The Parliamentary Under-Secretary of State for Levelling Up,
Housing and Communities (Eddie Hughes) I beg to move, That the Bill
be now read a Second time. As hon. Members may know, I have long
championed a root and branch comprehensive reform of our leasehold
system. It has been a long journey to get here from my private
Member’s Bill—Ground Rents (Leasehold Properties) Bill—to try to
overhaul the regulations on ground rents. It is particularly
gratifying to be...Request free trial
The Parliamentary Under-Secretary of State for Levelling Up,
Housing and Communities ()
I beg to move, That the Bill be now read a Second time.
As hon. Members may know, I have long championed a root and
branch comprehensive reform of our leasehold system. It has been
a long journey to get here from my private Member’s Bill—Ground
Rents (Leasehold Properties) Bill—to try to overhaul the
regulations on ground rents. It is particularly gratifying to be
standing here today as the Minister responsible for this hugely
important legislation.
The Bill will make home ownership fairer and more transparent for
future generations of leaseholders. We will do this by reducing
the ground rent on new residential long leases where a premium is
paid to a peppercorn. I am sure that this change, which will
benefit thousands of future leaseholders, will be welcomed right
across the House.
(New Forest West) (Con)
I lobbied for an exemption for the retirement living industry,
which was granted and then withdrawn in January this year. Why
was that?
I appreciate my right hon. Friend’s strong lobbying on this
matter. I think the Government decided that it was appropriate to
treat all leaseholders the same and therefore we made that
change, although we did allow an extension in the introduction of
that to April 2023.
(Rhondda) (Lab)
The bit I do not understand is why we have leasehold at all. It
is just preposterous nonsense, is it not? It is a feudal relic.
Would it not make far more sense to have some kind of commonhold
situation for flats, which is what they have in nearly every
other country in the world and, I think I am right in saying,
also in Scotland? Does that not make far more sense? We can then
just get rid of leasehold completely.
I thank the hon. Gentleman for his intervention. I wonder why, in
the brief periods when Labour has been in control, it has not
done so itself. I guess English law is pretty complex, so it
would not be so straightforward to simply withdraw it on the
basis that he suggests. Perhaps when Labour is in power again at
some point in the distant future, it will be able to return to
this matter.
(Hornsey and Wood Green)
(Lab)
The Minister is being generous in giving way. He may not wish to
be as radical as my hon. Friend the Member for Rhondda () is suggesting, but does he
share my concern at some of the greedier developers, which are
insisting on a year-by-year, annual increase? For example, ground
rents are going up and up in New River Village in Hornsey. I have
to name the Berkeley Group, because it really should know better.
It has done very well, including throughout coronavirus, given
all the leg-ups that it has had from the Government through
various coronavirus packages, and it really should not be
demanding multiples every year from my poor old leaseholders.
I largely agree with the hon. Lady, not least because the
ten-minute rule Bill to which I referred, which I brought to the
House when I was a Back Bencher, completely endorsed her points.
It is unfortunate that some people include such egregious terms
in ground rents.
(Alyn and Deeside) (Lab)
Does the Minister agree that this issue is about not only ground
rents, but the admin fees that are often associated with any
minor changes that the owner of the property wants to make? A lot
of these properties are also linked with extra charges for
management fees for the land and other things. The levels of
charges placed on leaseholders are becoming totally
unacceptable.
I do not want to jump forward several pages in my speech, but the
right hon. Gentleman is predicting—or at least pointing to—the
fact that we have identified this problem and have ensured that
when we reduce ground rents to a peppercorn, people will not be
able to cheat by introducing associated management fees and other
charges. If he is looking for further changes, the second part of
our seminal legislation, when it comes in due course, will no
doubt satisfy his needs.
The starting point for this legislation has to be our shared
recognition that for many people, to be a leaseholder is also to
be a homeowner, and we are clear that homes that have been bought
should be theirs to live in and enjoy, not be treated as cash
cows for third-party investors. This Government are on the side
of homeowners, which is why in our manifesto we committed to
introduce this important legislation.
Hon. Members will be well aware of the problems that many
leaseholders have faced in recent years, including, as pointed
out by Opposition Members, spiralling ground rents and onerous
conditions that have turned the dream of home ownership into a
nightmare for some leaseholders. This Bill is the first of our
seminal two-part legislation to reform and improve the leasehold
system. Further legislation will follow later in this Parliament
to continue to address the historic imbalances in the leasehold
system.
(Warrington South) (Con)
I pay tribute to the Minister for the work that he has done so
far. He may know that constituents on Steinbeck Grange in
Warrington South have been calling for changes for almost 10
years. Will he give an update on the current Competition and
Markets Authority investigation, which is vital to people living
in Warrington?
The work of the CMA has been pivotal so far in already changing
the behaviour of a number of significant developers. I have
spoken to it recently; further work is ongoing and I hope that it
will have further successes in the future. My hon. Friend is
completely right to raise that point.
Both this Bill and the wider leasehold reform programme have been
informed by consultation. I thank those present here today,
including the Opposition Front Benchers, who have taken the time
to discuss the issue. I look forward to further discussions over
the coming weeks and months.
The Bill has a specific focus: the ground rent in future long
residential leases. Some existing leaseholders face substantial
difficulties, including costly enfranchisement, a lack of
transparency and burdensome lease terms. Escalating ground rents
in particular can reach unaffordable levels and make some
properties difficult to sell. That is not right, which is why we
have asked the Competition and Markets Authority to conduct a
thorough investigation into potential mis-selling and unfair
terms in the leasehold sector.
I have met many people who were told by the company that sold
them their property that they would be able to buy the lease,
only to find out, when they inquire to buy it, that it has been
sold on to some financial institution. Does the Minister accept
that point?
Once again the right hon. Gentleman points out an egregious and
unfortunate practice that hopefully we will be finding ways to
address in future.
That prompts the question of what proposals the Minister may have
to enable leaseholders to enforce the purchase of freeholds from
such companies. Does he have plans for that?
As my right hon. Friend will know, unfortunately I am not the
Secretary of State, much as I would like to be. [Interruption]
Not yet, anyway. It is best to leave the fine detail of the
formation of future legislation to the Secretary of State to
decide. However, I look forward to discussing the matter further
with my right hon. Friend as we progress.
(City of Chester)
(Lab)
I have listened to my right hon. Friend the Member for Alyn and
Deeside () and others. The Minister is
waiting for the Competition and Markets Authority report, but is
he prepared to say, even before that report has concluded, that
on the basis of all the evidence we are hearing from right across
the House, what we are seeing is nothing more than a financial
scam from a bunch of greedy speculators?
I am not sure I can go so far as to agree, but, as a number of
hon. Members on both sides of the House have pointed out, it is
an unfortunate practice that we will be seeking to address in
future legislation.
The Minister is being very generous with his time; he remembers
well what it is like to be on the Back Benches. Does he agree
that many of the points under discussion will be good for future
generations, but it is all a bit “jam tomorrow” if we cannot help
our constituents today?
I would say that we are doing a very important thing with today’s
legislation, which effectively draws a line in the sand to
prevent future onerous ground rent clauses. Once we have done so,
we will then have the opportunity to work, hopefully quickly, to
deal with the existing ground rent problem.
(Thirsk and Malton)
(Con)
I have been known to swim against the tide once or twice with
regard to this particular debate. I draw the House’s attention to
my entry in the Register of Members’ Financial Interests. I am a
leaseholder, not a freeholder, in this context. Nevertheless, it
is not right to think that effectively scrapping leasehold and
moving to commonhold is a panacea. For evidence of that, hon.
Members should look at the system in Scotland, which moved to a
commonhold system. Some 80% of buildings require maintenance and
there is a £2 billion unfunded maintenance backlog. We should
step forward very carefully. Leasehold does need reform, but I am
very concerned that if we effectively scrap it altogether, we
will create ourselves a new problem.
I thank my hon. Friend, who is incredibly knowledgeable in this
area. I remember discussing my ten-minute rule Bill with him at
the time. I completely assure him that we will proceed with
caution and seek advice from experts both across the House and
outside the House. I look forward to discussing this with him
again in the future. I also take this opportunity to thank the
former Secretary of State, my right hon. Friend the Member for
Newark ()—I am delighted to see him
in his place—for all the work that he put in in driving forward
this agenda. Back in January, he announced measures to make
buying a freehold or extending a lease cheaper and easier for
many leaseholders.
I now turn to the specifics of the Bill. Ground rent is usually
paid annually by leaseholders to their freeholder or landlord,
but, crucially, no tangible service is provided in return. The
industry is also familiar with the term, “peppercorn rent”, to
describe a token or nominal rent used as a payment in forming a
contract, which typically is not actually collected in practice.
Historically, ground rents were generally very low. The past two
decades have seen a surge in properties sold with significant and
escalating ground rent. At its worst, this practice can lead to
properties becoming unsellable. These unfair practices have
caused real misery for those affected and, in turn, have
undermined the reputation of the leasehold system. Regardless of
whether the ground rent is a nominal peppercorn or thousands of
pounds, the fundamental issue is that no meaningful service is
provided in return. We want to end this for new leases, and that
is why we are legislating so that new residential long leases
will have no financial demand for ground rent. Instead, nothing
more than an actual peppercorn can be collected from the
leaseholder.
(Chipping Barnet)
(Con)
Will the Minister acknowledge that the situation is slightly
different in relation to retirement housing, where the practice
has been for ground rents to more or less fund the shared spaces,
and ground rents have been part of making retirement housing
viable? Will he take care to ensure that the Bill does not have
unintended consequences for retirement housing?
The reason why we extended the timeframe for the introduction of
this legislation for those properties is to allow people time to
adjust their business models, so that they can cope with the
change in legislation. To avert the risk of possible future
shortages of peppercorns, and to ensure that our meals continue
to be well seasoned, I should clarify that we do not expect any
landlord to require the actual payment of a physical peppercorn
each year. In reality, the new genuine peppercorn rent for future
leaseholders means that they will not pay the rent.
The specifics of the Bill apply to residential long leases in
England and Wales of over 21 years for which a premium is paid.
The inclusion of the requirement for a premium clarifies that
normal and legitimate practices relating to rack rents can
continue. For leases regulated under the Bill, the rent demanded
will not be any more than literally one peppercorn a year.
Following much careful deliberation, we have arrived at a broad
and flexible definition of “rent”, using the real-world meaning,
and therefore including anything in the conventional nature of
rent. The Government are clear that landlords should retain the
ability to collect legitimate charges. The definition will ensure
that landlords can still collect legitimate charges where the
market reserves them as rent, such as charges for services,
including building maintenance. The broad definition will deter
freeholders or landlords from trying to circumvent the new system
by disguising ground rent as a different charge. It will also
enable appropriate tribunals to make sound judgments on whether a
leaseholder has in fact been charged a prohibited rent.
We plan to leave no loopholes for unscrupulous individuals, so we
are also banning the charging of an admin fee for collecting
peppercorn rent. Where a prohibited rent or administrative charge
is paid, leaseholders will have the right to apply to the
first-tier tribunal in England or the leasehold valuation
tribunal in Wales. Provided that the tribunal deems the payment
inappropriate, the relevant authority can then order the amount
to be repaid. In the case of prohibited rent, that must be within
28 days and potentially also with interest.
There are a limited number of exceptions from the provisions of
the Bill. The first is leases used purely for a business purpose.
The intention behind the Bill has never been to reduce business
leases to a peppercorn rent, so through careful consideration, we
have excepted business leases that include the use of a dwelling
in any way that protects the interest of residential leaseholders
and commercial landlords. For mixed-use properties, such as a
flat above a shop, the exception will apply only if the
residential use significantly contributes to the business purpose
of the lease.
Community-led housing may have few other feasible funding schemes
that they can use to continue to grow developments that benefit
the community, rather than secure profits. To maintain this
growth, we have excepted community-led housing schemes. Home
finance plan leases are also excepted. That includes regulated
home reversion plans, such as equity release and rent-to-buy
agreements, where the consumer purchases the freehold at the end
of the term. We will also allow shared ownership landlords to
continue to collect a market rent on their share of the property.
That practice is integral to the shared ownership model.
The Minister is setting out a list of exemptions. Are complex
developments included in that—for example, a tube station with a
cinema or shopping centre attached, and a block of flats above
it, all in effect part of the same development? Who will manage
the complexity of that development? If I was a long leaseholder
in that block of flats, I would not be keen to manage all the
mechanical and electrical systems stuff in that development.
I am not sure that I completely understand my hon. Friend’s
point. The Bill will not change the management of that building’s
operation; it will just prevent ground rent from being charged.
If a leaseholder feels that they are being charged ground rent
inappropriately, they will have a right of appeal, and the issue
will be determined by the ways and means authority.
I am sorry; I should clarify my point. The Minister is quite
right that a management company could look after the whole
entity, but things such as common areas and insurance of the
whole building —among many other issues—affect the whole
building, and they require somebody to have an overarching view
of the entire development. I not sure how that is provided for.
In fact, in 2019, when I was a member of the Housing, Communities
and Local Government Committee, it looked into that and said
there should be an exemption for complex developments on that
basis. However, that does not appear in the Bill, despite having
been referred to in debates in the Lords.
As I said, the Government’s intention is to ensure that, for
fairness, the provision applies in as many circumstances as
possible. I am happy to pick that up with my hon. Friend for
further discussion after the debate, to which I hope he will
contribute.
Statutory lease extensions are the subject of existing
legislation and so are not covered by the Bill. The peppercorn
limit will apply to the extended portion of any lease extended
through the voluntary process.
I should note that there is no longer an exception for the
retirement sector. As I said to my right hon. Friend the Member
for Chipping Barnet (), we believe that all new
leaseholders should benefit from the reforms. The measures for
retirement properties will apply no earlier than 1 April 2023.
Hon. Members, some of whom are in the Chamber, have raised that
as a concern in correspondence, and it has been debated at some
length in the other place. We feel that the transition period
strikes the right balance between the sector and consumers.
The Government recognise that these provisions require a robust
and effective enforcement regime. Freeholders and landlords who
abuse the system and deliberately seek to charge a non-peppercorn
ground rent on leases in contravention of the Bill will be
subject to steep fines of up to £30,000. After listening to and
considering carefully the view expressed in the other place, we
concluded that the level of fines should be higher. The new
maximum fine of £30,000 is in line with other housing penalties,
including those in the Tenant Fees Act 2019. Fines can be even
steeper for more egregious abuses of the system. For example, if
a freeholder breaks the law by charging unfair rents at multiple
locations, such as in a block of flats, they will pay a penalty
per lease. It does not stop there; penalties can be supplemented
by the repayment of all prohibited rent collected. Enforcement
will be the responsibility of local trading standards
authorities, which already do an excellent job of enforcing
similar housing regulations. District councils in England will
also have the power to take enforcement action if they
choose.
We recognise that enforcement will require additional resourcing.
That is why authorities can retain any penalties imposed, and put
them towards the costs incurred in enforcement of residential
leasehold property rules. Taken together, the enforcement regime
will act as an effective deterrent, while giving authorities the
flexibility that they need to ensure that any enforcement action
taken is proportionate.
The Government’s vision for a reformed and improved leasehold
system is one anchored in fairness and transparency. For too
long, too many leaseholders have been let down by institutional
inertia and a ground rent system that has not worked in their
interests. The system has been dogged by opaque rules and left
many people in the dark. This legislation is targeted on exactly
what it should target. By reducing future ground rents to a
peppercorn, we will deliver a tangible and meaningful improvement
to home ownership for future generations. We have engaged
extensively to get to this point, and this process is by no means
over. We are clear-eyed about the challenges ahead, and know that
there is more to do, but today is a significant step towards
fixing our broken leasehold system for good. I commend this Bill
to the House.
17:25:00
(Manchester Central)
(Lab/Co-op)
The Leasehold Reform (Ground Rent) Bill sets ground rents on new
leasehold homes to peppercorn levels. We welcome this very small
step towards reform, and will not oppose the Bill this
evening.
Generating income through high ground rents is an outrageous
practice, as has been discussed, but serious leasehold reform is
long overdue. Leasehold has been the main way that properties in
shared blocks or converted flats have been owned in this country.
It stems from arcane feudal laws that date back to an era of
landed gentry and aristocracy, and it needs reform urgently. In
its more recent manifestations, there has been what can only be
described as a scam on an industrial scale, as was pointed out by
my hon. Friend the Member for City of Chester (), against innocent
leaseholders—and it increasingly affected new houses, not just
flats. It is totally wrong, and it needs ending.
I have been struck by the way that two houses, next door to each
other, may be exactly the same, but one can be leasehold and the
other freehold. We see that all the time. When a house is
advertised, the advert often says, “This is not leasehold”—it
points out that fact. Leasehold properties are being devalued by
the day.
My good and hon. Friend makes an extremely well-made point. The
practice of new homes being built as leasehold, and sold as
leasehold—buyers often do not even know that at first—has got out
of all kilter lately, especially in north Wales and north-west
England, where it has been a particularly egregious practice. I
welcome this Bill, albeit that it is a bit too little, too late,
but it does nothing to protect those trapped in the injustice of
leasehold. It does not do anything for those facing excessive
ground rent increases today or yesterday, nor does it put an end
to some of the most egregious practices, such as selling new
houses as leasehold.
The ground rent scandal typifies everything that has gone wrong
with our housing market. Housing has become a commodity to be
traded, packed up in financial products and thrown into an
unregulated market. Large-scale developers and investors have
been given free rein to create ever more complex financial
products, in order to squeeze money out of homeowners. Many
people do not even realise when they buy their house that they
will not own the land underneath it, as my right hon. Friend has
just made clear. Even worse, the leases often contain clauses
that double the ground rent—in some cases, every 10 years, which
means that a homeowner in a property worth a modest £200,000
might pay £10,000 a year in ground rents after they have owned
the property for 50 years or so.
Does my hon. Friend share my concern that this has got so out of
hand? The amounts being charged are rising in excess of the
retail prices index, which we would expect to be a basic marker.
People feel trapped, in that they cannot sell on.
Absolutely. My hon. Friend makes a really good point. People are
trapped in this situation, because we all know that when we look
to buy a home, we look at the overheads, and the ongoing service
charges, ground rents and other costs. In recent years, those
things have rightly been added to the affordability criteria, so
people often cannot get a mortgage for these homes. That leaves
the people living in them trapped in that situation with an
unsellable home.
Does this not give rise to an extraordinary question about the
legal advice provided by solicitors to those who made such
purchases?
I am glad the right hon. Gentleman raises that point, because I
am sure colleagues around the House will be keen to
highlight—
Will my hon. Friend give way on that point?
I will first try to answer it, and then when I do not answer it
very well, I will give way to my right hon. Friend to give a
better answer. What I do know is that, unfortunately, many people
who bought houses in this situation were advised to use the
solicitor of the marketing company or company selling the
houses—I have many in my constituency. So they were given poor
advice, and this is a mis-selling scam as well. Would my right
hon. Friend like to give a better answer?
My hon. Friend has in many ways made the point I was going to
make. These people were often first-time buyers, keen to get on
to the housing market and get their first home. They were told,
“Don’t use this solicitor or that solicitor; use these ones, and
we will give you a discount to use them”, and—shock, horror—many
were not even aware, as my hon. Friend has made clear, of the
property being leasehold, let alone of all the other charges
associated with that.
Absolutely; my right hon. Friend makes a very good point as well.
Many people, especially first-time buyers, do not understand the
difference between leasehold, freehold and so on, and many of
these issues come to light only as problems arise later or when
they try to sell the property.
(Ellesmere Port and Neston)
(Lab)
On legal advice, it is worth pointing out that not only were some
people told that they had to use particular solicitors, in breach
of Law Society guidelines, but some were also told that they had
to complete within a certain period of time, so even if they had
used a different solicitor, it just would not have been practical
for them to analyse or understand the documents correctly. That
suggests to me that there needs to be a complete overhaul and
inquiry into how the scandal was allowed to develop in the first
place.
My hon. Friend makes an excellent point, and there is a very
strong basis for a wider mis-selling scandal inquiry. Many
properties are affected: in terms of houses, for which the
practice has been particularly egregious, more than 500,000
leasehold houses have been built over the past 10 years. The vast
majority of them are in the north-west of England and north
Wales, which is why so many colleagues from those areas are here
this evening.
The rights to collect the ground rents are bought and sold on the
financial markets as steady income streams to investors, while
leaseholders get nothing back for—in some cases—thousands of
pounds a year. There is hardly a clearer illustration of the
damaging pervasive tendency to treat housing as an investment
opportunity—as a product to trade on the market—rather than as
homes where people live and build their lives around. That should
be the basis of housing in this country. We have lost somewhere
what housing is: homes, places where we live, where lives are
built, where we become successful —or not—and where we bring up a
family. Housing is not a commodity to be traded on the financial
market. We have seen more starkly than ever over the past two
years that housing is also a public health issue, an educational
issue, and a work, security and happiness issue, and we should
begin to treat it as such.
Although we welcome this Bill, it is a very narrow first step;
there are many glaring omissions—measures which could have been
included even in such a narrow Bill. First, there is nothing to
prevent freeholders from simply transferring their income stream
from ground rents to service charges or administration or other
charges, as has been highlighted. As shown by the ground rent
scandal itself, there is no limit to the ingenuity that some
freeholders will draw on to capitalise off the back of
leaseholders. Service charges and administration charges are
opaque at best, and far too hard to challenge. Will the Minister
address that issue later on?
Will my hon. Friend give way?
I will, because my right hon. Friend is an expert on this
issue.
To list just a few examples that I have come across, some
leaseholders who—in theory—own a house and the land around it are
asked to pay if they want a pet or want to change the flooring in
the house or the layout of the garden. People have said to me,
“I’m paying a mortgage on a house that I don’t really feel I
own.”
My right hon. Friend is absolutely right and he gives good
examples, some of which I was going to use later. He makes a very
good point—some of these charges are outrageous. Will Ministers
respond to that and address how we can stop that practice?
Secondly, the millions of people already trapped in leasehold
homes will see no benefit whatsoever from the Bill, so none of
the examples that we have heard will end as a result of it. The
Government have chosen to limit the scope of the Bill to new
homes, which means those already facing these bills will see no
benefit at all. Delay has real costs for them; the Minister can
pass the buck on to us for what happened 11 years ago, but more
than 2 million new homeowners have been trapped in this feudal
leasehold system since his Government came to power.
The Competition and Markets Authority has done some good work
taking down the largest and worst-offending of the freeholders,
but we cannot wait for it to take on every single company
involved in this outrageous practice. Will the Minister work with
us and support our proposal, which we will table in Committee, to
protect existing leaseholders?
Thirdly, the Bill does nothing at all to stop new houses being
sold as leasehold. Leasehold houses are straightforwardly wrong,
for the reasons that we have already heard. At the same time that
the Government promised to set ground rents at a peppercorn,
which the Bill does, they committed to ending the practice of
newly built homes being sold as leasehold.
Half a million houses have been sold as leasehold since 2010, 60%
of them in the north-west. Those homeowners face not just
exorbitant ground rents but restrictions on how they can alter
their homes. We have already heard some examples: if someone
wants to have a pet, or if they want to make changes to the
building, they have to ask permission. All too often, people are
left feeling that they do not really own the home. When the
leaseholder tries to escape this nightmare by buying out the
freehold, they often discover all kinds of other restrictions
that they were not told about when they bought their home. This
needs to change.
As recently as 2017, the Government promised legislation to
prohibit the granting of new residential long leases on houses.
When will that come in, and why is it not included in the Bill?
It makes no sense to me whatsoever that that has not made it into
the Bill. Again, perhaps Ministers will work with us, and with
some of my colleagues who are in the Chamber today, in Committee
to end new leaseholds on houses altogether.
There was a lot more that the Government could have done in a
simple first-step Bill, but I hope the whole House will recognise
that wholesale reform of leasehold is long overdue. The building
safety crisis has brought into stark relief how terrible our
feudal leasehold laws are. Innocent leaseholders can be passed
remediation bills totalling hundreds of thousands of pounds with
no right of recourse. It is a David and Goliath situation that is
hitting more and more homeowners across the country. Fixing the
building safety crisis truly must mean fixing our outdated
leasehold laws too.
As the last few years have shown, this is now an urgent task, so
we call on the Government to do these simple things when it comes
to wider leasehold reform: enable leaseholders to extend the
lease or buy the freehold; make commonhold the norm, and make it
much easier for properties to operate that way; abolish marriage
value, as they promised they would; strengthen leaseholders’
voices and simplify the right to manage; give real teeth and real
recourse to the bodies that are supposed to arbitrate and act on
behalf of leaseholders, or create new ones altogether; and
prevent freeholders in law from passing on extortionate costs for
remediation works, or for putting right problems that they have
created that are not the problems of the leaseholders, as well as
the things that I have already discussed. Those are just some of
the reforms that are urgently needed to ensure that no
leaseholder is trapped against their will in this broken,
outdated system.
In conclusion, the Bill is a tentative attempt at reform. While
it is welcome, it represents a massive missed opportunity to
transform a leaseholder sector that continues to scam working
people on an industrial scale. Even in a slimmed-down Bill, the
Government have failed to close loopholes, protect those already
in leasehold homes or end the sale of new houses as leasehold
altogether. Wholesale reform is urgently needed to ensure that
nobody continues to be voiceless, trapped in leasehold homes they
cannot sell, and facing ever-growing bills and charges.
17:40:00
(Newark) (Con)
It will come as no surprise to right hon. and hon. Members to
hear that I strongly support the Bill. It would be surprising if
I did not, as I was one of the Ministers who instigated it,
although stranger things have happened in politics.
I would like to take this opportunity to thank the Minister for
his hard work in bringing the Bill to the House, the noble who has worked extremely
hard on this issue for many months, and the fantastic civil
servants at the Department who have taken this forward. There is
a very strong, albeit very small, team of civil servants who have
been beavering away on this issue for many months and will have a
lot of work to do ahead of them not just in taking the Bill
forward but, perhaps more importantly, in preparing the next
Bill, which I will come on to speak about in a moment.
This is an important step on the road to leasehold reform. It is
a road that really began with the Leasehold Reform Act 1967,
which gave tenants of houses the right to buy their freehold. It
then took the next step forward with the Leasehold Reform,
Housing and Urban Development Act 1993, which gave leasehold
tenants of flats the right, collectively, to buy their freeholds.
There was a great deal of opposition, back during the Major
Government, to that reform in this House, the House of Lords and
from propertied interests, who said that it would be a disaster
for the housing market. It was not and those rights have been
enjoyed by hundreds of thousands of people pursuing the dream of
home ownership across the country. Then the last Labour
Government took it forward one further step, with the Commonhold
and Leasehold Reform Act 2002, which introduced commonhold,
albeit not nearly as successfully as they would have hoped or as
I would like to see taken forward in the years ahead.
The destination of those reforms is not just a better situation
for leaseholders, but the gradual elimination of leasehold
altogether. It is, as some have said here today, essentially a
feudal form of tenure: a product of our rich and ancient history
as a country, but one that is no longer fit for purpose. It does
not exist in any other developed country and it does not, in
essence, have a place in a modern society.
The Bill is, as my predecessor as Housing Secretary, the noble
Lord Young, said in the House of Lords, the appetiser for the
main course. It is a comprehensive piece of legislation to remove
more of the iniquities of the present leasehold system, and to
pave the way for the wholesale introduction of commonhold.
(New Forest East) (Con)
I am very encouraged to hear that my right hon. Friend is so
forward-looking on this matter. May I ask him to explain to the
House how one rather backward step took place some months ago,
which was the allowing of it to become routine that additional
storeys could be added to existing blocks of flats? I have lived
through that experience and found not only that it is terrible to
have a floor inserted above you, but that when things go horribly
wrong with the construction and the company goes bust or winds
itself up, it is the leaseholders who have to pay thousands upon
thousands of pounds to put right the faults. Would he not like to
revisit that change that was made and perhaps suggest that it
ought to be looked at again?
It would not be for me to revisit that even if we wanted to. The
purpose of that legislation, which was supported by many Members,
was to deliver more homes—particularly on brownfield sites and in
urban areas—as part of the mission of us all to deliver more
homes and to tackle the housing crisis, and particularly to
enable individual homeowners to build upwards on their home as
their household expands, particularly if they have young children
or if elderly relatives move into the home. That is an important
step forward, but, as with any of these changes, we should keep
it under review. If there are common instances of abuse or
malpractice, we should see whether there are ways to eliminate
them.
Dr Lewis
rose—
I will make progress, if my right hon. Friend does not mind.
The Bill was born out of two issues. One is a recent phenomenon,
which the Front Benchers and other hon. Members have mentioned:
the abuse of leasehold in recent years. A system that was never
perfect and that many of us would wish to see reformed was
subject to wholesale abuse and rip-off practices by developers
and freeholders, who used ground rents as an income stream and
escalated them, leaving leaseholders in a perilous position.
Leasehold was used for properties for no good reason, purely to
benefit from ground rents. We have heard about such examples, and
particularly the use of ground rents for houses. It is difficult
to see that any house needs to be built as a leasehold property.
In different times, I have bought into the argument that there
might be exceptional reasons why one would need to build such a
home, but it is very difficult to think what those would be. The
system is not used in other countries around the world, including
in the United States, where there are gated communities,
communities for the elderly—all manner of different homes. They
are not being built as leasehold properties, so I do not see why
they should be in this country.
I agree fully with that point. As the right hon. Gentleman said,
this practice had largely gone away. For years, houses were not
built as leasehold properties, but in the north-west and in north
Wales, a group of builders decided that this would be an extra
way of scamming—I use that word deliberately—even more money out
of the people buying the properties.
The right hon. Gentleman is absolutely right; I do not disagree
in any way. The north-west was particularly targeted, for reasons
that I do not understand, with tens of thousands of homes built
in this manner. It really was disgraceful. It gave leasehold a
very bad name and necessitated these changes and others that will
be introduced in future. The Bill ends these practices for new
properties; that is key. It will ensure that the business model
behind ground rents—the creation of such properties as leasehold
to benefit commercially—will come to an end. We are already
seeing its gradual reduction, and the Bill will lead to its
elimination.
I want to address the point that was raised about why the
proposals should be extended to retirement properties. As
Secretary of State, I came under fierce resistance and lobbying
from the retirement property sector. Its lobbyists approached
Members of Parliament and my Department and threatened judicial
review of our proceedings. I considered it to be an unfair
practice, targeted at the most elderly and vulnerable in our
society, that in addition to paying their service charge they
should pay a ground rent that might escalate at a significant
pace. Why not have a fairer and more transparent system where an
elderly person knows exactly what they are getting when they pay
the purchase price on their property and then when they pay the
service charge on an annual basis, instead of receiving two bills
every year? I think that is a simple matter of fairness and
transparency, and it was the right decision to bring that to an
end. We did, however, give a longer period for businesses to
transition and to change their business model, which is why that
part of the industry will not feel the force of the Bill until
2023.
(Reading East) (Lab)
I appreciate the work that the right hon. Gentleman has done to
try to get the right balance and stand up for the interests of
homeowners rather than large corporations. Does he have any
reflection, further to the point made by the right hon. Member
for New Forest East (Dr Lewis), on the knock-on effects of
allowing additional storeys to be built on existing blocks of
flats? In my experience, there is an exploitation issue both for
people who live in flats with top-hatted development—I think that
is the word—and for the neighbours. In the area that I represent,
there have certainly been a number of problems for neighbours to
those blocks. Does the right hon. Member for Newark () have any further
reflections on that point? If he were still Secretary of State,
would he have allowed that development to go ahead?
I think it should be kept under review, like any permitted
development. As we have seen with past examples, there are always
cases at the edges that concern us, and there are usually ways to
refine the permitted development over time to ensure that those
cases do not happen again. With the permitted development that
the hon. Gentleman mentions, I think—from memory —that we ensured
that the developer has to work with the local council to ensure
that there are not issues with building safety or loss of amenity
to the leaseholders in the building, and that the design of the
extra storeys is broadly in keeping with the neighbourhood. I
certainly think that the issue should be kept under review.
Will my right hon. Friend give way?
I will, but I appreciate that many other hon. Members want to
speak.
As I do!
It would be quite unlawful for the capital cost of the communal
areas in a retirement living community to be paid for through an
administration charge, so we come back to the question whether it
is in the interests of the purchaser to pay a ground rent or to
pay the up-front cost in the purchase price. For a category of
elderly people, it may well be in their interests to pay the
former.
My right hon. Friend gets to the nub of the issue. The debate,
exactly as he says, was whether it would be better for a retired
person looking to move into such a community to pay a somewhat
lower purchase price for the property or the share in it that
they were taking, and then, for as long as they live there, pay a
ground rent, which might escalate at an unfair level, and a
service charge. That is not a system that occurs in any other
country in the world, including countries such as the United
States that are far more advanced in their take-up of retirement
properties. I took the view that it would be much fairer and more
transparent for an individual to know exactly what they had to
pay from the outset: they pay their purchase price and then their
service charge, but they do not have to face escalating ground
rent. That makes sense to me; I appreciate that there will be
differences of opinion, but it was done as a matter of basic
fairness.
I make it clear that the reason for the Bill’s very limited scope
was to bring an end to unfair practices as quickly as possible.
That was the advice of the Law Commission, which said that it was
better to have a two-step process so that the iniquity of
escalating ground rents could be brought to a close, and then we
could move on to the much more complex piece of legislation that
will inevitably take the Department and Parliament a great deal
of time to prepare and pass. I think that that was probably the
best way to proceed.
Two further points emerge as a postscript to the events of the
past few years. First, as my right hon. Friend the Member for New
Forest West ( ) said, we need to think
about the conveyancing solicitors who gave or failed to give
advice in the process of house sales. They failed in their duty
to their clients: many constituents have come to my surgeries who
were oblivious about the homes that they were buying. That
applies not only in the situation we have discussed, but with
respect to management fees, which may be very high or—as the
right hon. Member for Alyn and Deeside () mentioned—may involve charges,
for example for putting up a satellite dish, building a
conservatory and so on. Conveyancing solicitors need to take much
greater care to bring such matters to the attention of their
clients.
Secondly, the work of the Competition and Markets Authority must
move forward at pace. It has already ensured that some of the
major developers have settled, but I encourage all developers
behind the sale of these properties, many of which they mis-sold
to members of the public, to do the decent thing—the inevitable
thing—and settle, so that the purchasers get some compensation
for the issues that they have faced. I see that many are on the
cusp of doing that, but I hope that the remaining ones will do so
quickly.
I also hope that the Government will ensure that the second Bill
features in the next Queen’s Speech and is delivered early in
that Session. There is, as I have said, a great deal of work for
the Department to do in preparing that Bill and ensuring that it
is sufficiently comprehensive, but I think it extremely important
that it does so, and that within the course of this Parliament we
deliver comprehensive reform to leasehold. It should include
990-year leases, a simpler, cheaper enfranchisement process,
ending marriage value, improving the position of leaseholders in
the management of buildings, and ending—as has already been
suggested—the building and selling of new houses as leasehold,
because there really is no justification for that.
Finally, I hope that that Bill will look to the destination of a
world beyond leasehold. That is the end point towards which we
must work. I established the Commonhold Council to see how we
could chart that course, and it seems to me that all the complex
issues that are raised are surmountable—that is the evidence from
the council so far. It also seems to me that commonhold will
never take shape to any substantial degree in this country
without a major Government intervention, which means indicating
that it is our tenure of preference, or setting an end date for
new leasehold properties. I favour the latter: I think we should
say clearly that, beyond a certain date, no property, whether it
be a flat or a house, should be built unless it is commonhold. I
hope that the Bill to be introduced in the next Session will set
that course, because I think it would be an important step
towards ending a feudal system and helping us to move forward as
a country.
17:56:00
(Ellesmere Port and Neston)
(Lab)
Let me first put it on record that, alongside the hon. Members
for Worthing West ( ) and for St Albans (), l am a co-chair of the
all-party parliamentary group on leasehold and commonhold reform.
The group is assisted by the Leasehold Knowledge Partnership,
which has been campaigning for many years for the kind of reform
that we are debating today.
We might have expected the Bill to be a cause for celebration,
and indeed any legislation that puts another nail in the coffin
of leasehold is to be welcomed, but we are left with a feeling
that it is a rather modest measure. Given that it took four years
for us to reach this point, it seems that we are making glacial
progress. Perhaps four years is not much in comparison with 1,000
years of leasehold, but for those who are still trapped in
unsellable or seriously devalued homes because of the leases they
signed, progress is not being made quickly enough.
I am not generally a fan of market-based solutions—the market is
responsible for most of the egregious injustices that we have
seen in leasehold—but, to a significant extent, the market has
already moved away from imposing ground rents for most houses,
not because those who concocted the leasehold scandal have had a
prick of conscience but because a spotlight has been shone on the
devastating consequences of their sharp practice. In that
respect, I pay tribute to the fantastic work of the National
Leasehold Campaign, which has done more than just about anyone to
bring the unfairness of leasehold to the public’s attention. It
is an irony that those campaigners do not stand to benefit from
the Bill because, as has been pointed out already, it does
nothing to tackle the existing problems. That said, however,
their influence has already benefited my constituents and many
others.
A new Redrow estate not far from where I live originally had
properties being sold on a leasehold basis. After some pretty
determined campaigning from the National Leasehold Campaign,
Redrow decided to stop the sale of homes in the second phase as
leasehold, but unfortunately not before several hundred people
had already bought their homes as leasehold. To be fair to
Redrow, I should add that it did then offer them the opportunity
to purchase the freehold after two years, although it was a
little unfortunate, to say the least, when it subsequently
lowered the purchase price for the freehold again, creating
another unfairness. While I give Redrow credit for stepping back
and weaning itself off the leasehold drug, that should not
obscure the fact that all this could have been avoided had it not
sold the properties as leasehold in the first place. That takes
me back to the basic concern that remains with the Bill, which is
that it enshrines in law a two-tier system of home ownership when
really we should be ending it altogether.
Very few new houses are now being sold as leasehold, but around
1.5 million houses will remain leasehold after this Bill becomes
law. Is there a risk that choking off income streams from those
who see other people’s homes as an investment will cause them to
turn their attention to redoubling their efforts to squeeze as
much as they can out of the existing properties? A number of
Members have already mentioned that, and I will return to it
later.
Turning to the details of the Bill, I know that a lot of
consideration has been given to how we define a ground rent. That
debate is instructive, because how can a payment for which
nothing is received in return be considered a proper legal
payment? The short answer is that it cannot, and I believe that
that is another reason to abolish leasehold altogether. The
reality is that ground rent is a legal fiction and a method of
maintaining control and securing an income for which the
recipient is required to do precisely nothing.
It is therefore disappointing that lease extensions for houses
are exempt from the Bill, because there is significant concern
that freeholders will put in massive multipliers when offering
informal lease extensions, just to make the premium look lower
and more attractive. They would then make their money back
through allowing the ground rents to continue. Let us not forget
that both parties do not have equal bargaining power. This all
just adds weight to the argument that what we have here is a
minor change that will help people in the future, when what we
really need to do is to deal with the injustices of the present,
and the best way to do that is of course to abolish leasehold
altogether.
As I said earlier, we also need to keep an eye on whether those
who have been involved in the systematic deception and
mis-selling change their sights to deal with the new environment
that the Bill represents. They have not gone away, those offshore
accounts, those trust funds and those private equity investors
who see people’s homes as an opportunity to cream off the cash
long after the people living in them think that they have bought
them. In particular, we have to keep a close eye on estate
management companies, because that is one area in which charges
could easily be inflated to more than cover the loss of a ground
rent.
My hon. Friend is making an important speech and he has hit on a
number of central issues, particularly when dealing with his own
legal experience of these dysfunctional markets where on the one
hand we have developers with enormous financial power and legal
resources and on the other we have humble first-time buyers. Does
he agree that there needs to be a rebalancing, with far greater
protection for first-time buyers and ordinary householders, and
with a much greater attempt by the Government to hold these large
developers to account?
My hon. Friend makes an interesting point. There is clearly an
imbalance. We have already talked about how some enthusiastic
first-time buyers who just want to get into their new homes put
their trust in the people who have been assigned to deliver the
legal niceties such as putting a value on the property and doing
the conveyancing. They put their trust in those people, and
sometimes that trust is betrayed through the egregious injustices
that we have talked about.
My hon. Friend has mentioned management fees, which I see as the
next scandal coming down the road. People who bought their
properties and were being charged perhaps £100 or £200 a year
will have thought that that was okay, but that might now have
gone up to £500 or £600 and there are often additional charges
because, for example, fences or certain parts of the ground are
not covered. People have told me that they feel they are paying
their council tax twice. That is how they see it, and it is
totally unfair.
I thank my right hon. Friend and neighbour for his intervention,
which leads me beautifully into the next section of my speech, in
which I shall talk about exactly that.
I will never accept that it is right for developers to choose not
to pay a sum to councils to adopt the communal areas, and that
they instead save themselves money by passing on that cost to the
homeowners and then make even more money from the homeowners by
charging them for things that ought to be coming out of their
council tax. Like my right hon. Friend, I worry that this trend
will be accelerated because the ground rent gravy train is coming
to an end, and that we will hear more and more stories of
homeowners having no choice but to pay inflated annual service
charges that, given the choice, they would prefer to pay through
their council tax.
The hon. Gentleman is making a good point about what is referred
to as “fleecehold.” Does he agree it is entirely within the gift
of the local authority to require the development to be made to
adoptable standards in terms of roads and drainage, for example?
It can then be adopted by the local authority, so people do not
have to pay twice for such services.
That is a fair point in theory, but I find it does not happen in
practice. I have estates in my constituency that were built a
dozen years ago and still have not been adopted because the
developers have not put them up to the required standard. The to
and fro never ends, because the developers have left town and
they have no interest or incentive to bring those areas up to the
adoptable standard.
I am grateful for the advice my hon. Friend has given to me and
my constituents on this matter, as he is a neighbouring MP with
particular expertise. He will be aware of one estate in my
constituency that has been parcelled up and given to different
developers, and it has been developed at different times. Not
only do we have a problem with the local authority, but he will
recall that we have a problem with different developers playing
themselves off against each other in order not to bring the
estate up to standard, as the hon. Member for Thirsk and Malton
() suggests.
My hon. Friend and constituency neighbour makes the point well.
It all points to the lack of capacity in local authorities to
tackle these issues. I do not want to make a party political
point, but we have had a decade of austerity and we are now
seeing the consequences in how local authorities police these
things.
I would like to see a crackdown on unfair fees and contract terms
by having an enforceable list of what are considered to be
reasonable charges. We should require transparency on those
charges and give leaseholders the right to challenge rip-off fees
and poor performance. We should also try to ensure that residents
are given greater powers to take over the management of their
homes, if that is where we are going.
As my hon. Friend the Member for City of Chester () said, I do not want to
be standing here in a few years’ time talking about another PPI
for the house-building industry because the Government have once
again failed to act on the warning signs that are there for us
all to see.
This Bill must be promptly followed with the promised wider
leasehold reforms, particularly the promised reforms for which we
have been crying out that will enable leaseholders to buy their
freehold quicker, easier and cheaper. I have had a private
Member’s Bill ready to go for three years that would allow us to
do just that. It could have already become law if there had been
the will to take on the freeholder interests that would lose out
as a result.
I have now got the message that my Bill will not find favour with
the Government. I am aware the Bill would not have meant an end
to leasehold, but it would at least have given the victims of
this industrial-scale con an opportunity to take back control of
their property at an affordable price. I thought this Government
were all about taking back control. Do they not realise that
leaseholders do not have control?
What is stopping firmer action being taken against freeholders? I
know there are legal opinions floating about on freeholders’
human rights, but what about my constituents’ human rights? Do
they not have the right to live in their own home without someone
else trying to make it into a cash cow? Do they not have the
right to expect that the biggest purchase they ever make will be
done fairly and will be properly regulated? Do they not have the
right to have a Government who are serious about stopping the
industrial-scale foul play we have talked about tonight?
It is disappointing that, although on the one hand the Government
accept that unfair practices in the leasehold market can turn
people’s home-ownership dreams “into a nightmare,” we are still
waiting for action for the many leaseholders who have been
trapped in this web that they did not sign up to. We have made it
clear that there are a number of reasons why they have found
themselves in this position, not all of which are resolved by the
Bill.
We know that one in three houses sold in the north-west in the
past 10 years is leasehold, and those people will not benefit
from the Bill. My constituents and my hon. Friend’s constituents
have been disproportionately affected by the leasehold scandal,
and they are still waiting for something that will help. If we
are to talk about levelling up in this place, we should be
looking at something like that as it will deliver true justice,
fairness and levelling up.
We need some clear timescales from the Minister for when existing
leaseholders can expect to see action on their concerns. What
commitments can they expect? I think we all agree that what has
happened is unfair and a significant injustice, but when are we
going to see action to put things right for existing
leaseholders? The right hon. Member for Bromsgrove (), when he was Communities
Secretary, promised an outright ban on leasehold for all houses
four years ago. That is four years of people being trapped in
homes that they cannot sell because of onerous ground rents, and
four years of stress and uncertainty about whether they should
try to buy their freeholds now or wait until the law is reformed.
I get asked regularly, “What should I do? Should I wait until the
law changes?” It is very difficult to give an answer on that
because we still have no clarity on when that law will be
changed. So let us end four years of jam tomorrow. Let us deliver
solutions for leaseholders today. Let us stand up to the vested
interests and please, finally, abolish leasehold.
18:10:00
(New Forest West) (Con)
I have had the nub of my argument with my right hon. Friend the
Member for Newark (), but it comes down to this:
the retirement living industry’s business model funds the capital
requirement for the communal areas through a flow of future
ground rents from the outset. The Minister said that he has given
the industry time to change its business model. My answer to that
is: if there was a problem with an escalating ground rent, it
would be perfectly appropriate to have dealt in a measure such as
this with that specific problem, rather than telling the industry
to change its entire model. Nevertheless, this is where we
are.
The business model must therefore have changed by 1 April 2023.
The difficulty is with the time it takes to sell properties in
the retirement living sector. The industry’s estimate is that
some 4,000 apartments will remain unsold in part-sold
developments. If someone was to complete on one of those
properties on 1 April, they would be paying all the capital costs
up front, whereas someone who had completed on 31 March would be
expecting to pay a ground rent for the remainder of their tenure.
That creates a huge legal confusion and a sense of injustice
among the tenants in those properties. So I put a solution to the
Minister: a technical amendment to the Bill to enable part-sold
developments to continue to sell the unsold properties with a
ground rent, provided those properties were built when it was
lawful to charge a ground rent. That strikes me as proportionate.
We are not dealing with a huge problem or a huge number of
properties, but with some 4,000. My proposal seeks to avoid the
confusion and difficulty that would arise with two different
types of tenures in the same development. That seems a not
unreasonable thing to ask Ministers to consider in Committee and
on Report.
18:13:00
(Reading East) (Lab)
It is a pleasure to speak in tonight’s debate. I wish not only to
address a number of issues that colleagues have raised, but to
add in further details that I hope are particular to my
constituency but fear may be common around the country.
First, I wish to support the points raised by my hon. Friend the
Member for Manchester Central (). Obviously, I welcome this
Bill, which will help, but the broader point about the deep
inequities of leasehold still stands true and we should be moving
much faster on this important matter, trying to remove leasehold
from the system of ownership in this country. Is it not
incredible that the UK still has this medieval system of
ownership, which, as has been mentioned, so discriminates against
first-time buyers, people on lower incomes, older people and many
other groups, which in many ways deserve more support and
encouragement to get on to the property ladder? They deserve not
to have their lives blighted by what is, sadly, sometimes the
behaviour of irresponsible developers. I am not saying that all
developers are irresponsible, but Members have clearly
highlighted some awful and appalling examples of behaviour.
First, Loddon Park is a pleasant development on the edge of
Woodley, a suburb of Reading. It is a relatively new and really
quite beautiful development, with many attractive homes. The
homes are freehold properties but some of the shared areas in the
large development are subject to charges. In many ways, the sort
of problems described so eloquently by my hon. Friend the Member
for Ellesmere Port and Neston () are also occurring for
those at Loddon Park—several hundred people living in an
attractive new development on the edge of an urban area in the
south-east of England. The residents potentially face unlimited
extra costs for the maintenance of some attractive
grounds—including meadow areas, large ponds and other areas where
children can play—because no cap was written into the charging
policy and they did not realise that when they bought their
properties.
As explained earlier by my hon. Friends the Members for Ellesmere
Port and Neston and for City of Chester (), as well as other
colleagues, some of the first-time buyers we are talking about
are unfortunately not always aware of some of the difficulties
into which they might get themselves. There is an unequal
situation in which on the one hand there are powerful and
articulate developers with an excellent team of lawyers and on
the other hand there are first-time buyers. That is deeply
unfair. In this case, young families face potentially unlimited
additional costs to pay for the upkeep of the rather attractive
communal areas around their houses. That is very sad and deeply
unfair. I respect the fact that the local authority had
difficulties in trying to provide the properties, but I wish it
had been more careful. There is also an element of involvement
from Wokingham Borough Council, which is the local authority
involved. Will the Minister look into that issue? I will write to
him to explain the situation and ask for his help and
support.
Before I mention another egregious example from the Reading East
constituency, I offer my support to colleagues who have mentioned
the issue of snagging and the problems with developers that
prevent the adoption of roads. I know of cases in both Reading
borough and Wokingham borough in which different developers have
started to build a new estate and completed all the properties,
which have been sold, but the roads, street lighting and other
services have not been properly completed. Although the issue has
gone on for years, there has been an ongoing tussle—similar to
what the hon. Member for Thirsk and Malton () mentioned—between
council officers and developers. It has been deeply problematic
for local authorities, which often have low levels of resource in
their planning departments so are not well equipped to argue the
case.
I totally agree with my hon. Friend. Quite often, the moment the
developers sell the last property, that is it: they are not
interested any more. They are not interested in snagging or doing
the roads; they are off to build somewhere else. The problem is
that, as my hon. Friend was saying, local authorities do not have
the money to chase these people. In my opinion, if they do not
finish an estate—what they were allowed to do under the planning
permission—they should not be granted permission again to build
anything else.
My right hon. Friend makes an excellent point. There should be
much stricter rules on this issue, because such sharp practice by
developers helps no one. It does not help the building industry
as whole, homeowners, local authorities or, indeed, other
businesses that have to operate. In one estate near me, drivers
can feel the difference as they drive on to the unadopted piece
of road because their vehicle goes over a huge bump. That is not
good for anyone, including many of the small businesses that have
to deliver to that estate. It is surely in everybody’s interests,
including those of the wider building industry, to get on with it
and come up with a clear, simple and fair solution to the problem
so that we can all move on and not spend vast amounts of
unnecessary energy chasing after developers to sort out problems
such as lamp posts that do not work or roads that have not been
finished off.
I wish to address a specific issue that relates to a social
housing enterprise in my constituency that operates across large
parts of Berkshire. I have been deeply disappointed by Housing
Solutions and ask for the Minister’s help. This organisation
appears to have badly let down a number of residents in Woodley,
the Reading suburb I mentioned earlier. It applied for planning
permission to build properties next to a transport depot, where
there are a lot of heavy goods vehicle movements, and on an
industrial estate. The properties have been sold in a
part-ownership scheme to local residents who were desperate to
get on the housing ladder and were finding it quite difficult
because they are on modest incomes. The local authority gave
planning permission and carried out all the relevant
checks—again, this is Wokingham Borough Council not Reading
Borough Council. There was nothing in planning law to stop these
flats from being built next to a haulage yard. The local
authority looked into it and it was not able to reject the plans
on that basis—on the basis that the flats were close to a noisy
and polluting business. However, it did try to insist on
conditions on the development. Sadly, though, it appears from
lengthy inquiries from my office and also from one of the local
councillors—Councillor Shirley Boyt—that these conditions have
not been met. Residents, including a constituent of mine, Elise
Maslen, who lives in the development, were not told of the
additional changes that would need to be made to these
properties—in particular, the need to adapt to air quality
problems, such as mechanical ventilation and other forms of
enhancements to the properties. They were also not told about the
noise and pollution from the depot when they purchased the
properties. That has resulted in around 20 families being trapped
in flats that they do not want to be in, suffering from noise and
air pollution.
The local authority has tried to find a way of bringing these
properties up to spec. It has insisted on Housing Solutions doing
that, but there has been a great deal of delay. This has gone on
for five or six years. Sadly, some of the residents have moved
away and are now having to pay for the cost of living in these
properties while also living at a new address. They are deeply
concerned about the health of their children and of themselves.
This seems to be an egregious abuse of the situation. While it is
not directly related to leaseholders, it has many of the same
features, with powerful organisations, sadly, abusing their
position of power and ordinary householders struggling and being
provided with incorrect information. I wish to write to the
Minister to ask for his help on this matter because it is of huge
concern to me, to the local community and to the residents
concerned. They have been treated appallingly by the housing
association.
(Warwick and Leamington)
(Lab)
My hon. Friend is making some incredibly important points. I have
parallels in my constituency, as I am sure do other Members
across the House. In one example, we have a managing company, a
massive social housing provider and a partnership scheme, as he
describes it, and the builder. It is a big organisation, but
there is no overall ownership of the issues. Residents get
utterly frustrated—I am thinking about Ellie, Matt, Sarah and
others. There are 200 of them in this one development and they
cannot get answers from anybody because no one is really taking
ownership of the problem.
I thank my hon. Friend for his intervention, because he shows
that there is a wider issue with this type of behaviour. It is
deeply worrying. These are ordinary families trying to get on
with their daily lives. They want to be able to find a home of
their own in a high-cost area and they are being treated in the
most appalling way by an organisation that should be much more
responsible. As I have said, I, my office and local councillors
have been struggling to find a way of solving this problem, but
we have not had much success so far and would appreciate the
Minister’s help. We hope that, at some point, Housing Solutions
will compensate these poor residents for the way that they have
been treated and, indeed, buy them out of their properties if
possible. It is absolutely appalling to live next to a haulage
yard. People are constantly interrupted by noise from HGVs,
driving past at all hours of the day and night. The air pollution
from diesel particulates and nitrous oxide is deeply worrying.
There is no way of protecting children and other vulnerable
people in that situation. I am sure the whole House would agree
that no one wants that for their constituents. There is also an
issue with planning law that needs to be addressed, by which I
mean looking at the risks from air pollution and from putting
housing in close proximity to an industrial development. I would
appreciate the Minister’s help with that.
Finally, let me reiterate the points made by other colleagues
about the wider issue of leasehold, which is a completely
out-of-date system and totally unfair to first-time buyers and
other householders—whether they be young residents, people in
leasehold properties for long periods of time, or, as the right
hon. Member for New Forest West ( ) said, older residents. This
system should come to an end. It is a feudal system. Our country
is unique in having such a system. Surely we need to end it once
and for all and move on from it.
18:24:00
(Chipping Barnet)
(Con)
I refer to my declaration in the Register of Members’ Financial
Interests, which includes an investment property that is a flat
held on leasehold.
I join other Members in strongly condemning the abusive practices
that have prompted this legislation, including the sale of new
leasehold houses where there is no justification, and spiralling
ground rents that double every few years. All the rip-off
practices about which we have heard in the Chamber this evening
are simply not acceptable. I, like others, very much welcome the
investigation initiated by the Competition and Markets Authority
into some of the major developers in relation to unfair contract
terms and what looks like mis-selling.
It is clearly right to legislate to stop sharp practices in the
leasehold sector. It is also correct not to apply the ban on
ground rents to existing leases, as that would retrospectively
impact on long-standing investments, many of which are held by
pension funds that support millions of people in their
retirement. Instead, the Government will be helping existing
leaseholders by making it easier to enfranchise or buy themselves
out of ground rent obligations, and through their second-stage
reforms.
As the Bill proceeds through Parliament, we need—as I said in my
intervention earlier—to consider the retirement homes sector,
where, as we have heard, ground rents are often being used to
generate the capital to fund communal areas and shared
facilities. Including retirement homes in the ban could affect
future investment in this type of much-needed housing. As my
right hon. Friend the Member for New Forest West ( ) said, there is a case for
considering a technical change to the Bill so that at least the
retirement homes built but not sold prior to the commencement of
the Act in 2023 are covered by the current rules, rather than the
new ones.
A second potential alteration that should be looked at carefully
is whether to allow the continued use of ground rents for some
large, complex apartment blocks. This matter has been raised with
me by a constituent who is worried that the exit of professional
freeholders from the market, which is the expected consequence of
abolishing ground rents, will leave leaseholders moving into such
buildings with extensive financial and legal responsibilities.
These complexities are intensified if there is mixed residential
and business use.
The Housing, Communities and Local Government Committee
acknowledged this issue in its 2019 report and advocated at least
a temporary exemption for large, mixed-use buildings. If this
carve-out were made, there would need to be a robust code of
conduct to ensure that the remaining freeholders acted fairly.
Violation of such a code should be subject to enforcement
mechanisms. Having spoken to my constituent and his colleagues in
the professional property sector, I think we need seriously to
consider whether some leaseholders in some new blocks might want
to have the option of leaving stewardship of their block to a
professional freeholder.
My right hon. Friend is making an important point. Would the code
of conduct to which she refers—for those kinds of complex
developments—include a cap on ground rents of, say, £100 or 0.1%
of the value, whichever was lower, to ensure that the ground rent
was always affordable?
We would certainly need a cap, and the sort of levels that my
hon. Friend mentions sound reasonable to me.
Let me turn to how this legislation will interact with new
building safety laws. New building safety legislation will impose
stringent responsibilities on freeholders, whether they are
professionals or just flat owners who are banded together to
manage their building. Frankly, not all leaseholders will want to
take on such liabilities, yet this Bill will mean that for new
flats, residents—whether they want this or not—will be jointly
responsible for the safety, maintenance and upkeep of the
apartment buildings in which they live, regardless of the size or
complexity of those buildings. As my hon. Friend the Member for
Thirsk and Malton () highlighted in his
earlier intervention, worrying research in a 2019 report
commissioned by the Royal Institution of Chartered Surveyors and
Built Environment Forum Scotland indicates that the removal of
professional freeholders in Scotland has contributed to buildings
falling into disrepair. A key problem that has been identified is
that difficulties in securing a majority agreement among
leaseholders and getting all flat owners to fund the repair works
needed can significantly slow down remedial work, and that pushes
up costs.
I appreciate that the right hon. Lady wishes to make a point
about the importance of shared ownership and the difficulties of
managing the shared parts of a large block of flats. Has she
looked into the way that this issue is managed in other
countries, given that all western countries other than the UK do
not have the leasehold system? Surely there are ways to manage
communal areas other than by maintaining leasehold, which
involves all the difficulties that we have heard about.
The fact that English property law is unique does not necessarily
mean that it is wrong, but I acknowledge that it is important to
look at how other countries manage these issues. That is partly
why it is instructive to look at what has happened north of the
border. Of course, Scotland has a different legal system.
Leasehold and commonhold have been a fundamental part of its
system for a long time, and it seems that, in some instances,
that is making it more difficult to keep buildings in a decent
state of repair.
This is a very important Bill, but it needs careful scrutiny if
we are to ensure that it protects leaseholders effectively from
abusive and unscrupulous practices, operates fairly and avoids
unintended negative consequences for the very people whom it was
designed to protect.
18:31:00
(Wimbledon) (Con)
Let me say to my hon. Friend the Minister how much I think
everyone across this House supports his aim—I certainly do—of
getting rid of some of the egregious behaviour that we have seen
in the market in the past five years. That behaviour undermines
the work done by those professional freeholders who have done a
good job for leaseholders for many years.
We are right to look at the whole process of leasehold. My right
hon. Friend the Member for Newark () described this Bill as the
appetiser before the main course. A lot of us will welcome the
main course, in which we can look at making it easier for
leaseholders to extend their leases through simplification of the
extension process, which I assume will come in that very complex
Bill. The hon. Member for Ellesmere Port and Neston () was right to say that
although progress has been not as fast as many would have liked,
it is coming. I warmly welcome that.
This Bill is fairly tightly drawn: it is very much about the
ground rents on future leases. I make only four points, and I
would like those on the Treasury Bench to respond to them. First,
a practical point: while we all welcome and recognise the work
done by the Competition and Markets Authority, it is missing half
the problem. On the many people who may or may not have been
instructed to use solicitors recommended by the developer or
their agents, those solicitors had an obligation and a duty to
the client purchasing the property, for whom they were working. I
strongly advise Ministers to talk to the Solicitors Regulation
Authority about whether this should be looked at as a corollary
of the work being done by the Competition and Markets
Authority.
Secondly, I heard what the Minister said about doing away with
ground rent and moving to a peppercorn that will not have to be
paid. What I am not clear about—perhaps if I am on the Committee,
we can explore this a bit more—is why anyone would not just
transfer all the increase in ground rent to other charges. He
said that there are protections in progress, but some of those
will be really difficult to establish. We have talked about
“excessive” admin charges, repair charges and service charges; I
think that will be quite difficult for the Minister to define,
and I look forward to exploring that with him. If I am not on the
Committee, I hope he will meet me to talk about how we might make
sure that that is more tightly defined.
My third and fourth points have already largely been made by my
right hon. Friend the Member for Chipping Barnet (). If ground rents are
taken to a peppercorn, freeholders are unlikely to want to be
involved, so we will move to a system of commonhold in reality,
rather than by legislation. That raises two issues. The first is:
who will manage the blocks of flats, and how will that come into
place? The hon. Member for Reading East () mentioned that there are
systems in other countries, but in complex buildings—those large
buildings with mixed use underneath, or large-scale blocks of
flats—a number of people will not want to actively participate in
the management of that building; nor will it necessarily always
be possible to bring them to resolution and agreement with the
rest of the commonholders. For things to work, there may have to
be an obligation on the commonholders to have a management
company; otherwise, a number of repairs simply may not happen. My
right hon. Friend the Member for Chipping Barnet talked about
Scotland a moment ago.
My other major concern is this: if that provision is not there,
and we no longer have professional managing agents or
freeholders, who will ensure future building safety? I am
interested to hear how the Minister intends to protect complex
buildings. Commonhold can easily be seen to work in smaller
buildings, but there is real concern about buildings over 18
metres and large buildings. If safety standards change in the
future, who will force through building safety measures? I am
keen to hear a response to that from my right hon. Friend the
Member for Tamworth ().
18:36:00
(Loughborough) (Con)
I am delighted to speak in support of this Bill. I have one or
two points to raise, but in general this is an excellent
Bill.
For too long, many of my constituents who have realised their
dream of owning their own home have been trapped in a cycle of
cumbersome bureaucracy and additional, unnecessary and, frankly,
unfair expenses in the form of both ground rent and service
charges. Since becoming an MP, I have supported a number of these
constituents, some of whom have told me that they were not
clearly informed about the additional costs they were signing up
to when buying their house—costs that have caused significant
stress and hardship. I had hoped to provide an example, but
unfortunately, all the cases are currently undergoing legal
action, which only reinforces my point that change is necessary.
I therefore welcome the Bill, which seeks to end these unfair
practices.
I share a lot of the hon. Lady’s concerns about what her
constituents are experiencing. Many thousands of new homes are
being built, and constituents are frustrated and surprised when
they discover that they have just bought a leasehold house. We
understand that a third of leasehold properties are typically
houses. Does she agree that where houses have been built as
leasehold, surely the simplest thing would be to make them all
freehold, and to get agreement with all the developers to reduce
the cost of transfer?
I wonder whether that is part of the main course that is coming
up. I am not sure; we will see, I suppose.
I think I got the same memo as my right hon. Friends the Members
for Chipping Barnet (), and for New Forest East
(Dr Lewis), as I am going to talk about retirement homes for a
moment. I draw the Minister’s attention to an issue I have
previously raised with him. I have been contacted by a leading
developer and manager of retirement communities, which has
recently completed Mill Gardens and Farnham House retirement
living in my constituency. McCarthy and Stone is concerned about
the impact the Bill could have on the retirement sector,
following the decision not to provide it with a concession from
the ban on ground rents. While it is welcome that the Bill
provides for a short transition period, it does not take into
account developments that were in the pipeline before the
position changed, and the impact that the provisions will have on
schemes that will be part-sold when the legislation comes into
force.
The proposals are likely to mean that retirement developments on
which building started when ground rents were expressly permitted
will find themselves split, with two lease structures operating
in the same building. That is likely to cause legal complexity
and on-site management issues, and to complicate future apartment
transactions. It could throw into doubt the financial
sustainability of some communities, on the basis that the
collective ground rent income on which a development’s funding
was predicated will be substantially reduced, even though the
development has already been built.
Furthermore, financial contributions to the development costs of
communal areas, which were previously shared transparently and
equitably, will become complicated, and that risks a sense of
unfairness and disunity arising between residents in the same
block. I wonder, therefore, whether a modest technical change
could be made to the Bill to allow for developments already
part-sold to complete sales, so that all apartments operate on
the same basis.
I heard the points made by my right hon. Friend the Member for
Newark (), the previous Secretary of
State, on retirement homes and wonder whether a longer transition
period for retirement homes would be better than one ending in
2023. That said, it cannot be right for buyers of new properties
to face further financial demands for ground rent. House buying
must be made fairer and more transparent, and freeholders and
landlords must not be able to continue to amass significant
profits from ground rent and, indeed, administration charges to
the detriment of homeowners. The Bill is therefore an incredibly
important piece of legislation that I wholeheartedly support.
18:41:00
(Thirsk and Malton)
(Con)
It is a pleasure to speak after my former colleague in the
Cabinet Office, my hon. Friend the Member for Loughborough
(). She made some good points, not
least on part-built developments. I support the Bill’s
intent.
There is an expression that you should never take down a fence
until you know why it was put there. As I set out in my
intervention, I have one or two particular concerns. I draw the
House’s attention to my entry in the Register of Members’
Financial Interests. I have been involved in the property sector
for a long time. I am not directly involved in it today and I
have no vested interest—that is for the people who make comments
on Twitter in particular, because I will not agree entirely with
many of the points made about completely scrapping leasehold, in
effect. I am actually a leaseholder, rather than a freeholder, in
this context.
On the leasehold system, for most of my life, when it comes to
selling and renting property, leasehold has been a perfectly
workable form of tenure for most people—for most leaseholders and
indeed freeholders. In recent years, there is no doubt that the
system has been tremendously badly abused. It is right of the
Government to act on that in no uncertain terms. However, the
fence to which I referred is between freeholders and
leaseholders, and it was put there to try to ensure a proper
mechanism for resolving disputes. That is why we ended up with a
professional landlord who had an overall interest in an entire
block, rather than in a specific unit in that block. The Bill
will in effect remove any interest that a professional landlord
would have in a future block. My hon. Friend the Member for
Wimbledon () is therefore right that
the default will become commonhold.
On freehold, in my formative years of selling property in York,
most flats were leasehold, and those flats were perfectly
saleable and rentable. However, if ever we came across a
development of freehold flats—a block where all the owners were
freeholders, or commonholders, in modern-day parlance—we found
that those properties were almost impossible to sell. In fact,
mortgage lenders would not lend on them because of concerns about
maintenance. If there was not a method to ensure that the
building was maintained or that its insurance continued, the
building might fall into disrepair and the lender’s security over
the property would not be sufficient to cover the mortgage. That
is the concern we potentially have here, as we move to this
system of commonhold. I think commonhold can work for quite a
number of flats—most blocks of flats, indeed—if it is simple and
easy to operate.
However, commonhold is far and away not, in any shape or form, a
panacea. We can see that from the current experience. There are
some effective leasehold or commonhold ways of managing blocks,
with residential management companies or right to manage
agreements, where in effect the leaseholders manage the block and
take on the responsibility of a freeholder. However, there are
disputes within such blocks or organisations. The trouble with
the commonhold rules—as I understand it, and the Minister may
tell me differently—is that each commonholder has the right to
raise their own dispute regarding the particular property, and I
do not think there is any clear means of resolving such a
dispute.
Previously, in a leasehold agreement, the freeholder would have
been able to say, “This is what is actually going to happen.
These are the terms of the lease, and these are the terms of the
lease that you must adhere to.” A simple example of that is the
payment of insurance. As I am sure most Members in this debate
will know, in a leasehold agreement the freeholder will normally
arrange the buildings insurance for the entire block, which
obviously covers communal areas, as well as things such as the
roof. That would be the responsibility of the freeholder, who
would pass on the costs to each individual leaseholder in
proportion. If one leaseholder decides not to pay the insurance,
the freeholder can say, “Well, you must pay the insurance”, and
they can actually carry out debt collection on that leaseholder.
If it is an absentee leaseholder, they can go even further:
ultimately, they could disenfranchise that leaseholder
completely, and take the apartment back from the leaseholder.
I know that that has been used in some draconian ways in
leasehold, but generally there is a mechanism that makes sure
everybody in the block pays a fair amount for maintenance and
things such as the insurance, but I am not sure how that happens
in commonhold. If somebody stops paying for their particular
element of responsibility for the charges, I do not think there
is any such mechanism. The others could take that person to
court, but again, the problem is that the fellow residents—fellow
commonholders—in that block would have to take one of their own
residents to court, instead of a freeholder doing so who does not
have a cheek-by-jowl relationship with the resident.
This is why I think we have some of the maintenance issues in
Scotland, and in Scotland there are some big maintenance issues,
as my right hon. Friend the Member for Chipping Barnet () mentioned. The hon.
Member for Reading West asked about other jurisdictions.
Australia has a very similar system, which I think is called the
strata system. There are issues there about the recruitment of
people to sit on the management boards, with 37% of companies
expressing difficulties in recruiting residents to sit on these
management boards.
I absolutely appreciate the difficulties that the hon. Gentleman
is outlining, including indeed in relation to my constituency. I
should say that my constituency is Reading East; Reading West is
the COP26 President’s. In Reading and Woodley, which I represent,
there are a number of private roads and other shared facilities
where residents come together and share the ownership of assets.
Certainly in my experience as the local MP and previously as a
councillor, that can be done quite effectively. I do appreciate
that there may be issues with very large blocks, and the point I
was making to the right hon. Lady from Chipping
Campden—[Interruption.] Sorry, I mean the right hon. Member for
Chipping Barnet (); there are various
interesting places around the country that we come from today.
The point I was making is that we really should look at the wide
range of jurisdictions overseas and try to work through some
models of what is most appropriate in each given set of
circumstances.
However, it is possible to bring residents together. Certainly,
that is my experience locally, and in the example of shared
private roads, that has been extremely successful. We have a
number of areas where they are maintained to a very high
standard, the residents all work together effectively and that is
absolutely fine. So I do not think we should try unduly to put
obstacles in the way of progress on this matter. At the end of
the day, the real issue is moving on from this totally unequal
system to one where individual householders are treated more
equally, and work together in a collaborative and sensible
way.
The hon. Gentleman makes some good points and I am not saying
that in certain circumstances commonhold cannot work. He pointed
to the simple situation of a non-adopted road to which local
residents have to contribute for the upkeep and it can certainly
work in those situations, but I am just trying to point out that
there are situations where it would prove difficult to make the
system work.
Every jurisdiction—those in Australia or the US or Scotland—is
different, and the UK is unique in various ways, one of which is
in having a high proportion of absentee owners, such as in
central London, where we all see blocks of flats that seem to be
rarely occupied. Problems might arise in managing such blocks
with for instance 100, 200 or 300 commonholders; there might be
disputes and difficulties, such as in debt collection.
On the point about simple things to manage, the biggest issue is
complex developments, as my right hon. Friend the Member for
Chipping Barnet mentioned. Let us consider a block of 300 or 400
flats built above a tube station or adjoining a shopping mall;
effectively there will be a common freehold in that development
but would anybody here be keen to sit on a committee managing
that entire block with, for example, joint M and E—mechanical and
electrical—so joint electrical, heating, ventilation and
broadband installations, managed not just between the 300 units
but the other infrastructure in that development? There are
concerns that that would be beyond the appetite of many
commonholders who manage that kind of development.
Yet it is done in every other country in the world—is that not
the point? I share my hon. Friend’s reservations yet every other
country in the world with equally complex cinemas and tube
stations and infrastructure manages it in a way that is broadly
commonhold.
My right hon. Friend raises a good point and has an advantage
over me as I do not know in depth how that would happen in, for
instance, Manhattan, but I think we should understand that
situation more before pushing ahead and ruling that commonhold
will effectively become the default for every single development
in the UK. The Government have done a great job in many things
and one of them is in increasing the rate of development in the
UK, and I have a concern that some developers might be inhibited
in taking on a very complex project because of fears about
selling the residential units or renting the commercial units. I
just think we need to understand more before pushing ahead and
rolling complex developments into the legislation, rather than
exempting such developments from it as we on the Select Committee
recommended and recommended in his speech—he
tabled an amendment.
I just think we should look at this area and make sure we get it
right, because one law we constantly effect in this place is the
law of unintended consequences and we must avoid that. So
peppercorn leasehold and commonhold are fine, but we need to make
sure we look at those complex situations. I personally think that
if we do not find a simple solution and cannot demonstrate that
it will work in the UK, because the UK clearly has some unique
elements to the property market, then we should set a cap on the
ground rent in exempted developments, for instance of £100 or
0.1% of value, whichever is the lowest, to make sure it is always
affordable for leaseholders. I absolutely understand that this
has been a problem, but we must make sure that developers do not
avoid exploiting development opportunities—particularly
brownfield development opportunities in city centres—because of
complexities.
Aside from that, I am very happy to support what the Government
are trying to do.
18:53:00
(Weaver Vale) (Lab)
This is a Bill not for the many but just for the new
leaseholders. Ministers have now heard the speeches of all
Members taking part in the debate and in one sense they all spoke
with one voice: they welcome this Bill in its narrow scope as far
as it goes. We agree that abolishing ground rents via peppercorn,
and beginning to rebalance the system so that it works for those
who live in homes rather than for investors who use them as
income streams, looking only for returns, is a good thing.
However, as Members have stated—I think we heard from around 11
speakers, including interventions—the Bill deals only with ground
rents, and only with the future. The feudal system now unique to
England and Wales is still alive and kicking; that is something
that I and the former Secretary of State, the right hon. Member
for Newark (), agree on.
That is the issue with the Bill. For people already trapped in
leasehold properties with high and escalating ground rents, it
does nothing. For those trapped in flammable flats, facing
soaring costs and crippling remediation bills, it does nothing.
For leaseholders facing extortionate service charges without any
transparency on where the money is going, or suffering from other
unfair terms and conditions or limitations on enfranchisement, it
does nothing.
We heard from my good friend and neighbour, my hon. Friend the
Member for Ellesmere Port and Neston (), who has constantly
referred to this as the new payment protection insurance scandal.
People across the House have referred to the obscure practices of
recommended solicitors and so forth. The right hon. Member for
Newark—I name check him again—referred to the Bill as an
“appetiser” before the main course. I and Members across the
House—certainly those of us on the Opposition Benches—would
prefer an all-you-can-eat buffet of reform. My right hon. Friend
the Member for Alyn and Deeside (), who is a good friend, referred
to the scamming in north Wales and the north-west, with a
plethora of dodgy clauses creating a cash cow for some
interesting people in the market.
This Bill could do so much more, and given that it has taken this
long to get any progress on leasehold reform from the Government,
we expect it to do more. It is, in many ways, a missed
opportunity for the Government to make good on a long-held
promise. This is a story we are becoming familiar with—a
Government on the side of vested interests. They are a Government
on the side of some big developers who see housing as an income
stream rather than as homes to be owned or lived in; developers
who contribute £1 out of every £10 that the Conservatives receive
in donations—developers who should instead be held to account for
bad building and bad management.
We expect from Ministers at the very least a clear timetable for
the more substantive second-part reforms of the leasehold
landscape. We expect to hear that those will happen in the
not-too-distant future. The Bill tackles only new homes yet to be
built. As Members across the House have said, it will leave us
with a two-tier system with nothing to help people, including
those in my constituency, who are experiencing problems right
now. Will the Government outline why, instead of using the Bill
as an opportunity to help people currently exploited through
leasehold, Ministers have left them waiting once again by failing
to apply this legislation retrospectively, as the shadow Housing
Minister, my hon. Friend the Member for Manchester Central
(), spoke about?
Do the Government have any numbers on how many more people will
join those currently scammed into buying leasehold properties on
bad terms while we wait for more legislation? It is those current
leaseholders—people such as Katie Kendrick and Jo Darbyshire at
the National Leasehold Campaign—who have been pushing for these
changes over the years. Alongside the brilliant people at the
Leasehold Knowledge Partnership, they have made the case time and
again for doing better for those across the country who have been
misled and taken advantage of. I also pay tribute to all members
of the all-party parliamentary group on leasehold and commonhold
reform.
Can the Minister answer why this legislation has arrived without
banning houses being sold as leasehold properties? Just take a
look at properties advertised on Rightmove for evidence. Local
authorities will be keen to hear how Ministers will resource
Trading Standards to conduct its new roles, as will I. I am also
keen to hear what further action will be taken against those in
the legal profession, as well as developers, who mislead. We also
need to hear assurances from the Government on how they will
tackle developers looking for new streams of income, for example
so-called informal leasehold arrangements. Tackling ground rents
only, this time around, means a risk of playing whack-a-mole.
Banning freeholders from charging ground rents leaves them
open—this was referred to by other Members—to finding new ways of
replacing that income stream with other charges.
In conclusion, campaigners such as the National Leasehold
Campaign, representing millions of leaseholders, are tired of
consultations and bland statements uttered by Ministers about
“When parliamentary time allows” giving the green light to foot
dragging. This feudal system from a medieval era should be kicked
into history, with commonhold as the default position. Our call
to action and our amendments to the Bill intend to do just
that.
19:01:00
The Minister for Housing ()
I thank the Front Benchers from the official Opposition for their
support for the Bill. I am grateful to them, as is the whole
House. It is a pleasure to see them still in their places. We
know there is an Opposition reshuffle going on. It must feel to
them that it is taking as long for the Leader of the Opposition
to conduct his reshuffle as it is to reform leasehold. We trust
that we can get on a little bit quicker than he can.
It has been a real pleasure to listen to the debate unfold. We
have had a valuable and considered set of speeches. One of the
ornamentations, one might say, of our Standing Orders is that
they allow right hon. and hon. Members to range freely across the
terrain in a Second Reading debate, and that is what has happened
tonight. As the House will know, the Bill is narrowly focused on
leasehold ground rent reform, but the debate has allowed the
House to debate more freely the wider question of leasehold
reform, retrospection and other matters. We will be addressing
them in future, but let me say, before I make some further and
more detailed points, that I am grateful to the hon. Member for
Reading East () for his very thoughtful
contribution. It sounds to me as though he is going to write me
and the Under-Secretary of State for Levelling Up, Housing and
Communities, my hon. Friend the Member for Walsall North (), a very long letter. We look
forward to working with him to resolve the issues he raised.
I am grateful to my right hon. Friends the Members for Chipping
Barnet () and for New Forest West
( ), and my hon. Friend the
Member for Loughborough () for raising the issue of
retirement sector ground rent reform. As the Under-Secretary of
State for Levelling Up, Housing and Communities, my hon. Friend
the Member for Walsall North, said, we have made it absolutely
clear that the retirement sector has had an exemption of a
further 12 months to get its business model in order. We believe
that that is a right and proper amount of time, because there are
a number of business models that the sector can use to
effectively and appropriately levy reasonable charges that are
transparent and fair on residents. It sounds as though my right
hon. and hon. Friends may be interested in amendments. They know
the process by which to pursue those, if they so wish. However,
there will always be disparities between one set of buildings and
another and between new buildings to which ground rents will not
apply and older buildings to which ground rents will apply. I
suspect that those differences will be factored into market
calculations or will have little effect on the actual challenges
that face residents.
The case for an amendment—I thank the Minister for his guidance
in that respect—on the retirement sector is that it was clearly
given an exemption and was assured throughout last year that that
exemption would hold, but that exemption was suddenly withdrawn
in January this year. Given the time that it takes to change the
model and to sell such properties, this is crying out for
amendment.
I am grateful to my right hon. Friend; he is not so much an
ornament as an energetic battery in this House. We look forward
to seeing what further proposals he has in due course.
My hon. Friend the Member for Wimbledon () put his finger on it when
he described how complicated the matter of wider leasehold reform
is. He asked whether the Solicitors Regulation Authority and
conveyancers will be engaged; whether tighter definitions will be
employed; what happens in more complex developments to repair
charges; and what the interaction is with the Building Safety
Bill. That is why the Bill is so narrowly defined, as the Law
Society advised—so that we can get on and deal with the most
egregious offences on ground rents and then move on to the more
complicated matter of wider leasehold reform.
As my right hon. Friend the Member for Newark () said in what I thought was
a very eloquent and forceful speech, making it clear without
saying a word how integral he has been to the advancement of
these reforms, they are really quite challenging. We know that
leasehold is woven into the tapestry of our law and our tort. We
know that in parts of the country, particularly the north-west—I
think you know it as well as anybody, Mr Deputy
Speaker—businessfolk of yesteryear, factory owners, would buy
land in order to build houses and tie workers to those factories.
Unpicking those sorts of complicated arrangements needs to be
thought through carefully. With an all-you-can-eat feast, as the
hon. Member for Weaver Vale () knows full well, if someone
stuffs themselves rather too quickly and rather too much, there
may be unfortunate consequences down the line. We want to avoid
those sorts of challenges with this Bill.
A great deal of thought has gone into the definition of rent to
avoid the sort of loopholes that the hon. Member for Manchester
Central () mentioned. We want to ensure
that we close loopholes that would allow freeholders or landlords
to collect ground rent. We considered a closely defined meaning
for “ground rent”, but at the end of the day, we came to the
conclusion that that would be something of a fixed target,
because experience teaches us that clever operators with clever
lawyers often find loopholes in such circumstances. A flexible
definition of rent will help us to ensure that the tribunal will
have the flexibility to consider what actually represents a
prohibited rent, even if it is not explicitly called “ground
rent”—the sorts of prohibitive and prohibited charges to which
she referred.
We have made it absolutely clear that we will introduce
legislation to ban leasehold houses; we have made that manifesto
commitment and will introduce legislation as soon as we are able.
We will also ensure that the second part of our legislative
reform addresses the challenges with respect to existing
leaseholders and retrospection, because we are committed to
addressing the historic imbalance in the system.
Meanwhile, I am grateful for the work that the CMA has done,
which I hope the whole House will welcome. We want to make sure
that the CMA moves as quickly as possible to tighten up on
egregious practices; we look forward to its report and to the
next steps that we will then undertake. I assure the House that
we will move as rapidly as possible.
My hon. Friend the Member for Blyth Valley () is not in his place, but he has
certainly raised with me the issue of ground rent in future long
leases. In January, we announced that we would legislate to
change the way in which the cost of buying a freehold or
extending a lease is calculated to make it cheaper and easier for
leaseholders. I hope that that gives my hon. Friend some
reassurance.
The Bill is the beginning of a process that we, the Conservative
Government, have started and that others, for too long, have
shirked. It will ensure fairness and transparency in our
leasehold system. I look forward to working with right hon. and
hon. Members across the House in the coming weeks to get this
vital legislation on the statute book and working for
leaseholders. I commend it to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Leasehold Reform (Ground Rent) Bill [Lords] (Programme)
Motion made, and Question put forthwith (Standing Order No.
83A(7)),
That the following provisions shall apply to the Leasehold Reform
(Ground Rent) Bill [Lords]:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not
previously concluded) be brought to a conclusion on Thursday 9
December 2021.
(3) The Public Bill Committee shall have leave to sit twice on
the first day on which it meets.
Proceedings on Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously
concluded) be brought to a conclusion one hour before the moment
of interruption on the day on which those proceedings are
commenced.
(5) Proceedings on Third Reading shall (so far as not previously
concluded) be brought to a conclusion at the moment of
interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not
apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(.)
Question agreed to.
Leasehold Reform (Ground Rent) Bill [Lords] (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No.
52(1)(a)),
That, for the purposes of any Act resulting from the Leasehold
Reform (Ground Rent) Bill [Lords], it is expedient to authorise
the payment out of money provided by Parliament of any increase
attributable to the Act in the sums payable under any other Act
out of money so provided.—(.)
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