Leasehold Reform (Ground Rent) Bill [Lords]

Theresa Villiers Excerpts

Report stage & 3rd reading
Monday 24th January 2022 Commons Chamber

[Mike Amesbury]

Let me begin by thanking all colleagues who have helped this short but important Bill through its stages so far, including our friends in the other place. In particular, I thank those who joined the Minister and me in scrutinising the Bill in Committee. Let me also begin with an apology to the Minister. I told him on the occasion of our final meeting in the Committee that that would be my last outing in respect of housing, having handed over the portfolio to my capable hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook), who is sitting behind me. I was wrong to say that, and I am very pleased that I was wrong. I stand here today ready to continue to raise an issue which matters hugely to me, to many of my constituents, and to leaseholders across the country—and, indeed, to the Minister himself.

Although the Bill is short, many important issues in it have already been covered extensively, first by our colleagues in the other place and then by Members here, in Committee. I do not wish to repeat too much of what has already been said, but the two new clauses tabled for Report are an opportunity for Members on both sides of the House to raise again two important aspects of the Bill.

New clause 1 would require the Government to produce draft legislation within 30 days to reduce ground rents to a peppercorn in existing long residential leases. The antiquated feudal system of leasehold is unjust for the many and not just the new. People in England and Wales have been trapped in that relic from the past for far too long. I urge the Minister to set them free, level up their life chances and support the new clause.

New clause 1 proposes that the narrow scope of the Bill be simply widened to improve the lives of leaseholders—the 4.5 million people trapped in this feudal system. Some 1.4 million of them are in houses, many in the north, the north-west and Wales, and may be experiencing high ground rents on top of other exploitative terms built into their leasehold contracts.

[Theresa Villiers (Chipping Barnet) (Con)]

We are all united in wanting to stamp out abusive practices with ground rents, but is the defect of the hon. Gentleman’s amendment not that it amounts effectively to a confiscation of existing property rights? That in itself has fairness issues, but it also deters future investment in our building stock. That future investment is needed, for example, if we are going to insulate against climate change and turn our buildings into more carbon neutral ones for the future.

[Mike Amesbury]

A feudal system of kings and barons needs to be kicked into touch. It is unjust and it is unfair. I am sure the right hon. Member will make an informed decision when it comes to the Division Lobby, but I know whose side I am on.

--- Later in debate ---

[Theresa Villiers]

I shall begin by highlighting the investment property in my entry in the Register of Members’ Financial Interests, which is a flat held on a long leasehold basis. Like everyone else in the House, I recognise the need to deal with abusive practices in relation to leasehold and ground rents, but I fear that the blanket abolition of ground rents for every single new building could have significant negative unintended consequences.

Measures specifically targeted at unfair practices such as a code of conduct, a potential cap on ground rents and a ban on selling houses on a leasehold basis could be effective in stamping out wrongdoing, but without the negative potential consequences of the Bill’s widely drawn approach. As drafted, the Bill will see professional freeholders exit the market. It is disappointing that the Government have not responded to the calls on Second Reading to consider an exception in the Bill to enable ground rents to continue to be an option for large, complex apartment blocks. If we remove the choice to use ground rents for buildings of that kind, all the responsibility for ensuring the safety and long-term viability of the block will fall on leaseholders. That will inevitably lead to higher costs, since individual residents groups will not have access to the kind of specialist expertise and collective buying power that professional freeholders have when they buy in services to repair, maintain and enhance buildings.

There is evidence that after the removal of professional freeholders in Scotland, the lack of professional oversight and accountability has meant many more buildings falling into disrepair. A 2019 report for the Royal Institution of Chartered Surveyors highlighted that many residents in Scotland had great difficulty in securing agreement from fellow flat owners to fund essential work on the fabric of their building. That can slow down remedial work, greatly adding to costs. Even identifying and contacting fellow flat owners may be difficult, for example if they are buy-to-let investors living overseas, and that is even before we get to the point of trying to secure agreement on the work that needs to be done, how much it will cost and persuading everyone to pay up. Disputes have left some leaseholders in Scotland having to threaten their neighbours with legal proceedings, generating even more fees to pay.

Without professional freeholders, flat owners in large blocks will have to take on myriad financial and legal responsibilities and keep up to speed with a rapidly changing and complex regulatory environment. These onerous obligations are an extra burden to be shouldered by ordinary people on top of busy lives holding down jobs and looking after their families. Some leaseholders might prefer to pay a modest regulated ground rent so as not to have the hassle and risk of taking on these responsibilities, but the Bill denies them that choice for new buildings.

Buildings that involve business as well as residential use will be especially difficult for residents to manage. Even the Levelling Up, Housing and Communities Committee recognised that exceptions to the ground rents ban should be considered in such circumstances.

I find it hard to comprehend a Bill whose main effect will be to reduce professional oversight and responsibility for residential buildings at a time when we have a building safety crisis. This is also an era where we urgently need investment in our building stock to make the changes to insulation and heating systems needed to meet climate change commitments. That is another reason surely to try to retain professional freeholders, not shut them down. It is worth remembering that the investors behind most of these professional freeholders are generally the pension funds that are so essential to providing us all with security in old age.

I close by asking the Minister to pause, reflect on this legislation and consider whether an exemption can be allowed for large, complex apartment blocks. The system of freehold interests and ground rents has come under sustained criticism, including this evening. It has even been described as “feudal”, but England’s laws on real property have successfully underpinned economic activity for centuries, providing a crucial foundation for economic prosperity and development. That was made possible by adaptability and inventiveness, including the capacity to slice up different rights over land in a way that maximised the incentive to use the property constructively and efficiently.

Put simply, there is a reason why English land law has deployed the concept of a freehold interest for the past 900 years. It makes sense for someone to have stewardship of the long-term future of a building, and it makes sense for their economic interests to be aligned with maintaining the building and investing in it for the long term. Yes, we need to crack down on the unscrupulous activities of morally suspect developers abusing the ground rent system, but I fear that the approach in this Bill is too blunt an instrument. We would be better off with the regulation of professional freeholders, not the de facto abolition of professional freeholders. I hope that the Minister and the Secretary of State will give that the most serious consideration.

Question put and agreed to.

Bill accordingly read the Third time and passed.