take the hon. Gentleman’s broader point.

[Rachel Maclean]

This discussion goes to the heart of some practices and problems that leaseholders have experienced across the sector. On behalf of the many retirement leaseholders, mentioned by the shadow Minister, the hon. Member for Greenwich and Woolwich, I will make a point and ask for reassurance from the Minister.

What we are talking about with this amendment is different from the ground rent issue. Ground rent is a payment for nothing—nothing is being provided—whereas something is being provided for service charges. There is a service, so there is a need for a charge; that is perfectly legitimate. As Conservatives, we do not dispute the fact that there should be financial recompense for services. However, we find ourselves with a problem, the law of unintended consequences and the drivers of business models.

I would welcome if the Minister could touch on this in his response, but my fear is that if ground rents are removed and business models need to adjust to make recompense for that, the natural behaviour of unethical operators in the retirement sector and possibly elsewhere—some are unethical and do not think about the people who bought properties in good faith—will surely be to seek to load their charges, their profit and loss, back on to the service charge in some way. I am not close enough to existing contracts to know whether they will be able to do that with a fixed charge, so the discussion might be better suited to when we talk about the variable charge. The Minister can help me on that.

The broad point stands, however, in the case of someone dealing with the estate of a loved one, perhaps someone who has passed on, is in care, is suffering from dementia or otherwise does not have the capacity to deal with all this—the Minister will be familiar with such cases. They might be stuck with a property that they cannot sell, and that often applies in such cases when service charges are racking up in a way that is difficult for people to get a handle on—

[Rachel Maclean]

I thank the hon. Gentleman for bringing those figures to the attention of the Committee. I am familiar with them, as are others. [Interruption.] I do not wish to detain the Committee any longer—I can see the Whip making that plain to me. I will leave my remarks there, perhaps to continue at a later point, but the Minister may wish to respond in detail.

[Lee Rowley]

I, too, do not wish to challenge the patience of my colleague the Whip. There will be people who have existing fixed charges; that should not change. There will also be people who have choices about whether to enter into new fixed charges, whether absolute or indexed to some extent. For an inappropriate attempt to do something with variable service charges, there will be the ability to apply to tribunals. I hope that we are closing off all the options that would allow the kind of instances mentioned.

[Matthew Pennycook]

I will be brief, so as to dispose of the amendment.

I appreciate what the Minister said. He provided some useful clarity. In particular, he highlighted the practical challenges in addressing this matter, and the potential for landlords possibly moving away from fixed charges and into variable. I think that there is a corresponding risk the other way. I appreciate and take on board what he said about the certainty of the charge.

I think the Minister alluded to the point that I am trying to make, which is that residents should have value for money, and they do not always get it on each occasion. We have deliberately not sought to apply all the protections that apply to variable service charges, but focused on the test of reasonableness. With the help of two former Housing Ministers, I think I had an indication from the Minister that he will do this, but I would appreciate it if the Government went away to satisfy themselves that the protections are in place for that category of leaseholder. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Mr Mohindra.)