Leasehold Reform (Ground Rent) Bill [ Lords ] (First sitting)

Nickie Aiken Excerpts

Committee stage
Tuesday 7th December 2021 Public Bill Committees

[Nickie Aiken (Cities of London and Westminster) (Con)]

It is a pleasure to have you as Chair of the Committee, Mr Hollobone. I welcome the Bill and the Government’s obvious determination to ensure that buyers of new developments will be protected from what I can only describe as dodgy practices.

Having looked into the issue before coming to Committee, and knowing bits and pieces from the media coverage of this story in recent years, I find it shocking that property developers and renowned house builders have thought it acceptable to expect families or individuals buying a property—we all know how expensive that can be; people save for years to have enough for a deposit—to be hit with a ground rent that they do not know is going to double and double over the years. I absolutely welcome the Minister’s determination to stop that practice.

I call on house builders across the nation to think about the consequences of such practices on their customers, and their future customers. I know that a number of house builders have taken steps to stop this practice. I believe that the Competition and Markets Authority is carrying out an investigation and that some, but not enough, house builders have stopped the practice voluntarily. That is why I am glad that the Bill will protect us in the future.

I was taken aback by the fact that the chief executive of Redrow, a renowned house builder, said in a letter to the then Select Committee on Housing, Communities and Local Government that ground rent of £400 per year would not always necessarily double over 10 years, but in fact could reach £12,800 a year. For the average family, the idea of trying to find that amount of money is eye-watering. Even people on good salaries would find that amount punitive. I absolutely welcome the Bill. We must regulate to safeguard hard-working families who want to invest in homes.

[Mike Amesbury]

I have no doubt that members across the Committee agree with much of what the hon. Lady says, but these measures are for the future, not for the here and now. The CMA investigation is very welcome, as is the work by the Select Committee and all the campaigners who have helped to force the issue, but many people are still applying these practices. Welcome though they are, these are baby steps.

[Nickie Aiken]

I thank the hon. Member for his intervention; I was coming to that point. In my constituency—the Cities of London and Westminster—many leaseholders live in properties with much older tenancies that involve ground rent. I believe the vast majority are on peppercorn. I have lived in the two Cities for 25 years, as a leaseholder and now, I am glad to say, as a freeholder. There is a massive benefit to being a freeholder, even though I own a flat.

The hon. Gentleman is right, and I am sure that this Government and this Minister will be looking at legislation that can protect all leaseholders, no matter what kind of tenancy they have. I understand that the renters reform Bill will be coming through, which will be a massive step towards creating a balance between tenants and landlords. This Bill and any further legislation that the Government consider on leasehold are about balance and fairness. I welcome the Minister’s taking forward this Bill and future legislation to protect leaseholders.

--- Later in debate ---

[Eddie Hughes]

As I said in answer to the previous question, we can already see—not just now, but over the previous few years—that there has been a rapid decrease in the number of properties being constructed and subsequently sold in this way, so the hon. Gentleman should feel reassured that the Government’s intended legislation is already having an incredibly positive effect.

[Nickie Aiken]

Following the previous point, does the Minister agree that the conduct of house builders such as Countryside Properties, which has voluntarily agreed to remove the doubling of ground rents from its leasehold contracts, is a step forward? The Home Builders Federation or another trade body should be working with its members to take that forward, as Countryside Properties and others have done, but too many house builders are still not doing so. Perhaps the CMA review will help, but perhaps the Bill will send a clear message to house builders that, actually, they should be looking at their own practices before they are made to do so by the legislation.

[Eddie Hughes]

I can say nothing other than that I completely agree with my hon. Friend’s comments.

--- Later in debate ---

[Eddie Hughes]

About the amendments, Mr Hollobone. Amendments 11 and 13, tabled by the hon. Member for Weaver Vale, seek to reduce the payment of rent on a shared ownership property. Shared owners are leaseholders of a share of their property. Most shared ownership properties fall within the terms of the Government’s shared ownership scheme, and the providers will be registered with the Regulator of Social Housing. In the Government’s existing shared ownership scheme, owners have a full repairing lease and are financially responsible for all maintenance charges and outgoings in the same way that any other homeowner is.

On 1 April, the Government confirmed the new model for shared ownership, which introduces a 10-year period during which the landlord will support the cost of repairs and maintenance on new build homes. Under the shared ownership model, landlords can collect rent on their share of the property, and I reiterate that the Bill will allow them to continue to do so. The payment of rent reflects the fact that the shared owner has purchased a share of their home, and pays rent on the remaining share, which is owned by their landlord. The rent paid is not the same as the service charge paid for repairs and maintenance previously described.

The effect of amendments 11 and 13 would be to remove the ability of a landlord to receive the rent that they are rightly due on the share of the property that the leaseholder rents in cases in which the service charge is more than £100 per month. The law is clear that service charges must be reasonable and that, where costs relate to work or services, the work or services must be of a reasonable standard.

[Nickie Aiken]

I just wish to mention service charges in central London, as the hon. Member for Weaver Vale did. I am very aware of extortionate service charges in central London, particularly for private blocks. Service charges of £100,000 are not unknown, but the properties in those cases are worth around £35 million; I suggest that, if someone can afford to buy a £35 million flat, they may be able to afford a £100,000 service charge. However, the hon. Member for Weaver Vale makes an important point, and I would like the Minister to consider it. We must not put all service charges into the same pot. We have to ensure that homes within the community—rent to buy, social housing and community housing—are different from very expensive properties. We cannot put them all into the same position. We must give landlords the ability to charge a fair service charge that is in keeping with the value of the home. There has to be a balance. There is a big difference between a £35 million flat and a rent-to-buy property.

--- Later in debate ---

[Maria Eagle]

I will be interested to see whether there is any kind of entrepreneurialism undertaken by trading standards around the country, but I would like to hear what the Minister has to say.

[Nickie Aiken]

I thank the Government for including effective enforcement in the Bill. There is no way that the Bill will work, and landlords will not be held to account, unless there is proper enforcement. Having been the cabinet member for public protection at Westminster City Council, which trading standards came under, I know at first hand the brilliant work that trading standards officers do day in, day out in Westminster and across the country. I would really appreciate it if the Minister could give assurances that trading standards teams across the country will have the funding to carry out the extra workload. I certainly think it is important that we ensure they can do so, because we do not want to be giving leaseholders any false hope, and I certainly welcome the ability for local authorities to keep the proceeds of any fines that they may be able to extract from a landlord.

[The Chair]

Order. I must ask the hon. Lady to resume her seat. It is nothing against the hon. Lady at all—I am enjoying her speech immensely—but it is now time to adjourn.

Leasehold Reform (Ground Rent) Bill [Lords] (Second sitting)

Nickie Aiken Excerpts

Committee stage
Tuesday 7th December 2021 Public Bill Committees

[The Chair]

I call Nickie Aiken to conclude her speech.

[Nickie Aiken (Cities of London and Westminster) (Con)]

It is a pleasure to serve under your chairmanship, Ms Elliott. As I was saying earlier, having been the cabinet member for public protection at Westminster City Council, I know that enforcement is the cornerstone by which we put words into action and ensure that what we pass in legislation has the intended effect in real life.

It is a welcome provision that the income from financial penalties will be kept by local authorities, but we need sustainable funding sources for enforcement ahead of the game. Local authorities may eventually keep the income from penalties, but work will need to be undertaken before that by the trading standards teams to bring enforcement cases to fruition. That funding is particularly important given the increase in the range of new enforcement duties being placed on trading standards departments across the country.

It is also important to recognise that no two councils are the same. They come in all shapes and sizes—rural, urban, global cities such as my own—which all have different numbers of leaseholders who will be affected by the Bill. I would welcome the Minister giving consideration to the kinds of measures that councils will need in order to be appropriately supported, in proportion to the number of leaseholders they may have within their local authority area and the duties being placed upon them.

Of course, as I have said, I welcome the Bill—it does so much to ensure fair enforcement—but we need assurances that there will be guidance for trading standards teams, particularly on the new provisions we will be introducing on leasehold and freehold law, to ensure that trading standards officers are adequately trained to deal with what may become difficult enforcement situations. Trading standards officers may not be trained in landlord and tenancy law; they may require some more training. Ultimately, we need the provisions in the Bill that place additional duties on trading standards teams to be under- pinned by proportionate support and adequate guidance.

Leasehold Reform (Ground Rent) Bill [ Lords ] (Third sitting)

Nickie Aiken Excerpts

Committee stage
Thursday 9th December 2021 Public Bill Committees

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Eddie Hughes)]

It is a pleasure to see you back in the Chair, Ms Elliott.

As hon. Members will know, it is our intention to protect leaseholders from unfair practices through the Bill by ensuring that future regulated leases are restricted to a peppercorn rent, unless excepted. The Government believe that those who purchase retirement homes should benefit from the same reform as other future leaseholders. Although we would like the provisions of the Bill to come into effect as soon as possible, we have decided to give the retirement sector additional time to prepare for these changes. The hon. Member for Weaver Vale has tabled amendment 10 to remove this provision and do away with the transition period entirely. I am grateful for his consideration of this point and would like to explain the reasoning for including a transition period for retirement properties, and why I believe that that is the right thing to do.

The plan for peppercorn ground rent was announced in 2019, following the Government consultation entitled “Implementing reforms to the leasehold system”. At the time, we also announced that we would proceed with the proposal to exempt retirement properties from the peppercorn ground rents policy. That decision was made on the basis that developers of retirement properties incur additional costs as a result of the communal spaces that are characteristic of these kinds of development. However, having reviewed this in further detail, we concluded that the argument in favour of an exemption did not outweigh the benefits of ensuring that those purchasing retirement homes can take advantage of reform in the same way as any other leaseholder could.

The Government believe that it is a matter of fairness that those buying retirement properties should be able to realise the benefits of this legislation. It was therefore announced in January 2021 that the exemption for retirement property would no longer apply, and we have offered the transition in recognition of that change of policy. As such, the Bill will come into force no earlier than 1 April 2023 for retirement homes. This transition period will allow developers of retirement properties time to adapt to the forthcoming changes. We believe the transition period in the Bill has been fairly granted in balancing the needs of developers and fairness to leaseholders.

[Nickie Aiken (Cities of London and Westminster) (Con)]

I have some sympathy with the amendment, but I absolutely hear what the Minister says about what he is trying to achieve. Many house builders we have heard from over the last few weeks have decided not to continue charging ground rent, because it is not a good idea. If I may be so bold, perhaps the retirement development industry might like to stop charging such exorbitant fees for ground rent, without the need for legislation.

[Eddie Hughes]

I thank my hon. Friend for her intervention. I will no doubt refer later to meetings I have had, including as recently as yesterday, with representatives from the sector. It is not necessarily for us to prescribe how they might change their business models, but different developers in the sector certainly take different approaches. Given that we signalled one intention and subsequently changed to another, I think we are striking the right balance in allowing a transition period.

In the other place, arguments were raised on both sides; there were those who wished to extend the transition period and those who wished to remove it. As I said, conversations are ongoing, including as recently as yesterday, and hon. Members including my right hon. Friends the Members for Chipping Barnet (Theresa Villiers) and for New Forest West (Sir Desmond Swayne) have been in favour of amending the transition period for the sector.

We acknowledge that the retirement sector has had less time to prepare than the rest of the development industry. However, we have given the matter careful consideration, and we believe the transition period in the Bill strikes the right balance between protecting retirement property consumers and providing a fair period of adjustment for developers. In my conversation with representatives yesterday, it was clear that prospective purchasers are already aware of the planned legislation—they seem to be a well-informed group—and I guess they will be mindful of that when deciding when to complete their purchase.

With regard to hon. Members’ concerns about the impact, I think it will be minimal for two reasons. First, the people who buy this type of property seem to take longer to make the purchase than would perhaps otherwise be the case; in fact, the sell-out rate for such properties is considerably slower than for normal residential properties. Buyers have a greater period over which to consider the purchase, and they frequently visit several times—first by themselves, and subsequently with members of their family—so this is a very considered purchase. Secondly, they seem to be well-informed about the changes to legislation. For those reasons, I feel they will be protected.