The Secretary of State for Levelling Up, Housing and Communities (Michael Gove)

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I beg to move, That the Bill be now read a Second time.

Before proceeding to the heart of the Bill, may I offer a few words of thanks to those who have laboured long in this field? We all know that leasehold and freehold legislation has preoccupied the House not just in this Parliament, but in many Parliaments in the past. Indeed, in the 1860s, 1870s and 1880s, much of the House’s time was taken up debating the finer points of such legislation. I was once described as a young man in a hurry. I am now an old man, but I am still in a hurry, in order to make sure that this legislation makes progress and that we liberate leaseholders from many of the unfair practices to which they are still subject.

I will say a bit more about that in a second, but I want first to say a special word of thanks to my predecessors as Secretary of State, who helped to issue the consultations and lay the groundwork for the measures that we are introducing today. I thank my right hon. Friends the Members for Newark (Robert Jenrick) and for Bromsgrove (Sajid Javid), but in particular I thank the late James Brokenshire, who did so much work to get us to this point. Having thanked them, I cannot but thank my hon. Friend the Member for Redditch (Rachel Maclean), who was a brilliant colleague in the Department and did so much of the heavy lifting to ensure that this legislation was ready to be introduced. She has been a brilliant colleague and a great Minister in so many ways. All the good things in the Bill are down to her; anything that is lacking is down to me.

I also thank members of the all-party parliamentary group on leasehold and commonhold reform, who have worked so hard for so long to ensure that the ground could be laid for today’s legislation. I thank the hon. Member for Ellesmere Port and Neston (Justin Madders) for his work and, in particular, his predecessor, the former MP for Poplar and Limehouse, Jim Fitzpatrick. I must thank the Father of the House, my hon. Friend the Member for Worthing West (Sir Peter Bottomley), who has been the single most consistent and bravest voice in standing up for leaseholders. I also thank—even though she is not in the Chamber—the hon. Member for St Albans (Daisy Cooper), who speaks on behalf of the Liberal Democrats and has contributed to the work of the APPG.

The APPG would not have been able to do its work without the Leasehold Knowledge Partnership. In particular, I thank Martin Boyd, who has been hired by the Government to head up our Leasehold Advisory Service, and Sebastian O’Kelly. Both have contributed to helping leaseholders and providing them with the advice and counsel they need to navigate this tangled landscape. I also thank the campaigners, some of whom I had a chance to talk to earlier, who have been indefatigable in making it clear that the law needs to change. I thank, in particular, Katie Kendrick, Cath Williams and Joanne Darbyshire, all of whom have made an impeccable case for change throughout.

What is the problem that we are trying to solve? Basically, it is this: leasehold as a form of tenure is essentially a deal where someone is invited to buy a home and then, instead of becoming a full homeowner, they are treated, or can be treated, as a tenant. It is a fundamentally unfair system and a fundamentally inequitable tenure, because those who buy flats and—increasingly, in recent years—houses, in good faith, paying market rates, assuming and hoping that they would be homeowners in the fullest sense of the word, have found that, rather than being homeowners, they are at the whim of the ultimate owner of the freehold, who is in effect their landlord.

In the past, there were justifications. There were cases and examples where those who held the freehold operated in an enlightened and paternalistic way. For example, the freehold of properties was sometimes held by trade unions or other enlightened organisations that would ensure that the common interests of all those within a particular building were looked after. It is still the case that some landowners and freeholders take their obligations towards leaseholders seriously, ensure that the service charges are levied in an appropriate way, keep the ground rent at an appropriately low level, and ensure that the building is maintained in a good state of repair. However, individual leaseholders should not simply have to rely on the good will and good character of whoever the freeholder is; they need better protection in law, which is what we seek to achieve with the Bill.

Michael Gove

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My hon. Friend is absolutely right. The miners’ families and their descendants, whom he represents so well, were originally in homes that the NCB established to ensure that those in the pit villages he represents would have a proper landlord, providing stewardship, care and support, but as he rightly points out, the freehold ownership has subsequently been used not as an obligation towards the leaseholder but as a commodity to be traded. More and more freeholds are in the hands of entities, often based offshore, that regard them as a licence to extort from the leaseholder, rather than as an obligation to be discharged.

Michael Gove

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It is the case that this Bill covers England and Wales. Obviously the hon. Gentleman is aware that there are slightly different tribunals that operate in each jurisdiction, but it will precisely address the situation he mentioned: it will ensure there is transparency over service charges and, through the appropriate tribunal in each jurisdiction it will become easier on the part of the leaseholder to contest any unfairness.

Michael Gove

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I just want to make one or two additional points and then I am happy to give way.

Personally, one of the moments where I realised that the system, which is hard to defend in any case, was fundamentally broken was in the aftermath of the Grenfell tragedy. We knew then that it was important that responsibility be taken for remediating buildings that were unsafe. We knew then that individuals and organisations had to take that responsibility on their own shoulders. We knew then that freeholders, if they were true to the spirit of the original legislation, would say, “Yes, we have a responsibility for this building and for all those within it. We have a responsibility to make sure this building is safe. Therefore, we should have a responsibility to pay for the remediation.”

But did we find freeholders queueing up to do that? Absolutely not. They were there ready to extract income at the highest possible rate whenever they could, through ground rents and service charges, but when they were called upon to discharge their responsibility to the leaseholders within those flats, they were absent. They ran away from their responsibilities. That is why I have limited to no patience now with the well-funded lobby groups that stand up for those freeholders and seek to ensure that they can continue to extract money from leaseholders. It seems to me that, at a critical point, the argument that is sometimes made on behalf of those people disappeared because of their negligence and their moral fault.

Michael Gove

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I take the right hon. Gentleman’s point, but he is conflating two things. Help to Buy can be criticised or defended on its own terms, and I believe it was the right intervention to ensure, in particular, that more first-time buyers could get on to the property market. However, he is also right that leasehold, which as he says was originally a tenure designed for flats, was then extended to houses, and in a way that is difficult to defend. It has expanded over recent years. That is why we are legislating now to ensure that we can stop it. There are two separate arguments that can be had there.

Michael Gove

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My right hon. Friend makes an important point on permitted development rights. On the whole, I am in favour of the extension of permitted development rights, because I want to see an increase in housing supply overall, but it is incumbent on the Government to review how those rights have been operating. He raises one concern, but there are other legitimate concerns about the way permitted development rights, when commercial buildings have been turned into residential, have meant that the quality of those new residential flats has been insufficiently high. I also know that colleagues, not least in London, are concerned about potential future extensions of permitted development rights. There is a responsibility on me and others to review their impact, and that is what we are doing, separate from this particular legislation.

Michael Gove

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An embarrassment of riches! I will give way to all colleagues currently standing, and then I will try to make progress.

Michael Gove

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I couldn’t agree more.

Michael Gove

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I actually agree that commonhold is the ideal form of tenure, but there are certain technical questions about when commonhold can apply, not least if a building also has commercial uses on the lower floors.

Michael Gove

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That is certainly true and I quite agree.

Michael Gove

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I believe that it should be, and I encourage the hon. Lady’s constituents—as I am sure she has done—to be in touch with Martin Boyd’s Leasehold Advisory Service to be absolutely clear that they are getting the support they need.

Michael Gove

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I am very grateful to the hon. Gentleman and his Committee for all their work—it was discourteous of me, when running through the names of those to whom I am grateful, not to mention them. His broader point, about not just the operation of the freehold system but the way in which different aspects of the property market work, is a fair one. The use of opaque overseas entities and special purpose vehicles—the way in which ultimate beneficial ownership can be hidden—are all problems that require to be addressed. The Bill is pretty lengthy and substantial, and deals with many of the issues—I will go on to explain why we have taken the approach that we have—but there are other abuses within the property and land market system that require to be addressed, which we will address, and not just in this Parliament but after we are returned at the next general election.

Michael Gove

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I am very grateful to my hon. Friend. She and my hon. Friend the Member for North East Bedfordshire (Richard Fuller) have been particularly energetic in pressing me to deal with this issue of leasehold homes—fleecehold estates, as they have become widely known—which is, I believe, precisely the phenomenon that the right hon. Member for North Durham (Mr Jones) was also referring to.

The Bill will ensure that there is a ban on new leasehold homes, but as well as averting that problem in the future, we are attempting to deal with the difficult situation we have all inherited. We will do so by making sure that we squeeze every possible income stream that freeholders currently use, so that in effect, their capacity to put the squeeze on leaseholders ends. That will mean the effective destruction of the leasehold system. Do not take my word for it: as Sebastian O’Kelly of the Leasehold Knowledge Partnership has made clear in his writing,

“The Bill is a full-on assault on leasehold’s income streams”.

First, we have a consultation on ground rents. I cannot pre-empt that consultation, but at its conclusion, we will legislate on the basis of that set of responses in order to ensure that ground rents are reduced, and can only be levied in a justifiable way. As I say, I cannot pre-empt the consultation, but in a way I already have, because I was asked by the Select Committee last week what my favoured approach would be, and I believe that it should be a peppercorn. Of course, if compelling evidence is produced, as a Secretary of State with great civil servants, I will look at it, but my preference is clear, and I suspect that it is the preference of the House as well.

Indeed, it is important to say that that particular squeezing of the freeholder’s income stream goes beyond what the Law Commission recommended. We are really grateful for all of the Law Commission’s work, but it was a little bit cautious in this area; we are deliberately saying no. I know that some people will say, “What about A1P1 rights under the European convention on human rights? You are taking property away from people.” I respect the ECHR, but if it stands in the way of me defending the interests of people in this country who have been exploited by ground-rent massaging, I am determined to legislate on behalf of those people, because their interests matter more than that particular piece of legislation.

Michael Gove

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The hon. Gentleman is absolutely right: a number of the people who have built, operated and retain the freehold on these estates levy service charges for all sorts of things that, in my view, are totally inappropriate. That is why the Bill makes clear that service charges have to be issued in a standardised format, so that they can be more easily scrutinised and challenged. It also makes clear that those charges can be challenged in such a way as to ensure that egregious examples, such as the one the hon. Gentleman has mentioned, will end.

Michael Gove

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I quite agree with my right hon. Friend. There are good landlords, and the Duchy of Cornwall has been a stand-out example, as have been the Cadogan estate, the Howard de Walden estate and so on—they are responsible landlords, absolutely—but an individual leaseholder should not have to rely on the good will and the grace of His Grace, as it were, to get the protection they need.

There is no stauncher defender of capitalism and property rights than me, but what has happened is that freeholds have become utterly torn away from the warp and weft of the capitalist system as we understand it in this country, and have become tradeable commodities that foreign entities are using to exploit our people who have worked hard and saved to get their own home. So whose side am I on—homeowners who have worked hard and saved up to secure a mortgage, or shadowy foreign entities that are essentially attempting to rip off British citizens? I am on the side of homeowners.

Rachel Maclean (Redditch) (Con)

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When the Secretary of State is considering the evidence from the consultation he mentioned, will he adhere to his own adage of “follow the money”, and remember that those people advocating for a higher ground rent probably have a motivation for doing so?

Michael Gove

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My hon. Friend is completely right. I will be looking at the responses to the consultation, and I am sure that some of London’s finest legal firms and most eloquent solicitors will be putting in some very thoughtful contributions, but the question will be: who is paying for them and how much are they being paid? To my mind, people can buy silver-tongued eloquence, but what is far more important is actually being on the right side of justice.

Michael Gove

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I believe that most of the people in the House are on the right side of justice, especially the hon. Lady.

Michael Gove

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I believe it will. I must now make progress because I know a number of people want to contribute, so I will try to run through the other arguments about why we are taking the approach that we are.

I mentioned service charges, and one other example, to which the Father of the House has of course persistently drawn our attention, of where those who have been managing properties on behalf of the ultimate owners have abused their position is that of insurance commissions. We will be taking steps in the Bill to make sure that insurance charges are transparent and that fair handling fees are brought in. The fact that I can list all these examples just shows hon. Members the way in which freeholders have operated. Many who have got hold of such freeholds have been thinking, “Right, okay, we can jack up the ground rent, great! We can have service charges, keep them opaque and add something. Tell you what—insurance; let’s try to get more out of that.” It is a persistent pattern of behaviour that does require reform.

Another pattern of behaviour is the way that lease extensions and the whole question of enfranchisement have been going. If someone’s lease goes below 80 years and they want to enfranchise themselves, they have to pay what is called marriage value. That is the principle that, by bringing together the ownership of the freehold and the leasehold in one by enfranchising themselves—bringing those two together in a marriage—people are enriching themselves. Again, however, it has been used by freeholders to bilk leaseholders overall, which is why the approach we are taking will in effect eliminate marriage value. It is also why, when we talk about lease extension, instead of people having to extend and extend again generation after generation, we are saying that leases can be extended to 990 years. In effect, as I say, this will make sure that one of the approaches that freeholders have taken to extracting more cash from leaseholders will end.

Michael Gove

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Broadly on the whole question of insurance, I am due to meet the chair, Baroness Morgan of Cotes, and the chief executive of the Association of British Insurers later this week to address not just that question but some other related questions.

Michael Gove

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I won’t at this stage.

I freely admit that this Bill does not go as far as some in the House and elsewhere would like. Strong arguments have been made about how property agents can be better regulated and Lord Best in another place has made arguments that I find incredibly persuasive—so why not legislate for them now? Well, as I mentioned earlier, this Bill has many clauses, deals with technical aspects of property law, requires close scrutiny and is likely to face a lobbying exercise from deep-pocketed interests outside attempting to derail it. Legislating to give effect to Lord Best’s proposals and to set up a new regulator—I am always a wee bit wary about setting up new quangos but on this occasion he makes a good case—would require significant additional legislative time of a kind we simply do not have in the lifetime of this Parliament. There are changes we are making overall in order to deal with some of the abuses for which managing agents are responsible, but there is still some unfinished business. I happily grant that, and there are organisations like FirstPort, which many of us will be familiar with from our work as constituency MPs, that require some gentle direction towards behaving in a better fashion.

Michael Gove

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My hon. Friend makes a good point. I was going to say there are two other areas in particular that we should look at in Committee: the right to manage; and the abuse of forfeiture, which is sometimes used by freeholders to intimidate leaseholders. I am very open to improving the Bill in Committee; we will be improving it ourselves by bringing forward the legislation that will ban new leasehold homes in the future, so I hope we will have a chance to do that.

I mentioned earlier that we have been debating leasehold and freehold in this place for a long time. In the preparation of this Bill, one of the brilliant civil servants in the Department drew to my attention comments made by Harry Levy-Lawson, 1st Viscount Burnham and MP for St Pancras, as it happens, when the Leasehold Enfranchisement Bill 1889 was brought forward by another great reforming Conservative Government under the Marquess of Salisbury.

The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Simon Hoare)

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Hear, hear!

Michael Gove

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Exactly: the Minister is, like me, a great fan of the Marquess.

In that debate the opening remarks of the Minister were:

“We do not claim for this Bill any perfection of draftsmanship, but it is so far complete that if it pass through Parliament, we believe it would be smooth, just and reliable in its working. The principle, however, is now exactly what it has always been, viz., the grant to urban leaseholders, with a substantial interest in their holdings, of the power to purchase the fee simple”—

the ownership—

“on fair and equitable terms.”—[Official Report, 1 May 1889; Vol. 335, c. 889.]

This Bill does so much more. Is it perfect? No, I would not claim for this Bill any perfection of draftsmanship. Is it substantive—does it move the dial, does it change the business model, will it effectively mean that leasehold will become a thing of the past? I believe absolutely it will, and I am fortified in that belief by the strong support for this legislation shown by leasehold campaigners. I commend the Bill to the House.

Michael Gove

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The right hon. Lady has made it clear from the Dispatch Box that she opposes excessive ground rents. Can she explain why the Labour leader made it clear at the Labour party conference that he would get new houses built by creating “attractive investment products” that had residential ground rents at their heart? How can it possibly be the case that she intends to deal with excessive ground rents, when the leader of the Labour party wanted to fund new development by pursuing precisely that policy? Which is it: against them or for them?

Rachel Maclean (Redditch) (Con)

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I am delighted to speak on this flagship piece of legislation, which will restore true home ownership to millions, end rip-off charges and introduce fairness to the leasehold market. I am confident that it is a good piece of legislation not because I did all the preparatory work on it, but because I worked with brilliant officials, whom I thank.

We heard the testimony of so many thousands of leaseholders who struggled with blighted properties that led to blighted lives. There are too many of them to mention individually, but the strength and tenacity of the campaigners—and the organisations, such as the Leasehold Knowledge Partnership and the Leasehold Advisory Service, under the leadership of the superb Martin Boyd, which helped them—is enormously impressive. Take, for example, Liam Spender, who was able to show that leaseholders in his block had paid £1.6 million in excess service charges to their freeholder, FirstPort. Incidentally, FirstPort is one of the worst offenders I heard about in my time as Minister. Yet freeholders still had the audacity to sit in front of me while I was a Minister and claim that

“some people like the security of paying service charges”

and that there is no evidence that they oppose ground rents. Yes, truly, that is what they said. Shockingly, I understand that Mr Spender and his tenants have received nothing yet, and now the freeholders are appealing the decision with the leaseholders’ own money. I would like the Minister to set out clearly how the Bill will tackle their situation and end that scandal once and for all.

We got here because of the greed and unethical behaviour of predatory freeholders who have treated leasehold properties as a cash cow and the leaseholders as a milking machine to produce an endless stream of income for no work at all. It is the ultimate definition of rent-seeking behaviour. In its worst excesses, it is frankly disgusting. I and many others find it appalling.

Rachel Maclean

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That is an excellent suggestion from my hon. Friend the Father of the House, with which I strongly agree—as I do with everything he says about this issue.

Despite the theatrics we heard from the right hon. Member for Ashton-under-Lyne (Angela Rayner), who spoke for the Opposition, it is the Conservatives who are finally bringing in sweeping reforms. It is right that we note that Labour ducked the issue while they were in office. They could have fixed it then. They could have saved millions from misery—nearly 5 million homes, accounting for 20% of the entire housing market, are owned on a leasehold basis across the UK—but it appears they bowed to pressure from freeholders. We will never know why, but thankfully things will now change.

Rachel Maclean

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I thank the hon. Member for the history lesson but, regardless, we are determined to fix this now.

Rachel Maclean

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No, because I need to make progress. Perhaps I will allow the right hon. Gentleman to intervene a little later.

The key factor here is choice. At present, leaseholders do not have a choice, or they have a fake choice. The Bill will give them a genuine choice when it comes to how they manage and own their homes. However, while I warmly welcome these measures, we can and must go further. May I draw the attention of the Secretary of State and the Minister to a few of my suggestions?

The measures in the Bill will clearly be of enormous benefit to individual leaseholders, making it easier and cheaper for them to buy freeholds or extend leases, but of course this is a very complicated area, and I know it will be difficult for many leaseholders to understand exactly how much they will benefit financially. My first suggestion, therefore, is the provision of an easy-to-use digital calculator enabling people to see what the Bill means for them.

Then there is the issue of commonhold fixes. I know that the focus here is on ensuring that leaseholders cannot be exploited and can take control of their homes, but there is a clear Conservative and free-market rationale for accepting the Law Commission’s recommendations on reforming commonhold so that more developers choose it, rather than leasehold, for new blocks of flats—not because they are forced to do so, but because it is the best option for their business model. Can the Government look at that again? All the work has already been done.

I strongly welcome the Government’s consultation on capping ground rents. As I said in an intervention earlier, the Secretary of State must look at who is making the representations, and bear in mind the old adage, “They would say that, wouldn’t they?” when people oppose such caps. We know that ground rents are sheer exploitation. Let us call a spade a spade: this is money for nothing. Can the Minister assure me that there will be time to get a cap into the Bill once the consultation has closed?

We have all heard of too many sad cases involving a hard core of truly exploitative and dodgy freeholders—the bad apples—ripping off and exploiting leaseholders. We know that there are some freeholders who treat people properly, but the others know that going to court will be too much hassle for most people, and indeed that the odd tribunal defeat is just part of the cost of doing business. We must do something to ensure that there is a real cost to those unscrupulous companies and their directors.

Rachel Maclean

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Of course I am aware of that. When I was privileged to hold the position of Housing Minister, I strongly supported the relevant legislation, because those people sat in front of me and cried crocodile tears, telling me that if we went ahead with it we would destabilise the pensions industry and leave lots of little old ladies with no pensions—which is obviously complete and utter nonsense, as I am sure the Secretary of State and the current Housing Minister, my hon. Friend the Member for North East Derbyshire (Lee Rowley), will be able to tell me on the basis of the analysis that they have conducted.

We also need assurances about section 24 managers. I note that, in recent weeks, at least one freeholder has tried to wrest control of a building back from a court-appointed manager—a so-called section 24 manager—claiming that it is incompatible with the Building Safety Act 2022. That is obviously nonsense. If a freeholder has been found not to be managing his building properly, it shows some cheek to try to ditch a court appointee on such spurious grounds. I hope that the Minister will take the opportunity later to give us the Government’s view.

I welcome the Government’s intention of introducing building safety measures to ensure that remediation continues to accelerate, and to make it easier to ensure that the right people pay, but may I press the Minister for a little more detail? I know that, even as we speak, people are making serious decisions about their own finances.

My constituents in Brockhill, especially those in the Persimmon Homes development, have faced innumerable issues relating to freehold estates, and I must press the Minister on what measures he will introduce to help them and, most importantly, when he will do so. I know that the Government intend to introduce a right to manage for freeholders, and to challenge arrangements and charges through the first-tier property tribunal. However, I urge him to read again the Hansard report of the Westminster Hall debate in which I responded, on behalf of the Government, to my hon. Friend the Member for North East Bedfordshire (Richard Fuller), who had told a story about one of his constituents who had had to pay thousands of pounds for one lamp post. This is an outrageous state of affairs, and I want the Government to introduce measures that will tackle it and many others. Currently, throughout the country, people’s new dream homes are turning out to be a nightmare. They are being ripped off by small-print clauses that turn into big bills, and they have no redress. That must be fixed.

Finally, there is a need for regulation of the property management sector more broadly. I recognise that the Bill was not the right vehicle for it, but I urge the Minister to continue to push ahead with a reform that must happen, if not on this side of a general election, then on the other side.

We Conservatives believe that the opportunity to own one’s home is sacrosanct, and the Bill takes another important stride towards the creation of a true property-owning democracy. While, as we have made clear, we stand firmly on the side of fairness and those who want to own a home, we are still none the wiser when it comes to where Labour Members stand. One week they are on the side of the builders, not the blockers—or so they say. The next week, they are blocking our proposals to build 100,000 new homes that first-time buyers and young families would desperately want to possess. While they decide whose side they are on, we are taking important steps to improve the lives of millions up and down the country. I look forward to working with Ministers on the Bill as it goes through the House to strengthen some of its measures, particularly those on commonhold and freehold estates, and to ensure that we deliver on the promise that it holds.

Let me end by wishing my hon. Friend the Minister better luck than I had in his tenure of this important role. I especially hope that he can remain to finish the vital job of leasehold and freehold reform and restore true property ownership to millions. He will have my full support in the Lobbies.

The Minister for Housing, Planning and Building Safety (Lee Rowley)

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indicated assent.

The Minister for Housing, Planning and Building Safety (Lee Rowley)

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It is a pleasure to wind up the debate after so many useful, thoughtful and detailed contributions. In that spirit, I want to spend a little time going through some of those details. Before doing so, I wish to thank, as so many others have, all the campaigners and all those who have spent so much time working in this area for so many years.

I thank my hon. Friend the Member for Worthing West (Sir Peter Bottomley), the hon. Member for Sheffield South East (Mr Betts), my hon. Friend the Member for Redditch (Rachel Maclean), the right hon. Member for East Ham (Sir Stephen Timms), my hon. Friend the Member for Dartford (Gareth Johnson), the hon. Member for Battersea (Marsha De Cordova), my hon. Friend the Member for Harrow East (Bob Blackman), the hon. Member for North Shropshire (Helen Morgan), my right hon. Friend the Member for Aldridge-Brownhills (Wendy Morton), the hon. Member for Brentford and Isleworth (Ruth Cadbury), my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken), the hon. Member for City of Chester (Samantha Dixon), my hon. Friend the Member for North Norfolk (Duncan Baker), the hon. Member for Walthamstow (Stella Creasy), the hon. Member for Liverpool, West Derby (Ian Byrne), and all those who intervened for the helpful comments they provided.

I welcome the general and broad support for the actions that are being taken in the Bill. I also welcome the consensus in the House on the need for reform, which I know, as was highlighted several times, has been some time coming. I hope right hon. and hon. Members will recognise that this is a complicated and intricate area, which is observable not least from the many examples given in the debate. We now have in front of us a good proposition for making progress.

Our focus in the Bill is on being able to make practical progress—to make the Bill as practically useful as it can be—and then to have the greatest impact that it can have. Some, including hon. Members tonight, have said that it does not go far enough; others have said that we should return to first principles and seek to build the whole system again. I am sure that those hon. Members will make their case in Committee if they are part of it, and on Report and in subsequent stages. The Government seek to have a proposition on which can be built; one that is practical, achievable and makes a difference. The art of politics is about being able to make progress, and we think that the Bill will make a significant difference to people’s lives.

Let me turn to some comments made in the debate. I pay tribute to the long-standing work of the Father of the House, my hon. Friend the Member for Worthing West. He raised a number of points, which we will go through in more detail in Committee, but I want to highlight his point on building safety with regard to sub-11 metre properties. A number of Members made similar comments. We have a process in place, so if colleagues have concerns about fire remediation issues in sub-11 metre properties, they should ensure that they get the appropriate fire assessments needed in all buildings. If substantial works are needed to those properties, they can be raised with the Department, which has committed at this Dispatch Box and has executed commitments to look into those issues in more detail.

I pay tribute to the work of the Select Committee, chaired by my constituency neighbour, the hon. Member for Sheffield South East. I particularly enjoy our interactions on this issue because it gives me, like him, the opportunity repeatedly to say as a constituency MP how outraged I am about Coppen Estates’s consistent failure to respond. That is a hallmark of a small cohort of actors in this area, which consistently and flagrantly ignore reality and their ability to make a difference to our residents’ lives. Coppen Estates is a good example of such actors, but there are many others.

Lee Rowley

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I am very happy to look at specific issues in Committee. As the Secretary of State highlighted in his opening speech, if there are areas where we can improve the Bill, we will be happy to do so. I cannot make promises, but we are happy to look at them. The hon. Gentleman’s constituents in Sheffield, my constituents in Dronfield and constituents all across the country have similar issues to those with Coppen Estates, so I hope we will be able to make progress.

The hon. Gentleman, the hon. Member for Battersea and others rightly talked about leaseholders not knowing what they are paying for. A few weeks ago, I had the privilege of taking part in a two-hour discussion with one of the better estate managers about an issue in my constituency in Hunloke Grove. They were willing to go into detail, talk about the issues, work through and be transparent on their fees in a way that so many other managing agents are not. The importance of that came home to me in that discussion.

My hon. Friend the Member for Redditch should rightly take all the credit for where we are today. I am surfing on all her work over many months to get the Bill ready. She deserves a huge amount of credit for that. She was an exceptional Housing Minister and has made some extremely constructive comments today, which we will look at along with the similar comments from my hon. Friend the Member for North Norfolk. I can confirm that our intention is that there will be sufficient time to be clear on ground rents. As my hon. Friend the Member for Redditch rightly said, it is so important that we secure a property-owning democracy for the next generation.

I thank the right hon. Member for East Ham for making a series of important points, which I am happy to look at. The Government are happy to see whether they are possible. He made a specific point about asbestos, which we will take away and review with the detail it deserves. I look forward to the visit to Barrier Point, which I wanted to make following his correspondence. It is important that, on building safety, we look at not just the overall macro picture but individual circumstances, to see whether we can learn anything.

I am also grateful to the right hon. Member for giving me this opportunity to make the point about insurance from the Dispatch Box. I am as keen as him to see progress on insurance. I have met representatives of the insurance sector on a very regular basis in the year that I have been in post. I hope that they will hold to their intentions. They have told us that they will launch the scheme, and we are keen to see it. The Secretary of State’s further meeting this week will, I hope, enable progress.

My hon. Friend the Member for Dartford made extremely important points on estate management. He has continually articulated the challenges on a regular basis, and has been a champion on this matter. He rightly speaks of the outrages he has seen in his constituency. It is important that we respond to that as best we can.

I am grateful to my hon. Friend the Member for Harrow East for highlighting a number of the important changes that are coming. He is right that our objective is to squeeze out the bad practice in the sector. There are honourable people out there and there are honourable ways in which it is done, but where bad practice occurs it gives the entire sector a bad name. We will legislate and regulate to remove it in a proportionate way.

My hon. Friend also highlighted an example of a property that has not yet made progress on remediation, and similar examples were given by the hon. Members for Brentford and Isleworth and for Walthamstow and my hon. Friend the Member for Cities of London and Westminster. We can see significant progress. We have only recently produced a new detailed set of data covering all the funds that are open on building safety. I hope hon. Members will see the progress that has been made, but we recognise that there is more to do. The hon. Member for Walthamstow is absolutely right that there are a number of names that pop up repeatedly—for example Y&Y Management and E&M. There are many others and they should be on notice that they need to change their practices, because they are not acceptable.

Lee Rowley

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We are looking at what may be possible. We recognise that, while the Secretary of State for Levelling Up, Housing and Communities has brought forward a very solid prospectus, tweaks can always be made. We see real momentum in this area. I know that that is not good enough for buildings that have not yet had their remediation or for leaseholders who are hugely frustrated by the inability or unwillingness of freeholders to make progress, but we have made significant changes and steps forward in the last year or so, and we are committed to doing more in the coming months.

I am grateful to the hon. Member for North Shropshire for meeting me earlier to talk about specific points about assets. We will look at those points and come back to her.

I can confirm to my right hon. Friend the Member for Aldridge-Brownhills that we intend to tackle ground rents. I am grateful to her for highlighting exceptions in leasehold houses. We intend that to be a very narrow element. She sought an example. One example I can give is that of National Trust land where freeholds cannot be sold and a small number of leasehold homes may therefore be required.

The hon. Member for Liverpool, West Derby talked about his disappointment with, I believe, the consultation on ground rents. We must consult on that because we must ensure that we are listening and that we take a decision based on the broad range of evidence in front of us, to ensure that it is legally sound when the decision is made. He encourages me to speak to the Law Commission. I can tell him that I have spoken to the Law Commission probably more regularly than any other external organisation outside the Department in the past three or four weeks.

The hon. Members for Walthamstow, for Battersea and for Brentford and Isleworth are seeking to push a narrative—if I may say that very gently to them, with the best of intentions—that this is not a significant intervention with regard to flats. I gently encourage them to continue to engage with the Bill. They will see long and cheap extensions, easier enfranchisement, service charge transparency, easier redress, lease extensions, standard forms, annual reports and many, many other significant measures that will have salience for those living in flats.

Before I conclude, I would like to thank the hon. Member for Greenwich and Woolwich (Matthew Pennycook) for his constructive comments. I look forward to meeting him in Committee to talk about them more. While I may disappoint the right hon. Member for East Ham, I would like to turn to some of the comments made from the Opposition Front Bench.

The right hon. Member for Ashton-under-Lyne (Angela Rayner), despite acknowledging that the Government have brought forward important legislation, despite confirming that Labour would not be opposing it and despite advancing the most enthusiastic compliment I have ever heard her give a Conservative—that the Secretary of State has reached the lofty heights of being a “functional cog”; heavy praise indeed!—showed that, as ever, she deals in rhetoric rather than reality, and in politics rather than policy. She called the Bill “empty”. This is a Bill with 65 clauses, eight schedules and 133 pages, and there are 67 pages of explanatory notes. Given its comprehensive reform of enfranchisement and extensions, its comprehensive reform of redress, and its comprehensive reform of service charges, estate management and valuation, that is a funny definition of “empty”.

Lee Rowley

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That is our intention, yes.

We have had a good debate today, which I hope—indeed, I know—will start the passage of this important Bill into law and lead to a better system for everyone in the long term. This is an outcome that is fundamentally Conservative because, fundamentally, the Bill is about empowering people, about levelling the playing field where it has been distorted, about reining in those who are trying to rent-seek for no purpose at the expense of those who just want to get on with living their lives, and about giving people the security of home ownership—proper home ownership, for the long term—so that they can build their lives and build their futures. I hope that all Members will join the Government in supporting the Bill tonight, and I look forward to further constructive conversations during its future stages.

Question put and agreed to.

Bill accordingly read a Second time.

Leasehold and Freehold Reform Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Leasehold and Freehold Reform Bill:

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 1 February 2024.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

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.—(Scott Mann.)

Question agreed to.

Leasehold and Freehold Reform Bill (Money)

King’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 and Freehold Reform Bill, it is expedient to authorise the payment out of money provided by Parliament of:

(1) any expenditure incurred under or by virtue of the Act by the Secretary of State, and

(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Scott Mann.)

Question agreed to.

Leasehold and Freehold Reform Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Leasehold and Freehold Reform Bill, it is expedient to authorise the charging of fees under or by virtue of the Act.—(Scott Mann.)

Question agreed to.

Rachel Maclean (Redditch) (Con)

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Q Mr Boyd, it is good to see you. You have talked about commonhold. Would you mind just being quite succinct and clear on your view about commonhold? There are proposals from various groups who are active in the sector to make it mandatory to sell all new leasehold flats as commonhold. Would that be a good idea, and if not, why not?

Mr Martin Boyd: I am proud to say that it was LKP that restarted the whole commonhold project in 2014. At the time, we were told, “The market doesn’t want commonhold.” The market very clearly told us that it did want commonhold; it was just that the legislation had problems in 2002. One of our trustees, who is now unfortunately no longer with us, was part of a very big commonhold project in Milton Keynes that had to be converted back to leasehold when they found problems with the law.

I think the Government have been making it very clear for several years that they accept that leasehold’s time is really over. I do not see any reason why we cannot move to a mandatory commonhold system quite quickly. What the developers had always said to us—I think they are possibly right—is that they worry that the Government might get the legislation wrong again, and they would therefore want a bedding-in period where they could test the market to ensure that commonhold was working, and they would agree to a sunset clause. They had fundamentally opposed that in 2002, and we managed to get them in 2014 to agree that, if commonhold could be shown to work, they would agree to a sunset clause that would say, “You cannot build leasehold properties after x date in the future.” I think that that is a viable system.

Rachel Maclean

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Q Mr O’Kelly, you are one of a large number of leaseholders who has been adversely impacted by your personal situation. If I am correct, what has happened in your case is that your freeholder has used the service charges from you and others in the block to take you to court—it is an appalling situation. You have updated the APPG and others. For the Committee’s benefit, will you say how much you are out of pocket and whether the provisions in the Bill will address the issues that you have faced and will face in the future?

Sebastian O’Kelly: This is for Liam really, because I am not a leaseholder at all; it is Liam’s court case.

Rachel Maclean

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Sorry, I was looking at Mr Spender and I misspoke.

Liam Spender: I quite understand anyone being distracted by Mr O’Kelly. Thank you for the question. In our case to date, the freeholder has put £54,000 of its legal costs through the service charge. It did so in breach of a section 20C order, which is the current restriction that is supposed to prevent landlords from doing so. We complained and got most of that money back, but they have served something called a section 20B notice: they intend to recover the costs in the future if they prevail on appeal, by which point we could be looking at a substantial six-figure sum. This is all to do with us fighting to get back unreasonable service charges.

We are currently owed about £450,000—to give a round number—pending appeal. There is an appeal in April and I am carrying the burden of doing all that work myself. I quite understand why leaseholders without legal training give up and things will fall by the wayside. The system is very much stacked in landlords’ favour.

The cost provisions in the Bill are welcome. As you probably know, they changed the default so that the landlord has to ask for their costs. The issue is what has been created as a just and equitable jurisdiction; the tribunal can do what it thinks is fair in the circumstances. I believe—I think many people who have much more knowledge of this than I do would agree—that what that will mean in practice is probably that the tribunal will be inclined to give landlords their costs if they have won the case, so it will not change anything.

The other problem is that the first-tier tribunal considers itself a no-cost jurisdiction, and that is a generational way of thinking, so that has to be overcome and it has to get into the mindset of awarding costs to leaseholders and against landlords. Provisions could be included in the Bill that would make that that process easier—for example, prescribing a regime of fixed costs as applied to other low-value civil litigation. It is not a magic bullet, but I think that would be better than the current provisions in the Bill.

Rachel Maclean

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Q You mentioned that you welcome the peppercorn ground rent. It has often been put to me by campaigners on the other side of this argument that leaseholders do not mind paying ground rents. What is your view on that proposition?

Jo Derbyshire: I had a ground rent that doubled every 10 years. It meant that my ground rent would be £9,440 after 50 years. It certainly is not a trivial issue in my experience. A ground rent is a charge for no service. That is the big thing for me. Some warped genius at some point in the mid-2000s decided to create an asset class on our homes. It is just wrong.

Rachel Maclean

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Q Do you agree with some of the arguments that are put forward by the freeholders lobby and organisations that abolishing ground rent will destabilise the pensions industry and mean that nurses and care workers and the good people who are toiling very hard in our public services will have their pensions destroyed? What do you say to that?

Jo Derbyshire: I think that is project fear. I work in pensions. I work in administration, not investments, but I sit on a lot of pension committees where we talk about the assets that pension schemes hold. They have investment strategies and they protect themselves from over-investing in one asset class. The amount of ground rents held by pension funds in this country would pale into insignificance compared with, for example, the impact of the mini-Budget and what happened with equities shortly after that. This is deliberate scaremongering.

Rachel Maclean

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Q I just want to clarify your understanding of something that Mr Gardiner said earlier. I might need to put this to the Minister later, but Mr Gardiner said that if the new provisions on ground rent go through and ground rent goes to peppercorn or zero—I might be misquoting him.

Rachel Maclean

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You mentioned that in the new Bill leaseholders will have to pay to get their ground rent to zero. Can you set out what that provision is? Where is that in the Bill?

Cath Williams: I don’t think we know. That was one of our questions. There is a process in the Bill about how a leaseholder can acquire the peppercorn ground rent, but who pays for that is not clear. I think that was raised before. I do not think leaseholders should pay, because it should not have been there in the first place.

Katie Kendrick: Or there should be a prescribed cost—“apply for your peppercorn now”—with a simple process. Otherwise it will be exploited, and lawyer will charge different amounts to convert. You can see what will happen, so it needs to be streamlined. Whatever we go for, it needs to be streamlined.

Cath Williams: And we need an online system that cuts out everybody in the middle, so that there is no confusion or discussion about what it should cost.

Rachel Maclean

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Thank you so much for clarifying that.

Rachel Maclean

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Q Have you ever acted for freeholders against leaseholders? Have you ever found that the leaseholders have been egregious, rather than the other way round?

Amanda Gourlay: I believe I have acted for freeholders against leaseholders on occasion.

Rachel Maclean (Redditch) (Con)

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Q Thank you for all your work. Can you remind the Committee how many recommendations you made in total?

Professor Hopkins: Across enfranchisement, right to manage, and commonhold, we made around 350 recommendations.

Rachel Maclean

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Q And how many did you make on commonhold?

Professor Hopkins: I think we made around 120.

Rachel Maclean

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Q You had to go through a long process. When did you start your deliberations on the commonhold provisions?

Professor Hopkins: We began it as a package of work that was being conducted in parallel. We began in 2017 as part of the 13th programme that we published in December of that year. We published three consultation papers on enfranchisement, right to manage, and commonhold. We ran public consultations from September 2018 to January 2019. We received around 1,800 responses across those papers, and around 1,600 responses to leasehold surveys that we undertook for enfranchisement and right to manage. Then, in 2020, on the basis of all the evidence we had, we published four reports: a report setting out options relating to valuation to reduce the price payable, and then a report on each of enfranchisement, the right to manage, and commonhold in July of that year.

Rachel Maclean

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Q So you started your work in 2017.

Professor Hopkins: Yes.

Rachel Maclean

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Q Without going through all the work that you have just described, what is the risk if the Government adopt policies or measures such as making commonhold the default position?

Professor Hopkins: We have to separate the two issues. Our work on commonhold was designed to provide the legal fixes needed so that commonhold can work. In our report we concluded that commonhold is the preferred alternative to leasehold. The question of whether commonhold becomes a default or whether it is mandated was not a matter on which we were asked to provide advice to the Government. You need the legal fixes to be in place, though, and then the decision must be made about what is done in order to ensure that commonhold is given a fair chance.

Rachel Maclean

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Q Thank you for that clarification. As a follow-up, if any Government adopted a policy on commonhold such as has been talked about sometimes, but without doing the legal fixes, what would be the risk?

Professor Hopkins: The risk at the moment is that the legal regime that governs commonhold is too rigid. It does not apply effectively in larger, mixed-use developments, because they were not envisaged at the time. The risk is that you mandate a legal regime that does not work. You need a legal regime that works, which could then be mandated if that is what the Government chose to do.

Rachel Maclean

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Q Mr Brewis, thank you for coming here. Is it within your remit or do you have any helpful information for the Committee to understand a point that has been put to me and that I am seeking to test with you, which is that when some of these freeholds have been sold off in the past, the insurance obviously is then sold off—sorry, let me start again; it is very complicated. The contention is that in the past some leaseholds have been sold off or converted, so now the freeholder, which may be an insurance company or a pension scheme, does not have that income stream that it used to have, and there is a consequent risk on insurance companies or pension funds that have previously been reliant on that income stream to make the returns to the pensioners. Is that something that you recognise? Do you have any powers to update us on it? Do you have any powers to investigate it? Do you have any thoughts on it?

Matt Brewis: If I understand your question correctly, you are saying, “Is there pressure on freeholders to charge more to make increased returns to pension funds?” I cannot answer that question, I am afraid; it was not part of our review to date. Sorry, I cannot tell you—

Rachel Maclean

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Q Okay, but do you recognise that as an issue, if I can put it that way? It is a fact that in the past some leaseholders have been able to buy out their freeholds, so the freeholder then would not have the income stream from the insurance—

Matt Brewis: I understand. What we have found in the past is that actually, for the insurance part, it is not necessarily a panacea for leaseholders to take over the freehold, because, as I was just explaining, when you have a pooled number of properties, that can reduce the cost. We have found, for leaseholders who have tried to insure their building on their own, that it has proved more costly when they have done so. That is more to do with market dynamics and trying to insure one building as opposed to a portfolio of buildings. It does not necessarily follow that it is cheaper for leaseholders who have taken over the freehold to—

Rachel Maclean

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Q That is really helpful, although it was not quite what I was trying to get at. If you are a freeholder, you may also be an insurer. A lot of big freeholders are insurers, and pension funds and so on, that are underwriting the pensions of many people in the country—in the NHS and so on. The claim that they have made is that in the past some of the leaseholders have bought out their freeholds. I might have slightly misunderstood the situation, but it has been put to me that, now that this flow of insurance is no longer coming to the insurers—or, to put it another way, now that the service charges and so on that are paid by the leaseholder to the freeholder are no longer coming to the insurance industry—that will somehow destabilise the insurers’ balance sheets and make them unable to meet their commitments. Is that something that you recognise, from your industry perspective? I am not talking about the individual leaseholder.

Matt Brewis: I do not believe that the size of the insurance part of the market is significant enough to destabilise any firms. I have not heard that claim before, but I do not think that this part of the market, in the types of firms that we are talking about, is of a size that would cause structural issues.

Rachel Maclean

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Q Harry, can I just ask you a couple of things? On the forfeiture point, is it your view that there is absolutely nothing in the Bill to prevent the forfeiture issue?

Harry Scoffin: There are not specific provisions to improve the position on forfeiture. I would love it to be abolished, but if we have to have some form of mechanism that is still going to be called “forfeiture”, at least say that if it happens, the equity is returned to the departing leaseholder when the flat is sold and it is just the debt that the freeholder gets back. The idea that he gets a windfall is obscene. That has to go. At the moment, forfeiture can kick in at £350, so what some law firms are doing is, for a breach of lease, a 350-quid charge, so forfeiture already kicks in there. So bring that up. Some people have suggested £5,000. I would go even higher—£5,000 is the figure for personal bankruptcy proceedings—and bring it up to £10,000.

There will be these freeloading freeholders that will come before you today or on Thursday and say, “Well, if these leaseholders are not paying, the whole building is going to fall to rack and ruin. It’ll be like this country in the 1970s where the bins weren’t getting collected and bodies were piling up. You’ve got to keep the lights on in a block of flats.” What you say to them is, “Sue for a money judgment.”

Rachel Maclean

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Do not worry: I know what to say to them. That is fine.

Harry Scoffin: Yes, you know. Okay, good. The point is that we do not need forfeiture, but if you cannot abolish it, at least get rid of the windfall.

Rachel Maclean

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Q Thank you. I will ask a second question, if I may. You mentioned the issue of the pump room. Can you explain very briefly what the issue of the pump room is? Is this for a conversion or an enfranchisement claim? Where is the pump room issue coming into play?

Harry Scoffin: It is for mixed-use buildings that would otherwise benefit from the 25% non-residential premises limit going up to 50%. Let us say that you have an underground car park, a plant room or maybe, more recently, a heat network. Basically, because you are now linked, almost like Siamese twins, with a hotel, for example, or some shops, under the current 2002 Act for right to manage and even the 1993 Act for buying your freehold, you are out. So even though the Law Commission and the Government mean well, saying, “We’re going to liberate mixed-use leaseholders,” for many of those mixed-use leaseholders, where they are completely linked with the commercial, it is game over; you will never be able to qualify. That definitely needs to be revisited because the Government will not get any political benefit from moving, rightly, from 25% up to 50% and even to mandatory leasebacks for when you buy the commercial.

The quick argument—the Law Commission understood it—is that at the moment, the plant room will normally be managed, yes, by the hotel, but the freeholder for the flats will appoint a managing agent who will also have access to the plant room. We are not changing that position. The only difference is that the managing agent that the freeholder appointed, who has access to the plant room, would now be working directly for people like my mum. So it is not disrupting—we are not going to become hoteliers. We are not going to become shop owners. If we rely on a service and are paying for it—53%, mind—we should have access to it, but the key thing is that we need the right to manage. Without right to manage, or without buying the freehold, you are, literally, perpetually in this abusive relationship with a freeholder who has your cheque book and is spending it how he likes, whether that is reasonable or not. That is a fact.

On the point about section 24, that needs to be revisited so that the manager, where a tribunal deems it appropriate, can be the accountable person. In our building, we have mobilised—ironically, it is over 50% of the leaseholders. We now face going back to them—with their cash, by the way—and saying, “We can’t now get one because of this unintended consequence of the Building Safety Act”. That is a quick bit of drafting— I have spoken to lawyers about it. It would be very easy for you guys and that would help, particularly on cladding developments, where the cladding is not getting done because the freeholders are sitting on their hands. You need an officer of the court who is going to turn around the development and be accountable.

Karolina Zoltaniecka: Can I say something about the right to manage? At the moment, the process is so complex. There are three notices that need to be served. I believe there needs to be only one, to say to the freeholder, “We are taking over the right to manage and this is the date we are going to do it on”, and that is it. There are solicitors who specialise in analysing notices to pick holes in them to prolong the process, so that leaseholders give up, and costs just go up and up. And I completely agree with the forfeiture point from Harry. It is unnecessary and a breach of lease, and especially, arrears can be taken to the county court to recover if the arrears are real.

Rachel Maclean

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Q I have one question for each witness. Kate, if I can come to you first. You made the point that leasehold works for some leaseholders. We know that there are something like 4.98 million leasehold properties. How many would you say it is working for? That might be impossible, but what is your gut feeling?

Kate Faulkner: I do not think we have ever asked that question, so it is very difficult to answer. Also, the issue with property is that people change a lot. As a result, you could have a block that works brilliantly because we have a wonderful violinist or—my grandma used to own a little place at The Poplars in West Bridgford in Nottingham and, through complications, the family still owns a garage where my grandma used to live. The two guys who run that estate—the guy who does the accounts and the guy who does the overall management—are absolutely fantastic. They are a pleasure to deal with, and it is an extraordinarily well-run block. Now, if either of those were to move on, who knows whether there is anybody to replace them?

If we take another situation—I must say that this was quite a shock for me and I was a bit green in those days—I owned a flat and I thought it was safe to buy because it was owned by a housing association. Thirty per cent of those flats were owned privately. We were treated abominably by that housing association, and I would go as far as to say that they really did not like private leaseholders. I understood; they were social homes originally and they did not want us to own them. I felt we were treated as if we were an ATM machine. The original agreement that we signed up for with the housing association was a good one, but we found that they were changing that agreement over time and changing it so fast with so much paperwork that by the time the roof needed to be replaced, all the reasons we had bought that property, which we thought was safe, had been taken away from us. I know what I am doing and I asked all the right questions, but we still ended up with a situation where we had no control whatsoever over what was happening.

You have two cases there. In one, you have a wonderfully-run estate, but that could change overnight if different people take over, and in the other, you have a situation where I thought I would be safe with the housing association, only to find all the rules were changed.

To give you some idea, I think it is the complexity of this that is so scary. However good anybody is, the missing qualifications are just horrendous. That just has to be sorted. The best way I could describe it to you is that when I moved, I had a bag. Do you remember those big Asda bags? Not the ones that they do now, because they seem to have got smaller, like everything else. I had a big Asda bag, and after owning this flat with the housing association for 10 years, I had three lever-arch files full of paperwork.

When we brought the complaint against the housing association about how they had dealt with the roof renovations, it took a year to take that to a complaint situation. When I suggested that I take it to a first-tier tribunal, I was told—this is one of the good things—that if I drove my other leaseholders into taking them to a first-tier tribunal, it would cost more than £30,000. I was asked whether I wanted that responsibility on my shoulders. Taking that cost off is one of the good things, but my worry is that however good we do, until you give the leaseholders parity with the legals—the surveying and the accounting expertise of the freeholder or agent or whoever it might be—we will still never dig ourselves out of the situation we have. That parity service has to be free, or every leaseholder puts in a hundred quid a year or something to provide them with some sort of service.

Rachel Maclean

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Q I am conscious of time, so I ask you to be brief in your answers. It is interesting and useful for all of us to hear the other side of the argument. I am not nailing my colours to the mast here. I am just making the argument that some people would argue in favour of leasehold, because it suits some people in certain situations. You have made that argument, but you have been very clear that it is obviously complicated: people can move on, and then they have no protection, and so on. Do you still think there is value in leasehold as a concept, if it can be addressed by the measures in this Bill or maybe some others? Do you still think leasehold should exist, as long as it can be reformed?

Kate Faulkner: Absolutely. That is in one of my notes. If we make sure all houses are freehold, but we keep flats as leasehold, is that a problem? Well, actually, we can make leasehold work. We spend so much time looking at how to solve the bad bit, but what we do not do in this industry—which I have always done in others—is learn how it goes right, and how we can pull everybody up to that standard. We spend so much time looking at what happens when it goes wrong.

Rachel Maclean

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Q Yes, because there are obviously egregious cases, and it is those that reach our attention. Thank you so much for that, and I will obviously scrutinise your evidence.

Beth, it is often presented that your industry and your members are perhaps part of some of the problems we see, because conveyancing is not done to high standards. We have heard so many times that people do not know what they are buying. Surely, that should be the role of conveyancers? Is it your view that there are some poor people practising in your industry? How much of this leasehold problem would have been avoided if we had had decent conveyancing right from the beginning?

Beth Rudolf: We have to go back to the understanding that, as Kate said, if you only have a few of the ingredients up front, then you are going to give misinformation. For example, let us think that without any information going to the buyer, they have decided to buy that property. Now, their intended use and enjoyment of the property is then what the conveyancer needs to do the due diligence on, to ensure that the buyer gets the information and understands what it means to them.

The issue we have with the current conveyancing process is that because of the dematerialisation of deeds, there is no need to keep deeds packets in fireproof safes any more. Consequently, they are just returned to the property purchaser, who loses them without realising their use, or they keep them really safe and then take them with them to the next property. All of that information goes missing, which means that every time the property is sold, the information and archive of the data has to be reconstructed. If I, as a conveyancer, was selling a property back in 1990, I would just get out the deeds packet and send through the contract pack on the day that a buyer was found. Within that, I could put old local searches, planning and documentation, warranties and guarantees, and insurances.

Now, when I get instructed, I have to start from scratch. I have to go to the lease administrator and planning authority and get all the information. That takes time. The trouble is that, as a buyer’s conveyancer, I am trying to report to the client on the information as it comes in. I hopefully get in the material information that the estate agent gets when they put the property on the market, but then I have to do the transaction form that the Law Society requires, which duplicates what has already been provided, but is slightly different, so you do not get the right information there.

On top of that, I get the search results in, but I probably do not order those until I get the mortgage instructions in. But the mortgage instructions are based on a valuation done by a valuer who did not know what information was available on the lease, so I then have to go back to the valuer and say, “No, you’ve got the wrong information.” By the time I have reported to my client on each thing, I have had to change my story each and every time. So conveyancing transactions take about 20 weeks before you can even exchange contracts, because each time you are trying to recreate the information about the property.

What we need is for the property data to be digitised and stored in property log books at the end of the transaction so that it can then be used when the seller wishes to instruct an estate agent to sell their property. To advertise it, they can then pull down the property pack, get the relevant material and information out of it, and ensure that when the buyer puts their offer in, they know what they are buying, and that the valuer for their mortgage company knows the details about the valuation. Where that happens—in Norway, Denmark and Australia—we see binding offers with cooling-off periods, and the only stress is trying to work out what you are going to move and what stuff you are going to give to charity.

Kate Faulkner: You have to bear in mind that when people are moving, they are also having a baby, getting divorced or getting married—or somebody has died, or they are in debt. Maybe they are trying to get in for a school time. As much as I wear a consumer hat, they are not in the most rational mode.

One of the difficulties that the conveyancer, the agent or anybody else has is actually getting people to sit down and understand the paperwork and what they are doing. We have a huge problem: consumers do not really understand, and do not always take the time to, either, because they just need to get into the property. We have a real education issue. One of the things I would do is work with companies to help them to educate consumers. I have to say that, in all my jobs, getting them to understand from a property perspective is the toughest thing.

That is why we have to bring everything up front. If we wait until they have made an offer and had it accepted, we have lost them—they are interested in what colour the walls are and what the sofa is, and if anybody, such as a surveyor, gets in their way and says, “You shouldn’t buy this property”, they are almost cross with them. The mindset of a consumer during the buying and selling process with property is very different from any other consumer mindset I have ever worked with.

[Chloe Smith in the Chair]

Rachel Maclean

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Q It is nice to see you, Professor Leunig. Why do we have leasehold in this country when other countries do not have it?

Professor Leunig: I think that is a question that people often ask medics: “Why do I have this?” Who cares? The question is, “Am I going to get any better?” I have not got the faintest idea about the origin of leasehold, but I contend to you that that does not matter; all that matters is whether this is an effective system and, if it is not, what we could do either to improve or replace the current system. Those two questions I can answer, but I am afraid that I get an E grade for my answer to the question that you actually asked.

Rachel Maclean

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Q Okay. You are very frank about that. I just thought that you might have some ideas, but let us move on to the point that you just made, which is that we do have leasehold; we are where we are.

We have a Bill in front of us. What is your view on the Bill? Does it address the problems that we have all heard and are familiar with?

Professor Leunig: It is a step forward; there is no doubt about that. I do not suppose that any person has appeared in front of you today and said, “Oh, this is a terrible step.” I do not suppose anyone has argued that we should keep leasehold for houses or that we should have 99-year leases or 49-year leases or anything like that.

Rachel Maclean

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No.

Professor Leunig: In that sense, it is obviously a step forward. I have not been here all day, but I am guessing that you have had a consensus on that throughout your evidence sessions. I am part of that consensus. I think that it is very good that leaseholders have increased rights to information and that we are eliminating ground rent for longer leases, although I agree with the person who was sitting here before me—whose name, I think, was Beth Rudolf—that 150 years is a rather long thing before you get rid of ground rent. The case for ground rent seems to me to be extraordinarily weak. I think that it would be better to move to commonhold.

First of all, I should say that I am not a lawyer. Indeed, once, when I made a remark about the law in a meeting with one of your predecessors as Housing Minister, said Minister remarked that, as an analyst, I should know better than anyone else that the first four letters of analyst stand for, “am not a lawyer”, which, I have to say, was wittier than most Housing Ministers.

I am not a lawyer. I am an economist, but I can say that leasehold is a peculiarly economically inefficient construct, because it usually constrains a person, for whom the largest single thing they will ever invest in is a leasehold—their house—from doing all sorts of things. It constrains improvements, for example. It also holds them open to the risk of forfeiture, and the risk of forfeiture is particularly bizarre: for a very small amount of service fee, you can lose the entire value of your flat or, occasionally, your house. That is disproportionate to any sense of economic, moral or any other kind of fair play, and it acts as a disincentive to people.

In that sense, leasehold is a fundamentally economically inefficient construct, as well as having dubious morality. For sure, if you do not pay your service charge, there needs to be some way of enforcing, whether it is commonhold or leasehold, but that is why we have things like the small claims court. Ultimately, we have bailiffs if you do not pay a bill. You do not lose your entire property because you failed to pay your telly licence or something like that, and nor should you for a service charge. In that sense, I think that leasehold should be killed off.

I also think that leasehold is, on occasion, an absolute magnet for sharks and other wretched creatures who disgrace our society and the good name of capitalism. I think it was Edward du Cann who made a remark—before I was born and before at least some of you were born—about the “unacceptable face of capitalism” when companies behave very badly. We see that happening in leasehold with the companies who had doubling ground rents until a property was worthless and the companies who pursue forfeiture over tiny bills. Bluntly, if I am allowed unparliamentary language—I think I am but you are not—there are bastards out there, and your job is to construct the law to constrain those people who have bastard tendencies. Leasehold does not do that; commonhold does. That is why I think that commonhold is a much safer construct for people who are currently leaseholders. It should be the norm and the requirement for all future building, whether that is flats or houses, and we should be looking to move leaseholds to commonholds over time.

Rachel Maclean

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Q One of the arguments against making commonhold mandatory now is that it would destabilise the existing leasehold system. There are many millions of leasehold properties, and it is argued that that would result in a lack of confidence, in a lack of investment and in even fewer properties being built. We all know that we want to build more houses, more flats and so on; part of the long-term plan for housing is to build more flats, as I think Mr Scoffin alluded to. What do you make of that argument? Secondly, what do you make of the linked argument that freeholders are providing a very good service in some ways, because that asset class is funding the pensions of NHS and care workers and policemen in the country?

Professor Leunig: The final point is factually incorrect, because of course the nurses pension scheme is unfunded, so there are no assets behind—

Rachel Maclean

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That is probably a bad example.

Professor Leunig: It is, but people always put forward nurses and policemen when they want an “Oh, woe is us” story. Well, the NHS pension scheme is unfunded; it is underwritten by us as taxpayers and is thus completely and utterly secure.

Although I accept that there are some people who have these in their pension funds, any good pension fund is diversified. No sensible pension fund has more than a trivial amount of its money invested in this class. Of course, if you have a self-invested pension plan and you decided to put it all in this, that is a risk that you took when you decided to invest all your money in it.

Changing to commonhold will make not a jot of difference to the number of houses that are built over the next year, or the number of flats. The number of houses and flats built is determined entirely by whether the builder believes that they can make a profit. This is a for-profit sector, and that is right and proper, as is the manufacture of pens, mobile phones, bits of paper, quasi-plastic cups and everything else. It depends on whether the buyers have enough confidence to buy, on whether they think their job is secure and on whether they can get a mortgage at a rate that seems acceptable and is competitive with renting. That is what matters. It also matters whether the builder thinks the market will be radically better in the following year, in which case they will quite understandably delay building for a bit.

Frankly, the difference between the value you will get for a leasehold and what you will get for a commonhold is at best slight; in so far as it exists, it is based on confusing and bamboozling buyers. Sometimes the builders of a leasehold flat say, “Ah, but we can sell them for less, because we make some money by selling off the right to the ground rent.” If that is true, the buyer is not better off, because they have got it for less, but they have to pay ground rent. The buyer would be perfectly able to pay a little more, because their monthly or annual outgoings would be exactly the same.

The only way in which the builder is able to do better is if the buyer does not realise that they have to pay ground rent and is unable to do a net present value calculation in their head, which I grant you is more than likely—I challenge any of you to tell me on the spot what the net present value of £250 a year discounted by 3.5% a year is, over any number of years you like that is greater than five. Does anybody want to do that off the top of their head? No? I even typed into Google last night, “What is the net present value of £250 discounted at 3.5% over 10 years?” Google did not give me a number as an answer. It is not the sort of thing that we have to hand.

Yes, some people might be bamboozled into this, but a good economy never says, “Great: we can build some more houses by tricking people into being poorer later.” That is not the way to have a well-functioning market—and a well-functioning market is the best guarantee that we will get the houses we need built where we need them and when we need them.

The Minister for Housing, Planning and Building Safety (Lee Rowley)

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Q I am trying to keep my interventions very brief, because I will be speaking a lot next week, but I could not resist asking you a couple of questions given your history, knowledge and background that is much more than my own. You have emphasised very clearly and articulately the rights of the people sat around this horseshoe to make decisions that will have economic impacts. Can I get your understanding of what you think the economic impact of the Bill as it stands broadly is?

Professor Leunig: First of all, I repeat what I said earlier, namely that it seems to me that a lot of it is up to the secondary legislation. In particular, I think that issues of compensation are entirely in secondary legislation and regulation. As I say, I am not a lawyer; I find it very hard to read a Bill. It is not my skillset at all. I would not like to have your job.

I think that the biggest effect is the dynamic effect of creating a much cleaner and clearer property market. We have a rather ossified property market in Britain; it has become more ossified over time. There are all sort of reasons for that, including the fact that far more people are now under stamp duty, as well as the effect of financial regulations that mean someone needs a relatively large deposit to get on the housing market. There is a bunch of other costs that we really could simplify and get rid of. Take searches, for example. You can buy a house that is two years old and you have to do a completely clean set of searches. Why? When did we last find a mine in central London? We know this stuff pretty well.

I think this is part of clearing up the housing market and if we do so it can have quite big dynamic effects—for example, facilitating the better movement of people in response to opportunity. Such opportunities may be economic. I do not want to sound too Norman Tebbit and say, “Get on your bike.” However, there can be opportunities to go and live next to an aged parent who has suddenly fallen ill, in order to provide better care for them, or opportunities to move nearer to better schooling. Whatever the opportunity is, a more flexible housing market allows people to move to a house that is better suited to their needs.

All those things are good dynamic effects that in the medium term are strongly pro-growth and I see this Bill being part of it, but it is a small step forward. A move to commonhold would be a better step forward to a nice, clean system, where everybody knows exactly what they are buying and nobody is left wondering, “What sort of freeholder is this? Are they an exploitative one? Are they a reasonable one?” Many freeholders are perfectly reasonable.

Lee Rowley

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Q Understood. Question two of three: what are the risks of getting things wrong that the Committee should be aware of when we go into line-by-line analysis of the Bill next week? Where do you see the biggest risks in the legislation?

Professor Leunig: I see no risks in anything that you plan to do; I really do not think that there are any meaningful risks in moving to 999-year leases over 99-year leases. I certainly do not see any risk in ending leasehold for houses.

However, you might have people coming back with very specific cases of supported housing, for example—you always want to check with specialist groups about things like that—but I see no meaningful risks in this Bill as far as it goes. If you had gone much further, there would have been no meaningful risks either. The fact that commonhold and similar things work in places like Australia shows that it is a perfectly possible and viable system.

The time when you want to be really worried is when you are the first person in the world doing something. Of course, that does not mean you are wrong—right? When we privatised the first utilities, or when we privatised British Telecom, that was not a wrong decision, but there were definitely grounds for caution. However, when you are doing something that is already done in many countries—of all the things you lot have to worry about, I would not worry about that one. Sleep well tonight.

Lee Rowley

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Q Thank you. I have a final question. I know that you were not here all day, but we have heard some very compelling testimony and questions from colleagues about the potential for going further and adding things to the Bill. Next week, we will get into a discussion, as colleagues know, about what we can do and the practicalities of that; we are not going to be able to do everything. However, we think that a very sensible set of propositions have already been put forward. If you had to prioritise, where would you go first in terms of additions, because there is a necessary prioritisation that needs to come in next week’s discussions and on Report?

Professor Leunig: The only prioritisation meeting I had was with the current Secretary of State for Levelling Up on the LURB—the Levelling Up and Regeneration Bill —because the first draft of the Bill had twice as many clauses as could get through Parliament. We had a meeting for about two hours with the Secretary of State and each part was read out, including what its intention was and how many clauses it required. That is the cost-benefit analysis.

If I say to you, for example, “The lady before said 150 is too big”, I would agree with her; I imagine that is a very sensible change to make. By contrast, I am sure that other people have said, “Go for commonhold for everything in future”. That strikes me as requiring a lot more clauses than the number that would be required to change the 150 figure to 99, or 75, or something.

What I urge you to do is to ask the lawyers—the people drafting the legislation—how many clauses would each change that has been proposed cost. Then you think, “Okay, we can probably manage another 24 clauses”, or whatever it is, “or we can change 24 clauses. Which ones do best in that cost-benefit analysis?” I do not think that it would be sensible for me to give you an answer without knowing that legislative cost.

Rachel Maclean

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I am sorry, Dame Caroline. When you told me that there was not time, the question went out of my head. I apologise.

Rachel Maclean

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Q Dr Maxwell, I understand you have written a book—oh, your thesis was on the proportionality of state interferences with possessions under article 1 of protocol 1 to the ECHR.

Dr Maxwell: There is a book, but it is probably not on your Christmas list.

Rachel Maclean

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You are presuming what is on my Christmas list! Anyway, are you able to express a view on whether this Bill and what we are proposing is a proportionate interference in property rights?

Dr Maxwell: That is an exceedingly broad question. There are 65 clauses in this Bill, and there is a consultation with five potential options. We do not have time to go through every single clause, but in terms of the risk register and potentially successful challenges being brought, I would focus on option 1 of the consultation, on reducing ground rent to a peppercorn.

There are various other people who have looked at this. For example, Giles Peaker, who is a very respected solicitor and has appeared before these Committees previously, has recently written that it would quite obviously, in his view, be a violation and it is important not to give people false hope. There is an undeniable risk of a violation being found in the relevant options. I suspect, but I do not know, that the prospect of a challenge being brought is very high, but again that depends on the relevant facts. It would be my understanding that it cannot be brought in a macro sense against the Bill as a whole, and it would depend on the relevant facts.

For example, the Supreme Court found a breach of the right to property in a case called Mott, which concerned limits on an individual’s right to fish on the Severn estuary. The Environment Agency’s policy of fishing as a whole—limiting fishing for the benefits to the environment—was considered okay. But for Mr Mott, it resulted in a complete loss of his income—fishing represented 95% of Mr Mott’s entire income—and it therefore did cause a breach to Mr Mott in particular. That is why I am slightly apprehensive about giving broad conclusions about consultations and clauses when we do not have the ability to analyse the impact on an individual or entity.

Rachel Maclean

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Q But it is my understanding that doing a consultation in and of itself is essential and helps to guard against the future risk of such claims being found successful. Has that been borne out through the courts system? Have you seen that?

Dr Maxwell: Yes, so in the case I referred to earlier—The Karibu Foundation v. Norway—one of the factors that the Strasbourg Court gave a lot of weight to was that the Norwegian Parliament had sat down with the Council of Europe, because it was following a breach in the Lindheim case, and considered all the relevant options. It was properly aired and debated and they got in experts from various fields. That is clearly a consideration. It shows that the democratic institutions—Parliament—have properly considered it, rather than it being, say, a last-minute amendment without justification.

Rachel Maclean

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Thank you.

The Minister for Housing, Planning and Building Safety (Lee Rowley)

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Q I do not want to divert the Committee away from the core discussion, but I will just pick up on something that yourself and Mike discussed a moment ago. On sub-11 metre buildings and potential challenges with fire safety, would you accept that our standards are life-critical safety standards, and that the likelihood of an issue in a sub-11 metre building is substantially lower than one in a building above 11 metres? Fundamentally, it is unlikely that those buildings would need remediation to the extent that would be needed in higher buildings. That is an accepted position of your members, I presume.

Paul Broadhead: That is absolutely an accepted position. The point I think you are getting to is that sometimes there is still an EWS1 form requested on sub-11 metre buildings. As I mentioned earlier, the lender is the expert in mortgage lending, not in building safety, and the surveyor on the ground will have their own gangs from the Royal Institution of Chartered Surveyors that they follow. If they come back and report that it needs further investigation, the lender has to take that at face value, because that is their expert.

Lee Rowley

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I am not sure that I would accept that, but I will take that up with you and your members separately.

The Minister for Housing, Planning and Building Safety (Lee Rowley)

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Q Mr Freedman, in terms of your previous but one comment, to Eddie, on how you were told about the potential impacts on pension funds and the like, can you tell us, either now or separately if you prefer, who told you that? What is the source?

Philip Freedman: It was one of the two partners in the firm I had been speaking to. Also, I have heard that various other bodies, like the British Property Federation, have been looking into these issues, and there has been a certain amount of it in the property press. It is only general awareness; I do not know any specifics.

The Minister for Housing, Planning and Building Safety (Lee Rowley)

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It is a pleasure to serve under your chairmanship, Mr Efford. Today, we begin our line-by-line consideration. I first want to note and put on record my thanks to all the witnesses who gave evidence to the Committee last week. It was hugely useful to hear their insights, which will improve the Bill over the coming days and weeks ahead.

I am delighted to bring the Bill to Committee, and I look forward to the debate that will follow. Before we proceed, I quickly draw the Committee’s attention to a minor issue regarding the Bill’s explanatory notes. Paragraph 18 refers incorrectly to the right

“for an intermediate landlord to reduce (‘commute’) the rents that they pay”

following statutory lease extensions and ground rent buy-out claims. That is a drafting error as the clauses were not in the Bill when introduced. I have since tabled an amendment to introduce those clauses on intermediate leases, which we will debate shortly. I apologise for that minor drafting error and reassure the Committee that the explanatory notes will be updated to reflect the latest clauses before the Bill enters the other place.

I also want to make a small point in relation to legal language that I will use throughout the session. In existing legislation, leaseholders are referred to as “tenants”, which legally, they are. In everyday language, however, we often use the term “leaseholders” to differentiate long leaseholders from tenants holding shorter tenancies or those with less security of tenure. For simplicity, I will use the term “leaseholders”. Likewise, I will use the term “landlord” to mean both landlords and freeholders. In many cases, the landlord will be the freeholder, although that is not always the case. Where the provisions concern freeholders, I will use that term rather than “landlord”.

I now turn to part 1, which deals with leasehold enfranchisement and lease extension. When people buy a leasehold property, they will want to ensure that they have the long-term security and control they need to make it a home. They may have a short lease and wish to extend it, or they may have concerns about their landlord and wish to buy them out to have full ownership and control of that home.

The current requirement, where a homebuyer has to wait for two years before they can extend their lease or buy their freehold, is an obstacle for leaseholders and results in higher costs, as the price for enfranchising increases year on year. Furthermore, many investors take advantage of a loophole to avoid that requirement, while ordinary homeowners, who may be less familiar with the process, can find themselves in difficulties. There are also inconsistencies in the current law where, in certain circumstances, people can rely on a previous owner’s period of ownership to satisfy the requirement whereas others are unable to do so.

Clause 1 seeks to remove that barrier to leaseholders who wish to exercise their enfranchisement rights. It removes the requirement to have owned the lease of a house for at least two years before qualifying to buy their freehold or extend their lease. It also removes the requirement to own the lease of a flat for two years before extending the lease. This gives leaseholders the flexibility to make a claim immediately upon buying a leasehold property, and it will reduce their costs. It also resolves inconsistencies in the current law. The measures will remove an unnecessary restriction for leaseholders. I commend the clause to the Committee.

Lee Rowley

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First, let me echo the remarks of the hon. Member for Greenwich and Woolwich. He said some kind words about me and I would like to say the same about him. He has always been extremely constructive and helpful. We share the aim of trying to improve the legislation and I am grateful to be working with him. I hope we can work in many areas and agree more than we disagree. He was right when he said that this is incredibly complicated. Having tried for the past two months to get into all the details, there may still be areas where I am unable to answer all the questions from hon. and right hon. Members today. I will do my best, but I will write to them if I am unable to answer anything.

I am grateful to the hon. Gentleman for confirming that Labour will support this clause. On his specific point around where leaseholders have sadly passed away and there is a requirement for a personal representative or equivalent, it is not our intention to make that process any more difficult or to change the fundamental ability of people to make decisions about how to dispose or deal with properties that are left in the event of a death. Having spoken to officials and those involved in the drafting of this, my understanding is that the exemptions referred to in subsections (2)(c) and (3) become effectively moot. The removal of the two-year rule preventing a representative from taking action means that at the point they inherit the property—or whatever legal approach is taken to transfer it the estate to a new owner or representative—the problem goes away.

If, for some reason, we have missed something, I would be very happy to take anything from the hon. Member for Greenwich and Woolwich or others, either now or in writing, which I can go away and look at. Our understanding is that this does not need to continue, hence why we have chosen to remove it within the clause.

Lee Rowley

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To confirm, I am happy to double-check this, but I hope what I have just indicated stands.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Removal of restrictions on repeated enfranchisement and extension claims

Question proposed, That the clause stand part of the Bill.

Lee Rowley

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Currently, the restrictions placed on leaseholders to make a claim to buy their freehold or extend their lease can be seen as excessively punitive. Leaseholders are prevented from making a claim to buy their freehold or extend their lease for 12 months, when a previous claim has failed even on a minor point. In addition, a claim for a lease extension on a house can be obtained only once, and we seek to remove those unnecessary barriers for leaseholders, which frustrate their ability to buy their freehold or extend their lease.

Clause 2 seeks to address this problem by removing the requirement to wait 12 months to submit a new claim if the previous one has failed. It will also remove the restriction on bringing a further claim where a lease extension has already been obtained for a house. This means that leaseholders will be able to put in a further claim to enfranchise or extend their lease as soon as they have resolved the issues with their failed claim. Leaseholders of houses will not be prevented from making a claim for a lease extension if one has already been obtained, preventing the landlord from being able to regain possession of the property from a leaseholder when the lease eventually comes to an end.

Clause 2 will also remove provisions that give courts powers to prevent new enfranchisement or lease extension claims for five years where a claim has failed, and the leaseholder did not act in good faith or attempted to misrepresent or conceal material facts. These powers are old and surplus to requirements, coming from the 1967 Act, which has been overtaken by developments in the law around civil restraint orders since then. These restraint orders are more flexible, better developed, subject to more rigorous checks, and may be fairer than the existing power. Therefore, the existing law and the Bill can still deal with meritless of abusive enfranchisement claims. The tribunal already has powers to award costs for such unreasonable behaviour. The removal of these should not change that; it is simply a tidying-up exercise, and a recognition that other parts of the law do this better. These measures will remove barriers to leaseholders being able to take up their right to enfranchise or extend their lease without unnecessary delays.

Lee Rowley

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I am grateful to the hon. Gentleman for his comments and, again, for indicating his support for the intent of clause 2. On his question with regard to subsections (1)(c) and (d), I will write to him, given that it is a technical question about the specific description in the legislation. Hopefully, I will be able to provide the comfort he seeks.

As he indicated later in his remarks, we believe there is the ability for vexatious claimants, in whatever sense, to be accommodated by the existing legislation elsewhere, so there is no need to replicate that or to retain something that is very rarely used. That is the reason for removing it.

Finally, on his point about orders from a tribunal and the Law Commission’s recommendation, it goes back to the fact that we believe the process that is in place is already mature and very capable of responding to the legitimate points he highlights. Therefore, there is no need to create an additional process in the Bill, but I will write to him to absolutely clarify that point and make sure that we have everything we need.

Rachel Maclean (Redditch) (Con)

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May I ask the Minister to confirm that clause 2(2) refers to schedule 7 to the Bill? In our evidence sessions last week, we heard from certain leaseholders who were concerned that they would not benefit from the provisions if their lease was less than a certain number of years. Paragraph 2(2)(a) of schedule 7 states that a lease will not qualify if

“the unexpired term of the lease is less than 150 years”.

There was some debate about that length. Will the Minister address those leaseholders’ concern that the period is too long and that there should not be that restriction? Or will he write to me later to address what considerations went into that provision? If we are excluding people from these welcome provisions, perhaps we should seek to otherwise widen the group of people who can benefit from having their leases converted to a peppercorn lease.

Lee Rowley

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We will probably talk in detail about the 150-year decision—the Law Commission proposed 250 years—in relation to quite a number of areas later this morning, so I do not want to pre-empt that now. As I will explain later, the Government’s intention was that, if a lease is coming up in a reasonably short period of time, it is advantageous to align everything together, as opposed to doing just one thing, because there will be the potential for double costs and the like. I am happy to talk about that more when we get further into line-by-line consideration.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

Change of non-residential limit on collective enfranchisement claims

Rachel Maclean

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May I throw the general issue of collective enfranchisement into the mix? The Minister may wish to come back on it at a later point if it suits him better. Many people in this situation have raised with me the sheer practicalities and difficulties of doing a collective enfranchisement. When people live in a huge block of flats with vast numbers of flats, they do not necessarily know who the other people are and certainly do not have their contact details. That, in and of itself, presents a barrier and an obstacle for some of these claims. We have heard evidence from groups affected by this situation—most notably the Free Leaseholders group, but there are many others—who have made this point repeatedly.

Rachel Maclean

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The hon. Gentleman is a very persuasive orator in this Committee, as he is in many other fora, and I will definitely listen to those arguments when they are made. We all work in the spirit of improving this Bill. I very much hope that the Government will provide the explanations I have asked for, and specifically on this issue at this point.

Lee Rowley

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I thank hon. Members and Friends for their contributions. I will take them in turn. On the amendment, I find myself in the slightly unusual place of arguing against a Henry VIII power, as they are occasionally called and as he referred to them. As indicated, there are a number of Henry VIII powers in the Bill, and I am sure that people will have views on them when we get to them. Our colleagues in the other place often have very strong views on such powers. It is an unusual place to be, but I happily take it up.

I absolutely understand the point that hon. Members have made and the reality of what they are trying to articulate. The fact that we are making a change indicates that there are times when it is proportionate and reasonable to make changes. The reason for the Government’s not taking powers in secondary legislation—which I know, joking aside, that hon. Members would accept—is that there is a continuum for drawing or not drawing lines, and we think that this does not necessarily need to be on the line of taking powers in order to do things in secondary legislation, simply because this is a substantial change. It is being actively debated; Members are debating whether it is sufficient and, as my hon. Friend the Member for Redditch asked, precisely how it will work to improve the situation in practice. I think the Government’s preference is to keep that discussion in primary legislation. We recognise that primary legislation is always more challenging in terms of timelines and space in this place, but it is a sufficiently important change that it should be able to be debated in the way we are doing today.

Lee Rowley

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I am grateful to my hon. Friend for highlighting that. The shadow Minister expressed hope that the Government would agree with some of his amendments at some point. I am afraid that I will have to dash his hope on this one. We understand its purpose, but on the basis that I have articulated, we would prefer to keep this in primary legislation. I hope that the shadow Minister might consider withdrawing the amendment.

On clause 3, as it stands, we have been clear that we want to improve access to collective enfranchisement so that more leaseholders of flats can enjoy the benefit of freehold ownership. Many leaseholders in mixed-use but predominantly residential buildings are currently prevented from buying their freehold, as hon. Members have indicated. Clause 3 amends the 1993 Act to increase that limit from 25% to 50%. This has been consulted on widely and was recommended by the Law Commission. Where residential leaseholders take up the majority of the floor space in a building, it is our view that they should be able to access the long-term security and control that comes with freehold ownership, if they choose to do so.

We recognise that this change impacts freeholders. If the leaseholders choose to buy their freehold, the freeholder stands to lose ownership of individual buildings, and that may fragment ownership of some areas over a longer timeframe. We believe that impact to be justified not only because of the significant benefit to leaseholders but because freeholders will be compensated for that loss. We do not believe, as a principle, that the single contiguous ownership of space is absolutely necessary for buildings to be managed well.

We have also heard arguments from leaseholders that they will be unable to professionally manage mixed-use buildings. Although I understand their point, through, for example, the delegation of a building’s management to an agent, that should be overcome. I accept the points made and understand the shadow Minister’s point on the difficulty of ensuring that leaseholders can be engaged to the point where they pass the threshold, whatever the number—and all numbers are ultimately arbitrary. As he has indicated, I think the Committee will return to this, but we think the clause, as it stands, is the right approach. Therefore, we resist the amendment and hope that the shadow Minister will withdraw it.

Lee Rowley

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Clause 4 introduces schedule 1, which repeals rights that enable landlords to block a lease extension or freehold acquisition claim for a house or flat where the landlord intends to redevelop or reoccupy the property. Where the blockers are used, compensation is only paid to leaseholders in houses, not those in flats. The blockers apply to a minority of leases that have not been extended and are very near to ending.

Although that means that, in practice, rights are rarely used, enfranchising leaseholders should have the opportunity to make their decisions about the need and scope of redevelopment once they own the freehold. Leaseholders with few years remaining on their lease should have the option of extending and securing their tenure. Where a lease is extended, landlords will continue to have statutory break rights that can terminate leases for redevelopment. We will consider break rights in schedule 6 and cover further details about the blockers when we come to consider schedule 1. I commend the clause to the Committee.

Lee Rowley

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I am grateful to the hon. Gentleman for his contribution. As he indicates, this is—I think by common consent—a rare issue in the first place, not that that diminishes the importance of ensuring that we get it right. It is very complicated, as he has indicated; different leases will have different elements within them and it is impossible to comment on every single case or every single instance, as has been indicated, because of the complexity. I am not aware that there is an indication that there is a general reduction in the value of leases for the very small number that this will cover. I will write to the Committee if what I have just said is incorrect or needs clarification in any way. I hope that, on that basis, we can make progress.

Lee Rowley

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I beg to move amendment 57, in schedule 1, page 82, line 16, at end insert—

“Exception to enfranchisement for certified community housing providers

3A (1) The LRA 1967 is amended as follows.

(2) In section 1 (tenants eligible for enfranchisement and extension), after subsection (1B) insert—

‘(1C) This Part of this Act does not confer on a tenant a right to acquire the freehold of a house and premises if the landlord under the existing tenancy is a certified community housing provider (see section 4B).’

(3) After section 4A insert—

‘4B Meaning of “certified community housing provider’

(1) For the purposes of this Part of this Act, a person is a “certified community housing provider” if the appropriate tribunal has issued a community housing certificate in respect of the person.

(2) A community housing certificate is a certificate that the tribunal has determined that the person—

(a) is a community land trust within the meaning of section 2(7A) of the Leasehold Reform (Ground Rent) Act 2022, or

(b) is of a description, or satisfies conditions, specified for this purpose in regulations made by the Secretary of State.

(3) The tribunal may issue a community housing certificate only in respect of a person that has made an application to the tribunal for the certificate.

(4) The tribunal may cancel a community housing certificate—

(a) on the application of the person in respect of which the certificate is issued, or

(b) on the application of a tenant affected by the certificate, if the tribunal considers that—

(i) the person in respect of which the certificate is issued does not fall within subsection (2)(a) or (b), or

(ii) the certificate was obtained by deception or fraud.

For this purpose a tenant is “affected by” a certificate if, by virtue of section 1(1C), the tenant does not have the right to acquire the freehold because the certificate is issued in respect of their landlord.

(5) The effect of the tribunal cancelling the certificate is that the person is not a certified community housing provider unless the tribunal issues a new community housing certificate.

(6) The Secretary of State may by regulations provide for—

(a) the procedure to be followed in connection with an application for a community housing certificate;

(b) the procedure to be followed for the cancellation of a community housing certificate (including in connection with an application for the cancellation);

(c) any matters to which the tribunal must have regard in deciding whether to issue or cancel a community housing certificate.

(7) The Secretary of State may by regulations make provision about the application of this Part in circumstances where—

(a) a landlord’s application for a community housing certificate has not been concluded when a tenant gives notice of their desire to have the freehold of a house and premises under this Part, or

(b) a tenant’s claim to have the freehold of a house and premises under this Part has not been concluded when a landlord’s application for a community housing certificate is made.

(8) Regulations under subsection (7) may in particular provide for—

(a) the claim for the freehold to be paused or to have no effect;

(b) a time period for the purposes of this Part to be extended in connection with the application;

(c) the landlord to compensate a tenant or reversioner in respect of reasonable costs incurred in connection with a claim to acquire the freehold—

(i) if the tenant ceases to have the right to acquire the freehold because of the issue of a certificate under this section, or

(ii) if the costs are incurred as a result of the claim being suspended because of an application for a certificate under this section;

(d) enforcement by the appropriate tribunal of any of the requirements of the regulations;

(e) the appropriate tribunal to make orders that are supplementary to the issue of a community housing certificate.

(9) Regulations under this section—

(a) may make different provision for different purposes;

(b) are to be made by statutory instrument.

(10) A statutory instrument containing regulations under this section (whether alone or with other provision) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.’

3B (1) The LRHUDA 1993 is amended as follows.

(2) In section 5 (qualifying tenants for enfranchisement), after subsection (2)(a) insert—

‘(aa) the immediate landlord under the lease is a certified community housing provider (see section 8B); or’

(3) Before section 9 insert—

‘8B Meaning of “certified community housing provider’

(1) For the purposes of this Chapter, a person is a “certified community housing provider” if the appropriate tribunal has issued a community housing certificate in respect of the person.

(2) A community housing certificate is a certificate that the tribunal has determined that the person—

(a) is a community land trust within the meaning of section 2(7A) of the Leasehold Reform (Ground Rent) Act 2022, or

(b) is of a description, or satisfies conditions, specified for this purpose in regulations made by the Secretary of State.

(3) The tribunal may issue a community housing certificate only in respect of a person that has made an application to the tribunal for the certificate.

(4) The tribunal may cancel a community housing certificate—

(a) on the application of the person in respect of which the certificate is issued, or

(b) on the application of a leaseholder affected by the certificate, if the tribunal considers that—

(i) the person in respect of which the certificate is issued does not fall within subsection (2)(a) or (b), or

(ii) the certificate was obtained by deception or fraud.

For this purpose a leaseholder is “affected by” a certificate if, by virtue of section 5(2)(aa), the leaseholder is not a qualifying tenant because the certificate is issued in respect of their immediate landlord.

(5) The effect of the tribunal cancelling the certificate is that the person is not a certified community housing provider unless the tribunal issues a new community housing certificate.

(6) The Secretary of State may by regulations provide for—

(a) the procedure to be followed in connection with an application for a community housing certificate;

(b) the procedure to be followed for the cancellation of a community housing certificate (including in connection with an application for the cancellation);

(c) any matters to which the tribunal must have regard in deciding whether to issue or cancel a community housing certificate.

(7) The Secretary of State may by regulations make provision about the application of this Chapter in circumstances where—

(a) a landlord’s application for a community housing certificate has not been concluded when a nominee purchaser gives notice under section 13 of a claim to exercise the right to collective enfranchisement, or

(b) a claim to exercise the right to collective enfranchisement has not been concluded when a landlord’s application for a community housing certificate is made.

(8) Regulations under subsection (7) may in particular provide for—

(a) the claim for the freehold to be paused or to have no effect;

(b) a time period for the purposes of this Chapter to be extended in connection with the application;

(c) the landlord to compensate the nominee purchaser, a tenant or a reversioner in respect of reasonable costs incurred in connection with a claim to exercise the right to collective enfranchisement—

(i) if a person ceases to be a participating tenant because of the issue of a certificate under this section (and in this case the compensation may relate to reasonable costs for which the person is liable that are incurred after the person ceases to be a participating tenant),

(ii) if the participating tenants cease to have the right to collective enfranchisement because of the issue of a certificate under this section, or

(iii) if the costs are incurred as a result of the claim being suspended because of an application for a certificate under this section;

(d) enforcement by the appropriate tribunal of any of the requirements of the regulations;

(e) the appropriate tribunal to make orders that are supplementary to the issue of a community housing certificate.’

(4) In section 39(3)(a) (qualifying tenants for extension), before ‘(5)’ insert ‘(2)(aa), ’.

(5) In section 100 (orders and regulations), after subsection (2) insert—

‘(2A) But a statutory instrument containing regulations under section 8B (whether alone or with other provision) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.’”

This amendment would provide for an exception to enfranchisement (but not extension) for tenants of certified community housing providers (persons certified as managing land for the benefit of local communities).

Lee Rowley

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As we considered regarding clause 4, schedule 1 repeals blockers to enfranchisement claims. The schedule repeals blockers that enable landlords to block claims for lease extensions and freehold acquisitions where the landlord intends to redevelop a property. The rights apply to cases where leases are very near to ending and, again, are rarely used. Compensation is paid to leaseholders only where the blockers are used in houses, not flats.

The schedule also repeals blockers that apply to niche cases, including: a blocker allowing a landlord or their family to reoccupy a house, which now applies to very few leases, due to its criteria; a public authority development blocker that has fallen from use; and a blocker to sub-lease extensions, where they are granted out of a superior extended lease.

The schedule makes consequential amendments that are necessary because of the repeals that I have just described. Where a lease is extended, landlords continue to have statutory break rights, which we will consider in later deliberations, and they may continue to seek voluntary agreements to end a lease. Public landlords may also have access to compulsory purchase orders. I commend that measure to the Committee.

I will now speak to amendment 57 and the consequential amendments 30 and 32. While we want to encourage many more leaseholders to buy their freeholds, there are good reasons for certain properties to be exempt from freehold ownership. For instance, certain community-led developments, providing affordable housing for local people, wish to be exempt from freehold acquisition—that is not their original purpose and it should not become so—so that the homes can remain affordable for the benefit of the community in perpetuity.

These amendments exempt community land trusts, a form of community-led housing, from freehold acquisition, as that model of housing relies on land being held in single ownership to remain as community-led housing. The amendments also provide a power for the Secretary of State to define in regulations further types of community-led housing, should that be necessary in future.

The exemption will only apply to an organisation once it has obtained a certificate from the tribunal that it satisfies the definition of community-led housing. That ensures that the exemption is properly targeted and not misused. An organisation will cease to benefit from the exemption if the certificate is cancelled by the tribunal. That includes where the organisation no longer satisfies the definition of a community-led housing organisation, or where the organisation asks the tribunal to cancel the certificate.

These amendments will protect the benefits of genuine community-led housing schemes from being lost to future generations. I therefore commend them to the Committee.

Finally, I beg to move amendment 58 in my name.

Lee Rowley

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My apologies, Mr Efford. I thought that we were debating these as a group. I will come to amendment 58 when we get to that group.

Rachel Maclean

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I will not detain the Committee for long. In response to those comments from the Opposition, I observe only that when they were last in government— in 2002, if I am correct—they had the opportunity to address the system and rectify the failures that we are now dealing with. It is now left to this Government to do it. On that note, I want to say to my hon. Friend the Minister how important it is that the community-led housing sector is excluded. I would not normally say that about any form of housing, but we have recently strengthened the national planning policy framework to encourage more of that type of housing. We know it is popular and often commands local support, while other types of housing sadly do not, and we need to see more of it built. The sector has had extensive discussions. This is a sensible amendment, which I support.

Lee Rowley

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I thank my hon. Friend for confirmation of the importance of community-led housing, which we have spoken about previously. I absolutely agree about its importance.

I will not get into a broader conversation about the processes of government, other than to say that I note the concerns of the hon. Members for Brent North and for Greenwich and Woolwich. The intention is to give the Committee and the House as a whole as much scrutiny as possible. I am sure that the hon. Members will understand that, outside the bounds of the points that they are making, getting proposed legislation ready is often a complicated process—in particular ensuring that it is as correct as it can be. None the less, I have noted their points, but I hope to be grateful for their support for the underlying provision we are debating.

Amendment 57 agreed to.

Lee Rowley

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I beg to move amendment 58, in schedule 1, page 82, line 28, at end insert—

“Eligibility of leases of National Trust property for extension

4A For section 32 of the LRA 1967 (saving for National Trust) substitute—

‘32 National Trust property

(1) Property is “inalienable National Trust property” for the purposes of this section if an interest in the property is vested inalienably in the National Trust for Places of Historic Interest or Natural Beauty under section 21 of the National Trust Act 1907.

(2) This Part does not prejudice the operation of section 21 of the National Trust Act 1907, and accordingly a tenant does not have the right under this Part to acquire the freehold of inalienable National Trust property.

(3) The right to an extended lease has effect subject to the following provisions of this section only if and to the extent that the existing tenancy demises inalienable National Trust property.

(4) In a case where the existing tenancy is a post-commencement protected National Trust tenancy, the tenant does not have the right to an extended lease.

(5) In a case where the existing tenancy is a pre-commencement protected National Trust tenancy, this Act is to have effect in relation to the right to an extended lease without the amendments made by the Leasehold and Freehold Reform Act 2024 (but without altering the effect of this subsection).

(6) In any other case, the right to an extended lease has effect subject to subsections (7) and (8).

(7) In determining whether the tenant has the right to an extended lease, the following requirements in section 1 do not apply—

(a) any requirement for the tenancy to be at a low rent;

(b) any requirement in section 1(1)(a)(i) or (ii) for the house and premises or the tenancy to be above a certain value.

(8) If the tenant exercises the right to an extended lease, the new tenancy must contain the buy-back term which is prescribed for this purpose in regulations made by the Secretary of State (the “prescribed buy-back term”).

(9) A “buy-back term” is a term which gives the National Trust the right to buy the whole or part of the extended lease if—

(a) it is proposed to make a disposal of the extended lease that is of a description specified in that term (which may be a disposal of the whole or a part of the property demised), or

(b) the National Trust exercises a prescribed buy-back term that is contained in a lease which is inferior to the extended lease.

(10) The prescribed buy-back term may, in particular, make provision about—

(a) the procedure where it is proposed to make a disposal that is of a description specified in the term;

(b) the procedure for exercising the right to buy;

(c) the price payable;

(d) the payment of costs incurred in connection with the operation of the term (including requirements for one person to pay costs incurred by another person);

(e) the operation of the term if the National Trust is not a party to the extended lease.

(11) If the National Trust is not the landlord under the extended lease, the National Trust may at any time apply to the appropriate tribunal for an order to secure that the extended lease is varied to contain (if or to the extent that it does not already do so) the prescribed buy-back term; and an order made on such an application may appoint a person who is not party to the extended lease to execute a variation of the lease.

32ZA Section 32: supplementary provision

(1) For the purposes of section 32, the existing tenancy is a “protected National Trust tenancy” if the tenancy is prescribed, or is of a description of tenancies prescribed, in regulations made by the Secretary of State.

(2) Regulations may not provide for a tenancy to be a protected National Trust tenancy unless the tenancy is within case A or case B.

(3) Case A: some or all of the property let under the tenancy is—

(a) property to which the general public has access, or

(b) part of property to which the general public has access (whether or not the general public has access to any property let under the tenancy),

whether the arrangements for public access are managed by the National Trust, the tenant or another person.

(4) Case B: the existing tenancy was granted to—

(a) a former owner,

(b) a relative of a former owner, or

(c) the trustees of a trust whose beneficiaries are or include—

(i) a former owner, or

(ii) a relative of a former owner.

(5) Regulations under section 32 or this section—

(a) may make different provision for different purposes;

(b) are to be made by statutory instrument.

(6) A statutory instrument containing regulations under section 32 or this section is subject to annulment in pursuance of a resolution of either House of Parliament.

(7) In section 32 and this section—

“commencement” means the day on which paragraph 4A of Schedule 1 to the Leasehold and Freehold Reform Act 2024 comes into force;

“disposal” , in relation to an extended lease, includes—

(a) the grant of a sub-lease of property demised by the extended lease;

(b) a change in control of a body (whether or not incorporated) which owns the extended lease;

(c) the surrender of the extended lease;

(d) a disposal (of any kind) for no consideration;

“former owner” , in relation to inalienable National Trust property let under a tenancy, means—

(a) a person who transferred the freehold of the property to the National Trust,

(b) a person who owned the freehold of the property immediately before its transfer to the National Trust by, or at the direction of—

(i) the Commissioners for His Majesty’s Revenue and Customs,

(ii) the Commissioners of Inland Revenue, or

(iii) the Treasury,

(c) a person whose executors transferred, or directed the transfer of, the freehold of the property to the National Trust, or

(d) a person who was a beneficiary under a trust whose trustees transferred, or directed the transfer of, the freehold of the property to the National Trust;

“post-commencement protected National Trust tenancy” means a tenancy which—

(a) was granted on or after commencement, unless it was granted under an agreement made before commencement, and

(b) is a protected National Trust tenancy;

“pre-commencement protected National Trust tenancy” means a tenancy which—

(a) was granted—

(i) before commencement, or

(ii) on or after commencement under an agreement made before commencement, and

(b) is a protected National Trust tenancy;

“relative” includes a person who is related by marriage or civil partnership;

“right to an extended lease” means the right under this Part to acquire an extended lease.’

4B For section 95 of the LRHUDA 1993 (saving for National Trust) substitute—

‘95 National Trust property

(1) Property is “inalienable National Trust property” for the purposes of this section if an interest in the property is vested inalienably in the National Trust for Places of Historic Interest or Natural Beauty under section 21 of the National Trust Act 1907.

(2) Chapter 1 does not prejudice the operation of section 21 of the National Trust Act 1907, and accordingly there is no right under Chapter 1 to acquire an interest in inalienable National Trust property.

(3) The right to a new lease has effect subject to the following provisions of this section only if and to the extent that the existing lease demises inalienable National Trust property.

(4) In a case where the existing lease is a protected National Trust tenancy, the tenant does not have the right to a new lease.

(5) If—

(a) the existing lease is not a protected National Trust Tenancy, and

(b) the tenant exercises the right to a new lease,

the new lease must contain the buy-back term which is prescribed in regulations made by the Secretary of State (the “prescribed buy-back term”).

(6) A “buy-back term” is a term which gives the National Trust the right to buy the whole or part of the new lease if—

(a) it is proposed to make a disposal of the new lease that is of a description specified in that term (which may be a disposal of the whole or a part of the property demised), or

(b) the National Trust exercises a prescribed buy-back term that is contained in a lease which is inferior to the extended lease.

(7) The prescribed buy-back term may, in particular, make provision about—

(a) the procedure where it is proposed to make a disposal that is of a description specified in the term;

(b) the procedure for exercising the right to buy;

(c) the price payable;

(d) the payment of costs incurred in connection with the operation of the term (including requirements for one person to pay costs incurred by another person);

(e) the operation of the term if the National Trust is not a party to the new lease.

(8) If the National Trust is not the landlord under the new lease, the National Trust may at any time apply to the appropriate tribunal for an order to secure that the new lease is varied to contain (if or to the extent that it does not already do so) the prescribed buy-back term; and an order made on such an application may appoint a person who is not party to the new lease to execute a variation of the lease.

95A Section 95: supplementary provision

(1) For the purposes of section 95, the existing lease is a “protected National Trust tenancy” if the lease is prescribed, or is of a description of leases prescribed, in regulations made by the Secretary of State.

(2) Regulations may not provide for a lease to be a protected National Trust tenancy unless the lease is within case A or case B.

(3) Case A: some or all of the property let under the lease is—

(a) property to which the general public has access, or

(b) part of property to which the general public has access (whether or not the general public has access to any property let under the lease),

whether the arrangements for public access are managed by the National Trust, the tenant or another person.

(4) Case B: the existing lease was granted to—

(a) a former owner,

(b) a relative of a former owner, or

(c) the trustees of a trust whose beneficiaries are or include—

(i) a former owner, or

(ii) a relative of a former owner.

(5) Regulations under section 95 or this section—

(a) may make different provision for different purposes;

(b) are to be made by statutory instrument.

(6) A statutory instrument containing regulations under section 95 or this section is subject to annulment in pursuance of a resolution of either House of Parliament.

(7) In section 95 and this section—

“disposal” , in relation to a new lease, includes—

(a) the grant of a sub-lease of property demised by the new lease;

(b) a change in control of a body (whether or not incorporated) which owns the new lease;

(c) the surrender of the new lease;

(d) a disposal (of any kind) for no consideration;

“former owner” , in relation to inalienable National Trust property let under a tenancy, means—

(a) a person who transferred the freehold of the property to the National Trust,

(b) a person who owned the freehold of the property immediately before its transfer to the National Trust by, or at the direction of—

(i) the Commissioners for His Majesty’s Revenue and Customs,

(ii) the Commissioners of Inland Revenue, or

(iii) the Treasury,

(c) a person whose executors transferred, or directed the transfer of, the freehold of the property to the National Trust, or

(d) a person who was a beneficiary under a trust whose trustees transferred, or directed the transfer of, the freehold of the property to the National Trust;

“relative” includes a person who is related by marriage or civil partnership;

“right to a new lease” means the right under Chapter 2 to a new lease.’”

This amendment would provide for tenants of National Trust properties to have the right to extension, subject to exceptions, and subject to a requirement to grant the National Trust the right to buy back the property in certain circumstances.

Lee Rowley

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My enthusiasm for the amendment was such that I started to speak to it earlier, but I am now moving it in the correct place.

The National Trust play a big role in looking after the heritage of the nation. Inalienable National Trust land is held for the benefit of the nation, forever. In order to ensure that that land remains in national ownership for future generations, freehold acquisition is restricted on National Trust land. None the less, the Government want to see National Trust leaseholders’ rights improved.

The amendment means that National Trust leaseholders will benefit from the new lease extension rights in line with other leaseholders, so that the 990 years will apply in this instance. The new rights will be subject to a narrow exception for a small number of leases of specified visitor attraction properties and donor leases. That will allow the trust to make bespoke lease agreements when a noteworthy property comes into its ownership—for example, where a property could be opened to the public in whole or in part, or where arrangements have been made with family members when a property has been gifted to the state and the trust itself. Those limited exceptions will be set out in regulations made by the Secretary of State in due course. Those leaseholders will retain their existing lease extension rights where they already have them.

The amendment also makes provision for the National Trust to buy back an extended lease at market value, if the existing leaseholder chooses to dispose of their lease. That will allow the National Trust to manage the long-term use of its inalienable land on behalf of the nation. I commend the amendment to the Committee.

Amendment 58 agreed to.

Schedule 1, as amended, agreed.

Clause 5

Acquisition of intermediate interests in collective enfranchisement

Question proposed, That the clause stand part of the Bill.

Lee Rowley

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The clause sets out how intermediate leases and leases of common parts are treated in collective enfranchisement claims for flats. In home ownership, intermediate leases are the middle rungs on a ladder between the freeholder at the top, and the leaseholder with rights at the end. Leases of common parts might cover parts of premises such as stairways.

The clause will introduce proposed new schedule A1 to the 1993 Act. The schedule sets out a series of gateways that require leaseholders to acquire certain interests, but also grants them further choices to reduce premiums. Qualifying leaseholders who participate in a claim must acquire all intermediate leases superior to their leases. They can, however, choose to leave in place the part of an intermediate lease superior to those qualifying leaseholders who are not participating. The intention is that this will help to reduce the premium where not all leaseholders wish to participate.

For example, leaseholders could leave the head lease in place above two out of eight flats, where the two are not participating. Where leaseholders acquire only part of a lease, they still need to acquire the relevant parts of leases above it in the chain to prevent a disrupted management structure.

The schedule sets out that leaseholders do not need to acquire a whole lease of common parts where certain legal tests are met, which will help to reduce premiums. The schedule prevents the acquisition of special cases of intermediate leases in collective enfranchisement. That includes qualifying leaseholders who own the immediately superior intermediate lease and landlords with enfranchisement rights over a flat. Those parts of leases can be retained by the owners to preserve their homes or tenure at the property. The schedule sets out various mechanisms for allowing leases to be left in place. That is done via an existing process called severing, and clause 16(6) gives the tribunal new powers to determine the terms of that.

The schedule preserves the necessary elements of the existing law that prevent ill effects arising from collective enfranchisement. Landlords can continue to require leaseholders to acquire interest, for instance where it would be impossible to maintain the premises. An exception that prevents the acquisition of interest held by public sector landlords continues. I commend the clause to the Committee.

Lee Rowley

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My response is short. I will happily write to the hon. Gentleman and to the Committee in due course on the technicalities to ensure that is correct.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Right to require leaseback by freeholder after collective enfranchisement

Lee Rowley

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I will turn first to the amendment from the hon. Member for Brent North. I appreciate the point that he has made, and he articulated it very well. He is rightly concerned that all those who have an interest in a building should need to pay for it. The amendment’s intent is to require any leases granted to include a requirement to make contributions to service charges, as he articulated. Our understanding—I have checked, following the introduction of his amendment—is that the existing law should sufficiently cover this and it should be unlikely that intermediate landlords will not ensure that their sub-lessees contribute to the service charges of a property. But I recognise that the hon. Gentleman has a lot of experience, knowledge and background in this area over many years, so if he wants to write to me separately, with examples of where we potentially have not understood the detail of the point that he is making, I will be happy to look at that in more detail.

Lee Rowley

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I am grateful to the hon. Gentleman for pointing that out. As indicated, this all needs to be considered in the round. Very few things come without trade-offs and without consideration of other implications. One reason why we are not able to support this amendment today is that we do not think that it is necessary. As a result, I hope that the hon. Member for Brent North will not push it to a vote but will withdraw it. If we have missed something, I will be happy to look at that separately. As the hon. Member for Greenwich and Woolwich suggested, this is something that we do not think is necessary in the wider scheme of things, but if there is a thing that we have missed, I will happily take further information on it.

I will now turn to clause 6, which has been discussed already to some extent. The Government want to broaden access to collective enfranchisement, so that more leaseholders can buy their freehold. However, we recognise that increased access will remain theoretical if many leaseholders are unable to afford to buy their freehold. Therefore, this enfranchisement must be cheaper if leaseholders are to gain the benefits of the ownership that is being sought.

Clause 6 introduces a leaseback right for leaseholders that, if they elect to use it as part of a claim, will in some cases significantly reduce the up-front price that they must pay. “Leaseback”, as has been indicated, is the term commonly used to refer to an intermediate lease over part of a building that is granted to the outgoing freeholder as part of an enfranchisement claim. This leaseback covers the value of the unit, which is therefore retained by the outgoing freeholder and reduces the cost for leaseholders of buying the freehold. Currently, the outgoing freeholder can require the leaseholders taking forward a collective enfranchisement to grant the freeholder a leaseback of any non-qualifying units in a building. Clause 6 gives leaseholders an equivalent right to require the outgoing freeholder to take a 999-year leaseback, at a peppercorn rate, of any non-participating units in the building as part of the claim.

In mixed-use buildings, the question of affordability is even more acute, as leaseholders must pay for the freehold interest in non-residential parts of the building, which they have no existing financial interest in, as well as their flats, which they already partly own.

Lee Rowley

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I am happy to give the hon. Gentleman that assurance, and I will be happy to write to him.