Barry Gardiner (Brent North) (Lab) I beg to move, That this House
has considered leaseholders and managing agents. I am grateful to
present this debate under your chairmanship, Sir George, because I
know that you have significant involvement with your local
leaseholders in Knowsley, for which they are very grateful. Saying
the word “leasehold” to any Member of Parliament is likely to begin
a long conversation on one of two things: fire safety or service
charges....Request free trial
(Brent North) (Lab)
I beg to move,
That this House has considered leaseholders and managing
agents.
I am grateful to present this debate under your chairmanship, Sir
George, because I know that you have significant involvement with
your local leaseholders in Knowsley, for which they are very
grateful. Saying the word “leasehold” to any Member of Parliament
is likely to begin a long conversation on one of two things: fire
safety or service charges. I could have phrased that better: it
would be more accurate to say “unsafe homes caused by fire safety
defects” and “rip-off service charges by unscrupulous managing
agents”.
For many people, the issue of leasehold crystalised after the
tragedy of the Grenfell Tower fire and the subsequent purgatory
that hundreds of thousands of residents throughout the country
found themselves living through as they waited to have their own
buildings’ fire safety defects remediated. They are still
waiting. It was about much more than cladding and EWS1 forms.
Residents who found that their homes had been constructed without
internal fire stopping, or with inappropriate materials or
inadequate fire doors, were unable to sell their property and
move on with their lives because construction companies, project
managers, surveyors, developers, freeholders, building control,
the National House Building Council and managing agents all
sought to pass responsibility among themselves. Nobody wanted to
pick up the bill for remediation.
In truth, the debate about a wholesale reform of leasehold goes
back much further. In the modern era, it starts almost exactly 50
years before 14 June 2017, with the Leasehold Reform Act 1967,
which gave qualifying long leaseholders of houses the statutory
right to buy the freehold of their homes. In 1969, a problem
arose: the Lands Tribunal ruling in Custins v. Hearts of Oak
Benefit Society noted that the 1967 Act treated the open market
for the reversion of the lease as including marriage value. That
is why the Government promptly and rightly reversed that decision
with section 82 of the Housing Act 1969. They did not wish to
artificially increase the cost for people wishing to buy the
freehold of their own home.
To see the injustice of marriage value, one need only to consider
the price difference on the open market between a leasehold flat
with a 125-year lease and the same flat with a share of freehold.
The difference is nil, yet the first is on a yo-yo tender,
whereby an owner, such as the Duke of Westminster, sells for the
full market value, only to receive the entire property back at
the end of the lease, allowing him to sell it all over again or,
more often, to receive a large payment to extend the lease when
the reduction in the term risks being so short that no lender
will advance a mortgage on it and the property becomes unsaleable
by the leaseholder, who sees the value of their asset diminishing
to zero.
(Worthing West) (Con)
I am grateful to the hon. Gentleman for introducing this debate.
May I, through him, point out that it is not just the traditional
landlords, but some great charities? Wellcome went to the
first-tier tribunal to get a judgment, but that decision should
have been made by Parliament, not highly expensive lawyers
arguing in court, given that it risked a knock-on effect on every
other residential leaseholder who wants to extend their
lease.
I am most grateful to the Father of the House, who is also
co-chair of the all-party parliamentary group on leasehold and
commonhold reform, for his knowledge, his campaigning over many
years and his intervention.
In the Housing Act 1974, which still related only to houses, and
the Leasehold Reform, Housing and Urban Development Act 1993,
which gave leaseholders the right, if more than 50% of them
wished to, to purchase the freehold interest in their block, the
concept of marriage value was sadly reintroduced. Marriage value
has been at the heart of many of leaseholders’ problems for more
than half a century, simply because the freehold title of the
property is worth more to them than to anyone else by virtue of
the fact that they live in it. The law allows the freeholder to
benefit from that asymmetry and impose considerable extra costs
on any leaseholder who wishes to purchase or extend the lease on
their home. When the Government come to legislate for leasehold
reform—they have promised to do so and I look forward to that—I
trust that they will understand that it is that fundamental
injustice that has kept leaseholders prisoner to the vagaries of
their freeholder and, often, the outrageous services charges
imposed by their managing agents.
(Weaver Vale) (Lab)
I thank my hon. Friend for securing such a vital debate. Here we
are again. The National Leasehold Campaign—
(in the Chair)
Order. The Division bell has gone. If the hon. Member finishes
his intervention, he might get a response when we come back, but
he should be brief.
Isn’t it time to abolish, rather than polish, the leasehold
system?
(in the Chair)
Order. The sitting is suspended. If there is one Division, we
will suspend for 15 minutes; if there are two, it will be 25
minutes.
4.36pm
Sitting suspended for a Division in the House.
4.46pm
On resuming—
(in the Chair)
Order. I think most people have now returned, so we can restart
if people are ready to do so. was about to deal with an
intervention from .
Indeed, Sir George. My hon. Friend the Member for Weaver Vale
() is no stranger to witty
epithets, and his suggestion that we should stop polishing and
start abolishing was absolutely right.
Before I turn to some egregious instances of service charges and
call out by name some of the managing agents that have played
fast and loose with the Landlord and Tenant Act 1985, which
provides that service charges must be “reasonable” and that
services and works must be carried out to “a reasonable
standard”, I wish to acknowledge some of the individuals who have
championed the cause of leasehold reform over many years.
(Ipswich) (Con)
Does the hon. Member agree that part of the problem is that rogue
agents and freeholders believe they can act with impunity, and
that it is incumbent on us to ensure that the regulations are in
place to hold them to account and penalise them when they behave
in an immoral way? They include Block Management, an agent in
Ipswich, and Railpen, which is a freeholder that has behaved in a
gross fashion and let down in a most egregious way almost 100 of
my constituents.
I am delighted that the hon. Gentleman has managed to get those
condemnations on the record. I am sure that his constituents will
be most grateful, as I am, for his doing so. He is right. The
trouble is that the law is there: it is the Landlord and Tenant
Act 1985, which makes it clear that unreasonable charges should
not be levied, and that services and works have to be done to “a
reasonable standard”. It is all there in statute; the trouble is
that it is not enforced and that the mechanism for enforcement
has gone awry, as I will come on to.
I already paid tribute to the Father of the House, whose
long-standing campaign on this issue is an inspiration to us all.
He co-chairs the all-party parliamentary group with my hon.
Friend the Member for Ellesmere Port and Neston (), who has also done so much
on this issue. Not with us at the moment is my hon. Friend the
Member for Sheffield South East (Mr Betts), the Chair of the
Levelling Up, Housing and Communities Committee, who has done a
huge amount over the years.
It is about not just those in this House; outside of the House
there are many more. I pay special tribute to Charlotte Martin,
who founded, with Nigel Wilkins, who is sadly no longer with us,
the campaign against residential leaseholds, and who did so much,
with Neil Mulcock, to usher in the Commonhold and Leasehold
Reform Act 2002.
(Stevenage) (Con)
While the hon. Gentleman has a glass of water, I want to ask
whether he agrees with the comments that my hon. Friend the
Member for Ipswich () made about Railpen and the
terrible impact it is having on leaseholders’ mental health up
and down the country, including in the constituency of Stevenage.
There have also been issues with the building that started the
original campaign, as highlighted by my hon. Friend the Member
for Southampton, Itchen ().
I am grateful to the hon. Gentleman for that intervention. He
highlights something that is really important to us all: the
mental health problems that this issue causes. It is not just a
financial issue; it has both physical and mental health
implications.
There was one more person to whom I was going to pay tribute. If
I left her out, I would be in deep trouble, because it is my own
head of office, Jackie George, who keeps a database of more than
7,000 leaseholders in my constituency and who keeps in touch with
them regularly.
In 2017, the then Secretary of State, the right hon. Member for
Bromsgrove (), committed the Government to
act on leasehold abuses. Specifically, he committed them to
legislate to prohibit the creation of new residential long leases
on newly built or existing freehold houses, other than in
exceptional circumstances; to restrict ground rents in newly
established leases of houses and flats to a peppercorn; to
address loopholes in order to improve transparency and fairness
for leaseholders and freeholders; and to work with the Law
Commission to support existing leaseholders. The Government said
that would include making buying a freehold or extending a
lease
“easier, faster, fairer and cheaper”.
In April 2018, the Government announced that managing agents in
the sector would be subject to regulation by an independent body
and that a code of practice would set out minimum standards for
key areas of activity, including service charges. In October
2019, the then Minister for Housing, the right hon. Member for
Tatton (), confirmed in a written
statement the Government’s intention to take forward those
measures. In 2020, the Law Commission published its report and
recommendations.
It is not good enough to say that the Government have been busy
with other priorities. Since 2017, we have had seven Secretaries
of State and nine Housing Ministers, yet leaseholders are still
being ripped off.
(Strangford) (DUP)
I hope to give the hon. Gentleman a chance to clear the frog in
his throat, and I congratulate him on securing the debate. Does
he agree that the current arrangements, whereby there is no limit
on the amount paid in service charges, insurance, ground rent and
forfeiture charges, have left leaseholders at the mercy of the
unscrupulous? Although we must allow the free market to prevail,
that does not preclude the House and the Minister introducing and
implementing fit-for-purpose regulation to protect the average
leaseholder, who wants a fair bill for a fair service. That is
not too much to ask for.
The hon. Gentleman is absolutely right. Leaseholders are not
asking for special favours; they simply want equity and
justice.
The Government’s survey reported that more than 70% of
leaseholders regretted buying a leasehold property. In London,
and in my constituency of Brent North, the leasehold model
accounts for more than 90% of properties sold. I do not believe
that my constituents should have to wait a moment longer for
basic rights over their own homes, the right to manage, and the
right not to be subjected to unreasonable and sometimes
fabricated service charges and then bullied into submission by
managing agents who threaten legal proceedings and, ultimately,
forfeiture.
For my constituents and millions like them throughout the
country, the delay is imposing financial penury and severe
impacts on their mental and physical health, as the right hon.
Member for Stevenage () said. The impacts
include those on the residents of Williams Way in my constituency
of Brent North, from where one resident wrote to me saying:
“My wife cried last night when I shared a few things about all of
this. Management fees have increased: £5,600 in 2020 to £8,400 in
2022—I cannot afford to pay this significant increase. That is a
50% increase. Water storage has increased from £564 in 2020 to
£1068—an 89% increase. The insurance premium charged at £5,820.76
in 2021 increased to £20,726.23 in 2022—a staggering 256%
increase. A detailed explanation has not been provided.”
Hallmark Premier Estates is the managing agent there, but it is
not providing a premier service—just as it is failing to do in
Parkside Place in Barham village, where the insurance premium,
which was £22,738 in 2021, has risen 108% to £47,415. No wonder I
was told yesterday that the landlord would be replacing Hallmark
as the managing agents for “unspecified reasons”.
One leaseholder in Lawns Court said:
“I have lived in my flat for 39 years, but I find I can no longer
struggle to keep it - the service charges for my one-bedroom flat
have risen from £1600 per annum to over £5000 per annum. That is
a 212% increase.”
The managing agents there are Aldermartin, Baines &
Cuthbert.
At the Living City development in Colindale in my constituency,
leaseholders were advised in March last year that after the
constant failure of the communal hot water supply to the building
over three successive winters, they would receive a rebate on
their service charge, only for that offer to be countermanded in
October last year. Residents noted that their insurance cover
appeared to be paying for associated commercial units, and found
that the premium had been increased by 100%. Lift maintenance is
also charged, conveniently, on a day rate rather than a job rate:
the lift fails, and a day rate is charged to fix it. Strangely,
it fails again the following day, and another day rate is charged
to fix it again—and so on, day after day, until astronomical
charges have been incurred, with the managing agents able to take
a management fee every time, of course.
I have written to all these managing agents, challenging them to
justify their service charges and other fees, and to none have I
been writing longer than Freshwater and its associated
companies—at the last count more than 150 linked under the same
beneficial ownership. It is because of Freshwater that in 1999 I
launched my original campaign for what became the 2002 Act. One
of its leaseholders wrote to me from Barons Court in my
constituency, saying:
“Dear Barry, every double bed apartment now costs £6000 up from
£2600 per year a 130% increase in service charge and we had to
pay for the Waking Watch. The management company will not tell us
how much commission they receive from the insurance premiums. We
arranged our own fire tests and paid for critical remediation
work.”
The name of the company FirstPort is well known to many Members.
Since 2013, my constituents in Chamberlayne Walk have been
challenging unreasonable service charges by FirstPort management
services. I say unreasonable but, in fact, the word “fraudulent”
is closer to the truth: it even charged for the management of
surrounding land that it did not own and was not its to manage.
One resident wrote to me about a typical example of its practice,
saying:
“I was charged £1725.88 for internal and external decorations
(painting of the windows). My windows are UPVC - no redecoration
was required.”
Another wrote to tell me:
“The back fill of the stack pipe which causes water to come up
into my kitchen sink and has flooded my kitchen on many occasions
is still an issue after 15 years of reporting it.”
Yet another person explained:
“My flat is a one-bedroom flat, one of the smallest on the estate
and I was charged £2861 for redecorations - almost double the
costs levied on the larger 2-bedroom flats this matter remains
unresolved.”
FirstPort’s response to those and the more than 500 more
complaints like them that I have received is to make no response
and ignore things for as long as possible—for months and years,
not days and weeks. There is a lack of accountability and
transparency over what the residents are charged for and whether
the costs are reasonably incurred and reasonable in amount. There
is a total failure to provide leaseholders with a breakdown of
service charges. Many of my constituents can wait more than 20
months for accounts to be finalised.
Even when FirstPort admits that refunds are owed to the
leaseholder because of double counting, overcharging or charging
for services not provided, the requests for the return of the
overpayments are often ignored, or the returns can take many
months to be made. FirstPort also charged multiple administration
penalty charges of £60 each when someone queried the costs. One
resident ended up being billed for more than £400 of admin
charges and was then browbeaten into paying because of the threat
of legal action.
In 2019, Nigel Howell, the then chief executive, conceded to me
that it was unlawful for his company to impose late penalty fees
on leaseholders who had disputed their charges—but not all
leaseholders have been refunded. Nigel Howell also confirmed to
me that his company had charged costs for areas not under
FirstPort’s management and promised that a 20% refund would be
given in the following year’s accounts. Strangely, Nigel Howell
was removed from his post as chief executive.
After years of suffering, one brave, resilient resident finally
took FirstPort to the tribunal. FirstPort sought to rely in its
defence on two factors: it tried to rely on the payments made by
leaseholders—in other words, by paying up they had intimated
consent; and, especially ironic given the FirstPort practice of
delay, it tried to rely on the length of time the leaseholder had
taken in bringing the challenge to the tribunal.
On Friday 13 January, the last working day before the hearing, I
received the following email in my office from my constituent at
5 pm:
“They are settling all of the claim. Their lawyers harassed me
all week and made the offer on Friday afternoon, just hours
before the hearing this Monday. They did not want this case heard
as they have been lying to Barry. They owe money to 202
families.”
Of course FirstPort did not want the case heard in public:
section 27A(5) of the Landlord and Tenant Act 1985 states
that
“the tenant is not to be taken to have agreed or admitted any
matter by reason only of having made any payment.”
Tenants often pay expressly disputed service charges to avoid the
risk of forfeiture and preserve their home and the value of their
lease.
Of course FirstPort did not want that in the public domain, but
it now is, and 200 other families have now been given heart that
it is possible to take FirstPort on and beat it. Already, 42
other leaseholders on the estate have signed up to a class
action. But the point is that this should not be happening. A
code of conduct for managing agents will not do any good. The
1985 Act already provides that service charges must be reasonable
and services and works must be carried out to a reasonable
standard. The problem is the whole imbalance of power between the
leaseholder and the freeholder.
Leasehold tribunals were intended to be a cheap, efficient way of
resolving normal disputes between reasonable people without
enormous legal costs, but landlords have intimidated leaseholders
by engaging vast arrays of lawyers and threatening them with
forfeiture and bankruptcy. There is a way to end this misery, but
it is not with a new code of practice. Companies do not obey the
existing primary legislation; they will not abide by a new code
of practice. The way to end this misery is not with the safety
regulator. Company law allows companies to avoid their
obligations, go into administration while the directors set up
new companies and repeat their scams all over again. This misery
will end only when we have an end to leasehold. Our country has
put up with a feudal system of land tenure for almost 2,000
years. It is time it stopped.
Several hon. Members rose—
(in the Chair)
Order. I am going to impose a five-minute limit on speeches, in
order to get everybody in.
5.04pm
(Warrington South) (Con)
It is a pleasure to follow the hon. Member for Brent North
(). I agreed with pretty much
everything he said. I am delighted to speak in this debate,
because the issue is so pertinent to constituents in Warrington
South. I am keen to hear from the Minister about progress on the
promised reforms to leasehold that we expect to see announced in
the King’s Speech.
My noble Friend , when he was the Minister
responsible, made a promising start to the process when he
brought in the first stage of leasehold reform, to crack down on
exploitative freeholders by removing escalating ground rents. Now
it is time to ensure that the next stage of reform delivers for
those who are currently trapped in the leasehold system.
The north-west has one of the highest proportion of leasehold
dwellings in the country, next to London. The most recent
statistics for 2019-20 put the proportion at around 31%—the
highest region outside of London. Throughout my time as the
Member of Parliament for Warrington South, residents have raised
issues regarding leasehold time and again. There are issues in
Chapelford, Edgewater Park, Chaise Meadow—I could list endless
developments in Warrington South that have been built over the
past 20 years under the leasehold system and where problems have
been raised.
Although I of course welcome the Secretary of State’s proposals
to address the problems associated with leasehold sales, I say to
the Minister that there is a growing worry among many of my
constituents that the difficult situations they find themselves
in may not be completely addressed by what we have heard so far.
The constituents I talk to are concerned about those who have
purchased properties in the past 20 years or so and are stuck
with problems of ever-increasing service charges, although they
receive very little for those charges, as the hon. Member for
Brent North said.
If anything, the problems are growing and getting worse. That
applies in particular to those who purchase leasehold houses
rather than flats. Colleagues may recall that I raised this issue
in a speech in the Christmas Adjournment debate, with particular
regard to Steinbeck Grange in my constituency. I pay tribute to
Mike Carroll, one of the residents who lives there, who was the
first constituent to contact me when I was elected. He has
persevered for about 14 years in trying to tackle this problem.
He has said that it has affected his life so significantly that
he has occasionally had to think hard about how to continue with
the fight. He has been browbeaten at every opportunity and has
required a tremendous effort to keep going.
Residents not only have to pay fees but run into difficulties
when they try to approach the freeholder. They are faced with
complicated, protracted processes, in which they cannot even get
information about the leaseholds for their homes without having
to spend money. If those constituents are trapped in leasehold,
it makes selling those properties incredibly difficult. A number
of solicitors have approached me in Warrington to say that they
had been asked to act for people buying the properties and had
advised them not to. Developers had then recommended solicitors
who disappeared overnight, so that the process could go through.
That strikes me as a real scandal.
The Competition and Markets Authority looked at this situation
for two years and did not really conclude anything. I say to the
Minister that that was a missed opportunity for a deep dive into
what is going on, not just with developers but with freeholders.
Will he ensure that the proposals that the Department brings
forward in the next Session address these problems? It is vital
that people wanting to get out of leasehold can do so without
facing extortionate fees that either leave them trapped in
leasehold indefinitely or result in their being short-changed
when they leave the system.
That legislation is desperately needed. I want to see a solution,
my constituents want to see a solution, and I sincerely hope that
the Department will take heed of that when they present their
leasehold reforms in the King’s Speech.
Several hon. Members rose—
(in the Chair)
Order. I am going to have to start calling the Front Benchers at
5.23 pm, so I will reduce the speaking limit to three
minutes.
5.10pm
(Vauxhall)
(Lab/Co-op)
It is a pleasure to serve under your chairship, Sir George. I pay
tribute to my hon. Friend the Member for Brent North () for securing this important
debate. In my three years as a Member, I have had to speak on
this issue so many times—I have joined long-standing Members in
the queue of MPs talking about it—so this almost feels like déjà
vu. It is a pleasure to follow the hon. Member for Warrington
South (), who outlined many of the
issues we are seeing up and down the country.
I will focus on the role of managing agents in the building
safety crisis, which has impacted so many of my constituents in
Vauxhall since the Grenfell tragedy—and, six years later, it is
still happening. Just yesterday, I held an online surgery with a
group of leaseholders whose managing agent has raised their
annual service charge from £1,000 a year to over £30,000 a year.
When I saw the email come into my inbox, I replied straightaway,
because I could not believe those figures. That staggering
increase was justified by fire safety problems but the agent will
not even disclose the details of the defects to the leaseholders.
I ask Members to pause for a second and think about what it would
be like to receive such an email. Imagine the stress of being
charged a thirtyfold increase in the middle of this cost of
living crisis without any proper explanation.
The sad reality is that that case is not even rare. Since
becoming an MP three years ago, I have had many constituents come
to me in desperation because their managing agents are refusing
to share the basic information about their building—somewhere
they call home and have to sleep every night. The issue has been
exposed by the cladding scandal. Agents were commissioning EWS1
inspections on behalf of freeholders, leaving leaseholders unable
to sell their flats and liable for thousands of pounds of fire
safety problems that they did not cause. Many agents would not
even publish those reports.
(Twickenham) (LD)
In my constituency of Twickenham, we do not have many high-rise
blocks of flats, but we have quite a lot of low-rise blocks. I
have had two cases come to me relating to two different blocks of
flats in Twickenham, in which managing agents have wrongly
commissioned fire safety assessments for buildings under 18
metres. In one case, the report has been shown to be flawed. The
residents cannot sell their homes; they are trapped. In the other
block, residents are potentially being charged up to £800,000 for
remedial works that are not needed.
(in the Chair)
Order. Interventions should be brief, particularly given the time
pressure.
I thank the hon. Lady for making that important point. That is
the real insult that leaseholders face up and down the country:
being forced to pay for the management of a block, even if the
agent is not providing a worthwhile service. It is a slap in the
face.
The sums we are talking about are not cheap; most end up being
hundreds of pounds every year for leaseholders. We have to be
clear that not all managing agents are like this; some are
professional and diligent, and a number of them do a lot of great
work. But the fundamental problem is that, whether agents are
good or bad, leaseholders have no power to hold them to account.
They do not even have a proper regulatory body that they can
appeal to to enforce standards. Current arrangements leave
leaseholders on the hook for almost everything, without having a
say in how their building is managed.
The root of the conflicting motivations at the heart of this
issue is the managing agents’ role. The problem is that,
ultimately, they are not employed by the people who are
paying—the leaseholders. We need freeholders to be accountable,
and we need to ensure that they take responsibility.
I will leave my remarks there, but I hope that the Minister will
hear the pleas from Members this afternoon. Instead of giving us
warm words and telling us that he has heard us, he needs to
outline a concrete plan for what he and the Department are going
to do to empower leaseholders in a system where managing agents
can be properly held to account, and we need a clear timescale
for that work. My constituents in Vauxhall and leaseholders up
and down the country cannot afford to wait any longer.
5.14pm
(Stevenage) (Con)
It is a pleasure to speak in this debate, and I am grateful to
the hon. Member for Brent North () for securing it.
We have spoken about leaseholders in this House for a number of
years now, and one of the things that I always try to get across
is that leaseholders are mentally, physically and financially
broken. We talk about stuff in these debates, but they have lived
it. I remember that during covid, when everybody was being told
to stay at home, these leaseholders were being told to stay at
home—and to keep their children at home—in buildings, flats and
apartments that they had been told were unsafe and could burn
down at any moment. When everybody else was being told to stay
home in order to stay safe, they were being told that the safest
thing for them to do was to get out. These people have been
completely through the mill.
We have secured huge concessions from the Government, with over
£10 billion in the Building Safety Act 2022. We have been back
and forth, and I am delighted that the campaign led by many
people in the Chamber, and by my hon. Friend the Member for
Southampton, Itchen (), was successful in
persuading the current Secretary of State to work with us to help
to support these leaseholders. But what frustrates me is that,
some years on, there are tenants still trapped in buildings such
as Vista Tower in Stevenage, where the freeholder is Railpen. We
know what is wrong with the building, and the Government have the
money there to help to fix it. Why has it not been fixed? What is
the delay? The building is there, and we know that—allegedly—it
needs these works for it to be safe. The freeholder and the
management agents need to work with the tenants to get the work
done, but there are just delays. Leaseholders up and down the
country are still trapped.
There is this weird combination of management agents, freeholders
and leaseholders. We are talking about leasehold reform. My
understanding was that, under the Building Safety Act, the
freeholder was the backstop if nobody else was going to be
responsible. If we are going to abolish freehold, we cannot be in
a position whereby freeholders and management agents can just
wait out all the current leaseholders, so that they then become
responsible for all these bills in the future. We need to ensure,
when we talk about leasehold reform, that leaseholders are at the
heart of it. Leasehold reform should be for leaseholders, not to
try to tidy up some property laws, or for freeholders, management
agents or vested interests.
I would love to meet the Minister and officials to talk about how
we can get the buildings that are out there at the moment made
safe, so that leaseholders can all feel as though the jobs are
being done.
5.17pm
(Ellesmere Port and Neston)
(Lab)
It is a pleasure to see you in the Chair today, Sir George.
I thank my hon. Friend the Member for Brent North () for introducing the debate
and setting out clearly why leaseholders are at the mercy of
freehold managing agents who—unsurprisingly—put the interests of
the freeholder above all else, from ignoring building defects to
rinsing the leaseholders through service charges. That can be
done through the padding of bills, the use of preferred
contractors, commissions and organising buildings insurance.
I can recall one example in my constituency where the insurance
company for a block of flats just happened to operate from the
same address as the managing agents and the freeholder. Under
what other contract would someone be expected to pay all the
costs but not actually be able to see the terms of the contract?
Yet that is what we see with these insurance deals. Thankfully,
that is being investigated by the Financial Conduct Authority.
This may well provide us with yet another payment protection
insurance-style scandal.
This is another outrageous example of the way that the dice are
loaded against leaseholders, and the fact that anyone can set up
as a property manager in this unregulated sector is unacceptable.
Although leaseholders have the option, of course, of going to
court to dispute charges, they will never get their legal costs
back, even if they are successful. There could be the most
egregious charges, and they could be thrown out of court as
totally unreasonable, but it is still the leaseholder who ends up
paying the bill for that legal action.
I also think that estate management companies on new-build
estates, whether they are leasehold or not, need to be tackled,
because the opportunities to inflate charges exist there almost
as much as they do in a block of flats. Much as with leasehold
itself, I do not accept that these arrangements are needed at
all. The fact that developers choose not to pay a sum to the
local authority for the financial commitment that is needed to
maintain communal areas, instead saving themselves money by
passing on the charge to homeowners, is another example of the
rapacious nature of many in this sector. Not only do they make a
saving at the start of the development, but they create an
additional income stream by charging for communal services.
This situation will not end well. Sooner or later, residents who
pay for the same service twice—once through their council tax and
once through their service charge—will demand an end to this
double-charging. However, as with leasehold, the guilty parties
will have long since left town. These residents have even fewer
rights than those in leasehold properties, but the central issue
is the same: a system that puts power in the hands of those who
have no business being involved with these people’s homes at
all.
Finally, on leasehold more generally, the linking of ground rents
to the retail price index is becoming a real issue, with
inflation so high. It even makes some of the outrageous ground
rent doubling clauses seem reasonable in comparison, and it is
putting people in real hardship.
It is five years since we were promised that this feudal system
of ownership would be ended, yet millions of people are still
trapped in leasehold. We repeat our plea yet again—I am sure the
Minister will hear this time and again today—for the Government
to please get on and deliver the work of the Law Commission so
that we can say goodbye to leasehold once and for all.
5.20pm
(Poplar and Limehouse)
(Lab)
In the interest of time, I will keep my remarks short and go
straight into an example.
In the first quarter of 2022, one of my constituents paid just
under a whopping £1,000 in electricity bills for a one-bedroom
flat. She is obviously extremely concerned about how she will
afford her bills when the energy price cap rises again in April.
The electricity account is held by the freeholder of the
building, which is a private company, and it is a commercial
account. My constituent, who is a leaseholder, wishes to change
her account type—indeed, she says that the majority of the units
are residential anyway—but she is facing difficulties.
In particular, the energy provider has said it cannot have direct
relationships with the leaseholders unless individual meters are
installed. The managing agent has confirmed that the cost of
installing individual meters would be passed on to the
leaseholders and would be around £1,000 or £2,000. However,
building-wide energy efficiency improvements are generally
understood to be the freeholder’s responsibility. As a
leaseholder, my constituent can make some energy efficiency
improvements to her home, but at the very least she needs
permission from the freeholder for major works.
Again, the leaseholder is trapped in this bureaucratic quagmire
between an opaque rock and an even more oppressive hard place,
thwarted by complex buck-passing that ends up with them being
financially liable or financially disadvantaged, without rights
or agency. That is because, essentially, a residential building
of leaseholders is run almost entirely at the landlord’s
discretion. I understand that leaseholders can dispute decisions
and costs, which can amount to millions of pounds, but they will
never get their legal costs paid, even if they are successful. On
the other hand, the landlord almost always gets their legal costs
paid as administrative charges under the lease. I repeat that the
system does not work for residents.
Appointed managing agents have failed significantly, over and
over again, to point out building defects in new blocks of flats.
The truth is that there is a clear commercial incentive for
building defects not to be highlighted. Indeed, if one were
cynical, one might believe that a prime task of a
developer-appointed manager is to ensure that the defects of a
building are not revealed within the timescale of the warranty,
after which date the cost can be placed on leaseholders’
shoulders.
In my constituency of Poplar and Limehouse, people view the
Westferry Printworks debacle and the history of controversy as
illustrating systemic priorities that lie in serving billionaires
rather than the interests of local people. I appeal to the
Government to put local people in need at the heart of their
planning and housing agenda, and once and for all to end the
scandal of leasehold for millions who have bought their home but
do not feel like they own it.
5.23pm
(Greenwich and Woolwich)
(Lab)
It is a pleasure to serve with you in the Chair, Sir George. I
start by declaring an interest: my wife is the joint chief
executive of the Law Commission, whose work I intend to cite in
my remarks.
I congratulate my hon. Friend the Member for Brent North () on securing this really
important debate. He has a long-standing interest in the matter
and, in opening the debate, he made a powerful case both for
regulating managing agents and reforming the leasehold system. I
also thank the hon. Member for Warrington South (), the right hon. Member for
Stevenage () and my hon. Friends the
Members for Ellesmere Port and Neston () and for Poplar and
Limehouse () for their excellent
contributions. Above all else, they served as a valuable reminder
of the scale and scope of the problem that we are considering
this afternoon.
There are, of course, good managing agents who work hard to
ensure that the residents they are responsible for are safe and
secure and their homes properly looked after. However, the case
for doing more to protect leaseholders from poor service and,
indeed, exploitation at the hands of unscrupulous managing agents
is as watertight as they come. We have heard numerous specific
examples in this short debate of the kind of abuses that
leaseholders across the country are routinely subject to by their
managing agents. It is clear that relying on incremental
improvement and the sharing of best practice to improve matters
is simply not good enough. Government action to address those
practices and improve the lives of leaseholders is necessary and
long overdue.
The Government clearly recognise that there is a case for
properly regulating managing agents, along with other property
agents. As my hon. Friend the Member for Brent North mentioned,
in 2018 the Government tasked a working group, chaired by the
noble , with bringing forward detailed
recommendations on how a new regulatory framework should operate.
The working group’s final report, which made a series of
proportionate and sensible recommendations, was published in July
2019, yet in the intervening 43 months the Government have
seemingly done nothing to implement the recommendations.
The Government’s failure to act on the recommendations has had
very real consequences. The burdens that homeowners have long
laboured under because of the dysfunction of the property agent
market and the inherent flaws of the leasehold system have become
more acute over recent years as a result of the building safety
crisis and surging inflation, the combination of which has pushed
many already hard-pressed leaseholders to the brink of financial
ruin.
Time is short, and I will finish by touching on the issue of
leasehold reform, because the deficiencies of the leasehold
tenure are often the root cause of the abuse and poor service
that so many homeowners experience at the hands of their managing
agents. Although we may wish ultimately to go further than the
Government in important respects, Labour is committed to
fundamentally reforming the leasehold system, and we will support
in principle any legislation that comes forward to that end.
Significant reform is therefore dependent only on whether and
when the Government will finally publish the second part of their
legislative agenda in this area. Despite being announced two
years ago, there is still no sign of a Bill.
I would therefore be grateful if the Minister could provide
answers to the following questions. Will the promised second
leasehold reform Bill definitely be in the King’s Speech later
this year? Will the Government make available the necessary time
to ensure that it receives Royal Assent before the end of the
Parliament? Will the Bill include all the recommendations made by
the Law Commission in its three residential leasehold and
commonhold reports of 2020? Will the Government commit to
ensuring that the Bill receives prelegislative scrutiny by the
Select Committee, so that we get this important legislation
right? I hope that the Minister can answer yes to each of those
simple and straightforward questions and give concerned
leaseholders watching the debate the reassurance they so
desperately seek.
5.27pm
The Parliamentary Under-Secretary of State for Levelling Up,
Housing and Communities ()
Thank you for the opportunity to talk about this hugely important
topic today, Sir George. I congratulate the hon. Member for Brent
North () on securing the debate. We
have covered a significant amount of ground. I am not sure that I
can do justice to the issue in the seven or eight minutes that I
have if I am to allow the hon. Member a few moments to comment at
the end, but I will try to cover as much as I can.
I am grateful to all hon. Members who have contributed. As hon.
Members will know, there is a significant overlap between the
people who are in the Chamber today and those who have stood up
for their constituents and taken their concerns to the Department
over the last few months. As hon. Members will know, we have been
in correspondence on a number of occasions, and I am grateful to
them for highlighting issues, particularly in my part of the
portfolio, around building safety, in the Department for
Levelling Up, Housing and Communities. I am grateful for their
time and the efforts that they go to on behalf of their
constituents in both those areas.
We have discussed two broad areas today. One is the broader
situation with regard to leasehold and the reforms that are
coming in, and the other is the more specific question of
building safety. I will try to take those in two buckets, if I
may, then talk about some of the specific points that hon.
Members have raised. As numerous hon. Members have highlighted,
we made a series of commitments from 2018 onwards on leasehold in
general. Reform in this area is necessary, is important and needs
to happen. That covers a number of things raised by the hon.
Member for Brent North, and other matters.
As my predecessor, the noble , indicated, the Government
have committed to abolishing marriage value at the earliest
possible opportunity. On service charge transparency, the
Secretary of State has highlighted the fact that we are
absolutely committed to providing more information, for exactly
that reasons that the hon. Members for Poplar and Limehouse
() and for Ellesmere Port and
Neston () indicated: the importance
of transparency in those discussions, so that people know what
they are paying for when they are given bills and charges.
I have heard the comments about managing agents. We recognise
that, as in all systems, particularly ones where there are
multiple individuals and entities involved, there are people who
are exemplars and who do things well, there are people who do
things less well, and there are people who do things badly. It is
important that we call out bad practice and we take the
opportunities where we can and where it is proportionate and
reasonable to do so, both now and in the future, to be able to
reduce the propensity for bad practice. I know that my right hon.
Friend the Secretary of State for Levelling Up, Housing and
Communities will make that clear when we bring forward more
information about our proposed leasehold reforms in due
course.
In answer to the questions raised by the Opposition spokesperson,
the hon. Member for Greenwich and Woolwich (), while I cannot
anticipate what will be in the package, we are committed to
bringing forward those reforms. We have said that we want to
undertake reform in this Parliament. There is still time to do
that and my right hon. Friend the Secretary of State will provide
more information in due course, when he is able to do so.
This is a brief intervention. I have invited many of my hon.
Friend’s predecessors to Warrington South. None have made it,
because they have not been in position for long enough to get
there. May I extend an invitation to him to come and meet some of
the leaseholders who are facing problems in Warrington South, so
that he can hear directly from them before the final piece of
legislation is put forward?
I am grateful to my hon. Friend for his kind invitation to the
north-west. I will speak to the Housing Minister, my hon. Friend
the Member for Redditch (), who has been in post for a
couple of weeks, because she is taking forward these specific
points on leasehold and I want to ensure the right conversations
are had with the right people.
I will respond to a few points on building safety, for which I am
responsible in the Department; I am happy and keen to hear more
about the issues that have been raised. Important points about
significant increases in insurance were made, which we recognise
and understand. The Association of British Insurers was asked to
look at the issue a number of months ago and find a solution. I
meet the Association on a regular basis—I did so most recently at
the end of last week—and I will continue to do so. We hope that
it will be able to bring forward a scheme on insurance in the
coming months.
There was reference to lending. I hope hon. Members are starting
to see a change with regard to building safety. I met all six big
lenders before Christmas and we have come to an agreement with
them through UK Finance. The market should now start to become
more functional and successful again. I am receiving data from
each of the banks on a regular basis—indeed, just a couple of
days ago, I looked at the data I received from Santander and
Barclays—in order to understand what is going on and how we can
separate out, as much as we are able, the challenges that are
known, understood and need to be remediated over a number of
years, so that people can live their lives and get on with making
choices about where and how they want to live. I welcome views
from hon. Members in the months ahead about whether they have
seen those changes.
I am conscious that I need to conclude in about two minutes. On
building safety, my right hon. Friend the Member for Stevenage
() has been a stalwart; I
give him huge credit for making progress on the issue with
colleagues across the House, irrespective of their party. He made
a vital point about lived experience; people have seen this,
lived it and breathed it for many years. As the responsible
Minister, I have tried to make visits. As my hon. Friend the
Member for Ipswich (), who is no longer in his place,
indicated, I visited Cardinal Lofts and spoke to residents. I
went to Wicker Riverside in Sheffield within a few weeks of
becoming Minister, talking to leaseholders and people who were at
the forefront; I appreciate the challenge and difficulty they
face. That is reason why my right hon. Friend the Secretary of
State is keen that we make progress. From the work we are doing
on Vista Tower, my right hon. Friend the Member for Stevenage
will know how important it is for us to call out bad behaviour
and for us to make progress.
Finally, the hon. Member for Vauxhall () raised a case where
charges have increased exponentially. Without knowing any of the
detail, I would be very happy to receive additional information
on that. I would be very happy, in principle, to come and visit,
or to speak to those leaseholders. It is important, as a
Minister, and for the Department, that we look at the macro
level, at the changes and how that is occurring, and check that
it is working in individual areas, so I would be very happy to
see more information on that.
To conclude, these are hugely important issues that affect
people’s lives, so I absolutely appreciate the points that have
been made regarding both leaseholds and the reforms needed in
general. I understand the urgency, and I hope that we can say
something more corporately on that soon, particularly on building
safety. We need to make progress on remediation, on top of the
good progress that we have already made, but there is a long way
to go. While I am in post, I am committed to trying to make as
much progress as possible so that the people who are affected can
get on with living their lives again, as we all want them to.
5.35pm
I am very grateful to all hon. and right hon. Members who have
spoken in this debate. It is clear that there is a compelling
case for wholesale reform in this area. The hon. Member for
Warrington South () has done himself no harm in
Steinbeck Grange today, I am quite sure, but the point that he
made is one that we all share. It was ably made by the right hon.
Member for Stevenage () as well. He said that
that resident had said that he had to reassess his life.
For so many people, that is what is happening. Millions of people
in this country are having to reassess their lives and the
possibilities that they thought were open to them—even on
changing jobs—trapped in their own homes, unable to sell, unable
to move to a new job, or trapped in a one-bedroom home, unable to
have any more children. Their plans are on hold. Their lives are
on hold.
It is really interesting to hear the case that my hon. Friend the
Member for Vauxhall () made about a 3,000%
increase in service charges. I am glad that the Minister has
agreed to take up that case and look into it further, because it
is astonishing.
There are two key points that I want to follow up. The first is
the point made by my hon. Friend the Member for Ellesmere Port
and Neston (), who talked about the
scandal of managing agents often being at the centre of a web of
companies all linked to the same beneficial owners.
In Wembley Central Apartments in my constituency—I am not sure
that I will get this entirely right—St Modwens and Sowcrest were
the joint developers. Sowcrest sold to a Canadian company, which
then sold to Wembley Central Ltd, which is established in Jersey.
They claim that it is for them to do the remediation work on the
building, yet Sowcrest was the original freeholder and the
developer itself. Those are the sorts of entangled webs that we
are dealing with here.
With that, I look to the Minister to do all that he can in
government to bring forward the legislation. I hope that it
conforms to the four points—the four challenges—that my hon.
Friend the Member for Greenwich and Woolwich (), speaking from our Front
Bench, mentioned. We all look forward, ultimately, to seeing an
end to this appalling practice.
Question put and agreed to.
Resolved,
That this House has considered leaseholders and managing agents.
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