Leasehold and Commonhold Reform

Mike Amesbury Excerpts

Thursday 21st December 2017 Westminster Hall

[Mr Wragg]

There was certainly an iniquity there, which needs to be resolved.

Like many right hon. and hon. Members present, I am dealing with a number of cases and complaints on behalf of my constituents. I am pleased to be able to put some of them on the record in this debate. A resident of the new build estate at Strines in my constituency informs me that he is entering the fifth year of his lease, and the prospect of his ground rent increasing is causing him a great deal of trepidation. He is paying £250 plus a £300 service charge. Along with the worry about the additional strain on his finances, he is rightly concerned at the possibility of his property becoming less attractive for sale.

Several residents of the new build Offerton Park estate tell me that property developer Bellway recently transferred the freeholds to a financial management company called Adriatic Land 6, so they are now subject to above-inflation ground rent increases every 10 years. They were not offered a chance to buy the freehold themselves at a reasonable cost.

The residents of Davies Court in Romiley, with whom I had a very enjoyable meeting last month, and who are predominantly retired, face annual ground rents of £450. That is £450 being demanded from pensioners for the ground their houses stand on. The managing agency for the building, FirstPort Retirement Property Services Ltd, also charges residents spurious administration fees when homeowners carry out improvement works, such as installing fitted wardrobes or new bathrooms, at their own expense. The company even attempted to charge one retired lady an £80 administration fee when she bought a cat. She refused to pay.

These are just a few examples from my post bag that highlight the unfair and, in places, absurd situation.

[Mike Amesbury (Weaver Vale) (Lab)]

A similar practice was highlighted just last week by one of my constituents in Winnington in Northwich. One householder tried to sell their property and put up a “For sale” sign, but because of various caveats that applied to the lease, she was told that she had to remove the sign. She could not post a “For sale” sign; does the hon. Gentleman not think that is scandalous?

[Mr Wragg]

I am surprised that the agency did not charge a ground rent for the “For sale” sign—that would have been more appropriate—but the hon. Gentleman is absolutely right to highlight that example from his constituency.

I am pleased that the Government are taking action through the recent White Paper to tackle the unfair practices that we see. Future homebuyers may be protected by limiting the sale of new build leasehold houses to exceptional circumstances. I also welcome the Government’s moves to tackle the scourge of escalating ground rents, with the intention to limit ground rents in new leases to start and remain at the peppercorn level.

While I welcome those measures, they really are just the first steps in achieving transparency and fairness for the growing number of leaseholders. They may make the situation easier going forward, but are far more difficult to apply retrospectively. The far more intractable problem—and the one facing my constituents whom I referred to earlier—is what to do about current homeowners on existing leases altering the terms of a lease part-way through. Ministers ought to consider what steps could be taken to help those already facing onerous ground rents or unreasonable and spurious administration fees. That could include, for example, steps to tackle unreasonable ground rent rises within existing leases at their next review period, or to strengthen the rights of homeowners for redress for unfair lease terms.

In conclusion, I welcome the Government’s plans to limit leaseholds on future new build homes and to cap ground rents, but I am concerned about whether any new legislation will retrospectively benefit homeowners already in this invidious situation. There must be more support for existing leaseholders, including making buying a freehold or extending a lease easier, faster, fairer and cheaper. Leasehold property law is a complex area, and not being lawyer myself, I cannot profess to be an expert. So I look forward to what the Minister, who no doubt has the excellent support of the legal team in his Department, has to say in response to the points raised. May I take this opportunity to wish you, Sir David, and one and all a very merry Christmas?

--- Later in debate ---

[Mr Howarth]

My right hon. Friend is absolutely right; that is another complicating factor. I will quote what some of my constituents have said about this—I will not name them because I have not asked their permission. The first said:

“Why were we not given the full facts of exactly what it was we were buying into? We haven’t bought a home, we’ve bought a license to live in the house until the lease expires. Please tell me, where is the security in that?”

Another constituent said that:

“we bought a Bellway home in Huyton unaware that Bellway were going to sell on the freehold to a private company without giving us the chance to buy. The increase is immoral and totally unfair”.

The third constituent said:

“I was never told I could purchase the leasehold although I now know some people on the estate purchased the leasehold at the time they were buying. I thought Bellway would manage the property for many years to come, not be sold off to the highest bidder who would raise their fees whenever they want to. I feel ripped off by Bellway”.

That is what some of my constituents say.

Most of the properties in Knowsley that I am talking about are houses—starter homes, as my right hon. Friend the Member for Delyn called them. On some estates, some flats are mixed in. One constituent asked my office to contact the developer of his flat, Redrow, to find out what would be involved in purchasing the freehold. Eventually, somebody called Steve at Redrow replied—“kind regards, Steve.” We got a reply; the company conceded that the residents in the flats could purchase the freehold, which, of course, is their statutory right. The end of the reply, from December, states:

“As you will appreciate the 2 month notice period is only a first step, and should give residents time to decide whether it would be something they would wish to pursue.”

A group of residents makes the effort to look at a freehold arrangement, but they only have until the end of January to find out where they would get the money from, and to find out whether a majority of them want to go down that route. I would think that that is almost impossible. Anyone who has ever been involved in a house purchase knows that these things take a lot longer than that. There is a lot going on.

I welcome the announcement by the Secretary of State. The hon. Member for Hazel Grove said, “So far, so good”. We hope that the work that the Law Commission will be asked to do will provide a way forward for my constituents who have bought new homes, although there is no guarantee. It worries me that a lot of those developers will see some kind of control or legislation that will curtail their activities looming ahead of them and will hurry to sell those homes so that they are not left with a liability. I realise that with potential legislation pending, that might not be the most attractive sale ever, but nevertheless it is a worry.

[Mike Amesbury]

In my constituency of Weaver Vale, Morris homes is selling houses in a development in expectation of the new arrangements, and literally on the other side of the street, people are caught in the scandal we are talking about. Their homes are simply unsellable.

[Mr Howarth]

My hon. Friend makes a very good point. Was someone else trying to intervene?

--- Later in debate ---

[Mr Peter Bone (in the Chair)]

Does Mr Amesbury want to speak?

[Mike Amesbury]

No, I withdraw.

[Mr Peter Bone (in the Chair)]

For the benefit of the House, I have called all the Members who have given me notification that they want to speak. I will continue to call other Members, but it would be nice if we could start the winding-up speeches at 4 o’clock or earlier.

[Marsha De Cordova (Battersea) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bone. I thank my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) and the hon. Member for Worthing West (Sir Peter Bottomley) for their work and leadership on this important issue.

Leaseholder reform is often overlooked when it comes to the housing crisis. The reality is that we must view leaseholder reform as part of, not separately from, how we address the injustices of that housing crisis. Leaseholders face a number of exploitative conditions that relate to the way in which housing is seen as an economic investment, not as about homes. That is particularly acute in London, where we have the highest number of leaseholder sales. In my constituency of Battersea, which has become something of a developers’ playground in recent years, 83% of all property sales in 2016 were leasehold. As more and more high-rise developments go up, it is crucial that we ensure leaseholders have rights and protections, and that legislation is implemented to stop such exploitation.

One key issue that hon. Members raised, which my constituents have written to me about, is ground rent. With more and more developers selling flats on a leasehold basis, there is an incentive to set ground rent at a higher level and to build hidden charges into leaseholds. Developers have admitted that the returns from selling on ground rents can be up to 35 times the annual ground rent value, and can be more than the amount normally charged to the purchaser of a new build house for the freehold interest at the point of sale.

There is no duty on the freeholder of a house to inform the leaseholder of a change in ownership. Nor does the leaseholder have a “right of first refusal” to buy the freehold interest at that point. One of my constituents’ is subject to ground rent that will double every 15 years, which means that her property will become more and more expensive, and will be unsellable if she cannot afford the charges. Over time, the ground rent will rise to hundreds of thousands of pounds for a one-bedroom flat. My right hon. Friend the Member for Wentworth and Dearne (John Healey) rightly described this as legalised extortion in some of the worst cases. The Government must act to end this practice, and commit to help those already trapped in unfair and exploitative ground rent schemes. Nobody should be made homeless because of ground rent or trapped in a contract that means that they are unable to move on or afford to maintain the cost of their home.

[Mike Amesbury]

Does my hon. Friend agree that the evidence presented today and presented to us by constituents points to the fact that people have been mis-sold products? As my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) rightly said, this is the new PPI scandal.

[Marsha De Cordova]

My hon. Friend makes a very important point. I agree.

It is important that we regulate the new lease models that developers are creating. Shared ownership tenants in the new blocks along the river in my constituency find that the service charges do not seem to match up with the proportion of the housing estate they occupy.

We cannot forget leaseholders on council estates. Any so-called regeneration scheme must give owner-occupier leaseholders the same value and agreement on their flats or a like-for-like buy-in. Council estate residents must not be forced out of their communities when demolitions take place. Another major fear that many council estate leaseholders in Battersea have is the cost of the retrofitting of sprinklers. After the tragedy of Grenfell, councils have rightly sought to ensure that old tower blocks that are more than 10 storeys high have the same safety regulations as new builds. However, the Government are refusing to fund those crucial safety measures. Councils such as Wandsworth are planning to charge leaseholders for the work, which means charges of up to £4,000. Leaseholders on one of my estates—the Surrey Lanes estate—already face charges of £9,500 for recent window works, and they will now be hit with an additional £4,000. There is often an assumption that leaseholders can afford that, but that is totally untrue and misunderstands the circumstances of many owner-occupiers on our council estates.

Cladding is another issue in Battersea. Castlemaine Tower was found to have the dangerous cladding similar to that on Grenfell, and the council are paying to have it removed. In private blocks with that cladding, however, the private freeholder and/or landlord is likely to pass on the huge sums in charges to the leaseholders. I ask the Minister, what plans are the Government making with regards to safety works in the private-rented sector, in particular post-Grenfell, to ensure that leaseholders are not held to ransom by freeholders?

Finally, it is great to see that leaseholder reform is getting a higher profile, and that the work of the APPG is starting to have an effect on Government. As we become a more urban nation, more and more people will be living in apartments and high-rises, so it is crucial that we get things right.

My final, final point, Mr Bone, is to thank you and all hon. Members present, as well as all the parliamentary staff. I wish everyone a very merry Christmas.