Leasehold and Commonhold Reform

Wednesday 2nd October 2019 Westminster Hall

[Albert Owen in the Chair]

16:00

[Sir Peter Bottomley (Worthing West) (Con)]

I beg to move,

That this House has considered progress on leasehold and commonhold reform.

This debate is an opportunity for the Government to explain what progress has been made on this issue, describe what is in their mind at the moment, and give us some hope that there will be even more improvements in future.

Before I start in detail, I want to thank colleagues who have worked really hard on the issue. I welcome the fact that the Labour party has developed proposals of its own, and I know that the Liberal Democrats have done the same. In particular, I thank and praise the hon. Member for Poplar and Limehouse (Jim Fitzpatrick), who I think has done more on this issue than any other Member of Parliament. I also thank the hon. Member for Ellesmere Port and Neston (Justin Madders), who has joined in and helped to make the scandal of leasehold homes in the north-west so relevant.

I also pay tribute to the right hon. Member for Kingston and Surbiton (Sir Edward Davey), who was deeply involved in the early stages of the campaign by the Leasehold Knowledge Partnership. That charity’s campaign, both for the ordinary leaseholders of flats and houses and in the retirement field, has done so much to make it possible for the work of MPs to be well directed and well supported. With Louise O’Riordan, it acts as the secretariat for the all-party parliamentary group on leasehold and commonhold reform, and I think we can all say that we have made progress together.

I say to those in the Government field and in the Government’s Leasehold Advisory Service, or LEASE, that we often agree that problems exist. We agree more often now than we did five years ago, when a succession of temporary Housing Ministers could not see that there is a problem, which partly was because the Department did not have many officials working on the issue of leaseholds and commonholds. The attempt by Parliament and the Government to bring in commonhold failed because the responsibility for it was split with the Ministry of Justice, which had no resources whatsoever. As a result, nothing happened. When we put forward the case for uniting commonhold with leasehold, I understand that the predecessor Department to the Ministry of Housing, Communities and Local Government said that it would take responsibility if it received the resources, but there were no resources.

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

I and other Labour Members are grateful to the hon. Gentleman for his generous comments, and I congratulate him on securing the debate. He does not have any support from other Government Members at the moment, whereas Labour Members are mob-handed in Westminster Hall today. However, I can assure him that we are here as his fan club and support structure, because it is the prominent role that he has played—leading the all-party parliamentary group, as co-chair—that has ensured that we have been able to press the Government on the issue. To the Government’s credit, they have made a number of commitments on leasehold during the past five years, and we are very keen to hear the Minister’s response to this debate.

[Sir Peter Bottomley]

That is the sort of remark I can survive, and I am grateful for it.

I will say, as I try to in each of the debates on the issue, that I am a leaseholder of a small flat in my constituency, and with the other five leaseholders we bought the freehold. We had a good freeholder, good managing agents and we have had no problem whatsoever, and we know how the system can work. In effect, we are commonhold now, but we were originally freehold. Ground rents were low and we did not have the problem of ground rents doubling every 10 years.

We also did not have the kind of crooks, such as Martin Paine, who came in and gave informal leases, which really made a mess of people’s lives. We did not suffer from the Tchenguiz interests, which were responsible—both in the retirement field and in other fields—for some of the worst excesses. Frankly, the public authorities, such as the fraud people, the economic crimes people, the police and the Competition and Markets Authority people failed, and the Tchenguiz-controlled business got away scot free, when the people in that business should have been sent to jail and fined millions of pounds. The millions of pounds would have made up for the losses of the ordinary leaseholders who were failed by them.

I also pay tribute to Martin Boyd and Sebastian O’Kelly, chief executive and trustee of the Leasehold Knowledge Partnership, who have done so much, and they have now joined members of the National Leasehold Campaign and Bob Bessell, the former director of social services in Warwickshire, who in his retirement built 1,600 retirement homes without a single ground rent.

I thank my right hon. Friend the Minister for coming down on a fast train from Manchester, where she has given distinguished service over the past two days. I ask her to review whether it is sensible, necessary or right to allow ground rents in retirement properties. I look on the Churchill Group as the son of McCarthy and Stone, which was, with Peveril, at the foundation of some of the problems that hit previous generations. To any Treasury civil servant who reads the report of this debate, I would say that if we get leasehold and commonhold right, the value of homes will go up, not down, and the income to the Treasury will go up.

[Mark Tami (Alyn and Deeside) (Lab)]

My area has quite a few new leasehold housing estates, some of which have now been there for a number of years. The residents are being hit with a double whammy. They have all the costs associated with leasehold and they also have service management fees, which are absolutely enormous and growing. More and more people are reporting to me that they cannot sell their properties because they get partway through the process and the buyer looks at the cost and says, “No way.”

[Sir Peter Bottomley]

We are not able to cover everything in a half-hour debate, but that is one of the issues to which I think the House of Commons needs to return. We ought to have a full-day debate, preferably in Government time and on the Floor of the House, so that many other Members can speak and be a voice for their constituents.

As an example for those who do not read Private Eye on the day it comes out, there is a story about Rothesay Life, which apparently has £1.5 billion of loans. It can revalue the interest over 30 years and take it almost as instant profit. That is the kind of thing that leads people to say, “I am going to be greedy and get away with things as long as I can.”

[Justin Madders (Ellesmere Port and Neston) (Lab)]

I echo the comments of my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick). We are very grateful to the hon. Gentleman for all the work that he has put into the campaign, which is growing stronger by the day. Some of the voluntary schemes that developers have entered into with leaseholders have a sting in the tail, with additional clauses carrying on afterwards. Does he agree that that example shows that it is important to get something on a statutory footing as soon as possible?

[Sir Peter Bottomley]

The whole House will agree with the hon. Gentleman. Incidentally, we got the Competition and Markets Authority to hold an investigation into leasehold and—this is one of my tributes to the Government—I want to say how grateful we all are for the matters that have been sent across to the Law Commission, with the aim of getting practical and fair proposals that can be enacted.

One such important issue is lease extensions. There are more than 1 million leases, mainly of flats, that are coming to the 80-year limit where they cannot be mortgaged and where the marriage value starts coming in. At the moment, it is very difficult to find a cheap, easy and fair way of getting an extension on a lease. As and when we come to the elimination of new ground rents, we should find a way of putting a sunset clause on old ground rents, and give an incentive to freeholders to come forward with ways of getting some capital value now, rather than none later on. They have had the dawn of their money, and there needs to be some kind of sharing of the dusk that stops the money rolling in. We need to find a way of saying to them, “Let’s agree a simple chart; if you take 10 years of existing ground rent, don’t start saying you will take a doubling, and a doubling again after that.”

I interrupt myself to say that there is one announcement from the last couple of days that is potentially very dangerous to leaseholders, which is the proposal that people can put two more storeys on top of a block without planning permission. If the block is owned by an outside freeholder, that will ruin the chance of enfranchisement. If it is going to happen, all the value should go to the leaseholders, not the freeholder. In fact, it might provide an incentive for the leaseholders to buy the freehold and then agree among themselves how to deal with building on, and having a bigger community. As I said, I own a lease and part of a freehold of a block in Worthing. I am also contracted to buy a leasehold flat that is being built at the moment, which might be built in three years’ time. If anyone thinks that I have an interest in this issue, I do—if I get any benefit from it, I will give it to a good cause.

To go back to LEASE, MPs have had difficulty with its two previous chairs. The first, Deep Sagar, showed no understanding at all that LEASE should not be helping rapacious freeholders or clever managing agents to screw money out of leaseholders. He moved on, but I must say incidentally to the civil service appointments people that they should count how many public appointments he has had—I think he has had more than the number of years I have had in the House of Commons, which is 45. The second chair was Roger Southam, whom I took on trust when he was appointed. Others said that he was not trustworthy. It turned out that I was wrong and they were right.

I hope that when a permanent chair is chosen for LEASE—it now has an interim chair—the stakeholders will be consulted on the process and, if possible, given a chance to comment on who might be on the shortlist. If they do not want to trust me, perhaps they could ask the hon. Member for Poplar and Limehouse or someone else to bring an impartial view. LEASE has been led for many years by Anthony Essien. I have no complaint about him; I have treated him with respect on every occasion, and vice versa.

LEASE has been changing: it is now unequivocally on the side of leaseholders, thanks to the intervention of Gavin Barwell, who was the first Housing Minister to get a grip on what was needed—he provided leadership in the Department, and I am glad that the Department has responded. LEASE’s website now has more than 100 categories under which people can interact and get some advice. The problem is that LEASE could not give all the advice on practical things.

For example, on the Grenfell Tower cladding issue, when the Government rightly said that no social tenant should have to carry the cost of re-cladding, the private tenants were left stuck, either in public or private blocks. The advice that the campaigning charity Leasehold Knowledge Partnership gave was right, while the advice that LEASE gave—to go to court—was wrong, because the tribunals had to reach the unfair conclusion that the leaseholder was stuck with the cost.

I pay great tribute to the then Secretary of State for Housing, Communities and Local Government, my right hon. Friend the Member for Old Bexley and Sidcup (James Brokenshire), who got the Government to agree—perhaps against the advice of some civil servants—to carry the cost. He solved a problem that would otherwise have hit many small people.

There are other issues that I could cover at some length. I pay tribute to the National Leasehold Campaign, and to Katie Kendrick and Jo Darbyshire; to Victoria Derbyshire’s programme on BBC 2, which gave the issue prominence at a time when it mattered; to Patrick Collinson of The Guardian; to whoever advises Strobes at Private Eye on leasehold issues; and to others.

I declare this in public: if any of these big property interests threaten defamation proceedings against any of the leasehold campaigners, I will say on the Floor of the House of Commons exactly what can be said about them, in spades—I won’t hold back. Up to now I have been pretty restrained, but I want people to know this: do not bully those who campaign for justice. We are all on the side of the small voice. By all means have discussion, and by all means have disagreement, but do not think that you can get away with lawyers’ letters of the kind that get prominence every now and again in Strobes’s legal pages.

[Ruth George (High Peak) (Lab)]

I pay tribute to the hon. Gentleman for all the work that he has put in over many years; many of us have come in on the back of it. Does he welcome the decision in the Persimmon case in north Wales last month and recognise that other leaseholders are in a similar position of not having had enough information when they bought out their lease? I have a situation with Barratt Homes in my constituency, where leaseholders are now looking to get the county council to take on a similar case under trading standards. Would it not be far more efficient for the Government to send out a clear message to property companies in this case that they really need to do the right thing by leaseholders who have been dishonestly sold to? That would save them from all those actions and relieve the pressure on county councils and leaseholders.

[Sir Peter Bottomley]

The whole House will agree. Perhaps it would help if the Ministry considered having a roundtable to go through some of these issues—it would not have to be secret, but it could be informally private. We were fortunate, in part, with Pete Redfern of Taylor Wimpey, when we discovered that the then chair of LEASE had written totally defective documents that put it as though Roger Southam could control blocks that should never have been anywhere near his control. That got resolved. Taylor Wimpey said it would set aside £130 million to put right some of the things it now recognises it should not have done—it has not done enough, but at least it recognises the issue and has made a start.

I think the trading standards case in Wales is a way forward. Responsible shareholders in each of the building firms should be saying, “With social responsibility in corporate governance, what are you going to do about it?” That applies to Barratt as to the other firms. As for Persimmon, I hope that it will say that this is not just a judgment relevant to Wales, where in fact it kept away from judgment by making a voluntary payment, but applies to England as well.

Put simply, we need to abolish new leaseholds in any but the most extreme circumstances; we need to find a way to convert to commonhold; and we need to make commonhold so well known that when people try to register, it is recognised by Help to Buy and by the Land Registry—it is now recognised by both, but it was not previously. Advice should be taken from the all-party group and our secretariat, the Leasehold Knowledge Partnership. When there is friction, let us try to resolve it in a normal way. I end with this offer: I hope that the chief executive of LEASE will accept an invitation to bring all his staff to a drinks party here in the House of Commons, where the all-party group and those who give day-to-day advice to leaseholders can come together and get past any problems that may be apparent at the moment.

16:16

[The Minister for Housing (Ms Esther McVey)]

I congratulate my hon. Friend the Member for Worthing West (Sir Peter Bottomley) on securing today’s debate on the progress of leasehold and commonhold reform. He is a determined and formidable campaigner. I am also grateful to the Opposition Members who, with my hon. Friend, have been making solid progress on this important matter. With more than 4 million leasehold properties in the UK, we need to ensure that the system is working correctly, and that where it is not—where we see unfairness and exploitation—the market is held to account and changed.

[Sir George Howarth (Knowsley) (Lab)]

During a recent Backbench Business Committee debate on the Floor of the House, my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) and others raised the problem of people who had bought new properties in the north-west with leasehold arrangements that, to be frank, are a rip-off. At that point, the body language of the Minister—great champion of free enterprise that she is—conveyed her recognition that we had a case. Will she agree to meet a small delegation to discuss what can be done? The developers involved, in particular Redrow in my constituency, are completely unwilling to discuss the rights and decencies due to our residents.

[Ms McVey]

I will indeed meet the right hon. Gentleman and a delegation of fellow MPs. I did not realise he was such a good reader of body language, but he is quite right. The cases raised are not right, the system is not working right and those who agree with the market can see that it is not working right for the market either. Such cases should not be happening.

Let me be clear: the Government are committed to improving consumer fairness for leaseholders, and we have a programme of work under way to make sure that changes are made. Some of that work has already happened, including setting out how the ban on leasehold for new homes will work and stating our intention to reduce to zero ground rents on new leases, if we have them at all.

[Mark Tami]

The Minister talks about going forward, which is great, but we must go back too. We cannot leave behind the people who have been sold a pup. People tell us how they were advised to use Taylor Wimpey’s own lawyers and how it was never pointed out to them that the properties were leasehold. Even now, some people do not realise that they have a leasehold property.

[Ms McVey]

The hon. Gentleman makes a fair point; I will come to it later in my speech. No doubt, he realises that with leaseholds dating back a long time, there are legalities to unpick, but we are working on understanding how to do that.

I am pleased to see that the leasehold house ban has had an immediate effect on the market. In 2017, when we first made the announcement, 10% of new-build houses in England were sold as leasehold; today, that figure is down to 2%, which is significant progress, but we obviously want to make more. We will still legislate to ensure that, in future, apart from in exceptional circumstances, all new houses will be sold on a freehold basis.

Developers will no longer be able to use leases on houses for financial gain—a practice that has become the norm in some parts of the country, as we have heard again today. That will make certain that the right tenure is used on the right properties, which will make it fairer for all. The reforms will remove the incentives for developers and freeholders to use leaseholds to make unjustified profits at the expense of leaseholders.

[Matt Western (Warwick and Leamington) (Lab)]

To echo the point made by my right hon. Friend the Member for Alyn and Deeside (Mark Tami) about going back, do the Government see that as a responsibility and could they find a way to intervene? We have identical houses on the same estate: they were sold in the first phase as leasehold but are being sold in the second phase as freehold at the same price, yet the owners of the first-phase houses have been told that they must pay £3,750 to Persimmon, Redrow or whoever to convert to freehold. There is no market and there is no choice in that—is it not wrong?

[Ms McVey]

Everybody here can agree that is wrong, but it is about the steps that we will have to take to get the situation under control. We are looking at help for existing leaseholders, many of whom face, as the hon. Gentleman says, onerous fees and charges, including the doubling of ground rent in some cases. The Housing, Communities and Local Government Committee and many existing leaseholders want the Government to legislate to amend those. We are deeply concerned about the difficulties that people are having with those charges, but we clearly have to look at how to unpick those contracts, which are set in law.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I am grateful to the Minister for her generosity in giving way and to the hon. Member for Worthing West (Sir Peter Bottomley) for securing the debate.

One thing I would beg the Minister for is a simple right-to-buy formula, perhaps based on the number of years remaining—a multiple of the ground rent, in some way—that could be applied nationwide. I know there will be a lot of complexities in that, but is it something she is looking at in those plans? It would be great to hear if she were.

[Ms McVey]

We are indeed looking at a much simpler model that people can understand and make sense of, and at how to make it easier, smoother and quicker to do.

We have also made sure that there is a voluntary way for the sector to come together to solve the problems of its own creation. The industry pledge is an important first step. It has been signed by more than 60 leading developers, freeholders and managing agents. We will work with them and keep a vigilant eye on how it is working. Through that pledge, freeholders have committed to identifying any lease that doubles more frequently than every 20 years and contacting the relevant leaseholders to offer to amend their lease where necessary. I acknowledge those developers that have signed the pledge not to insert such clauses into future leases and welcome that. The pledge is an important first step, but we need to keep our eye on it. We will continue to monitor how effective it is in supporting leaseholders and we will take further action where necessary.

[Matt Western]

The Minister is being generous in giving way. It is interesting to hear that there is a voluntary assembly of the various housebuilders and developers. Surely, however, there is an opportunity for a paid-for body, funded by all those builders, to come together and arbitrate on behalf of the leaseholders and come to a sensible cost for them to pay for the conversion to freehold. Would not an independent body funded by the builders be a better solution?

[Ms McVey]

All the ideas that have come forward are being looked at to figure out what the way forward will be. That may well be something that ends up happening. At the moment, I cannot say, but we will look at every idea that comes forward.

The Government are looking to standardise the enfranchisement process and have asked the Law Commission to review the current arrangements. That is to support existing leaseholders and, as mentioned, it includes making buying a freehold or extending a lease easier, quicker and as cost-effective as possible. The Law Commission is analysing responses to its consultation paper on leasehold enfranchisement reform, “Leasehold home ownership: buying your freehold or extending your lease”. This autumn, it will report back to Government on the options for reducing the price of that, and on all other aspects of the enfranchisement regime early next year. I look forward to receiving its recommendations.

[Mike Amesbury (Weaver Vale) (Lab)]

If there is evidence of mis-selling and collusion between solicitors and developers, what action can the Government take?

[Ms McVey]

I shall come to that later, but the hon. Gentleman will know as well as I do, I hope, that that is looked at and where it can be proved that something wrong and unlawful has been done, it will be taken up and checked.

Obviously still more needs to be done. Our recent publications show the other plans we have for leasehold reform. They include our responses to the technical consultation on implementing reforms to the leasehold market, and to the Select Committee, most of whose recommendations we were able to accept in full or in part. We have also committed to regulating managing agents, and to improving the transparency and fairness of service charges. Too often, people feel ripped off by fees and charges, sometimes not even being told what they are paying for. We have committed to introducing a single mandatory and legally enforceable code of practice to set standards across the sector. We will also require agents to be qualified to practice.

Last October, we established an independent working group, chaired by Lord Best, to look at how standards can be raised across the property sector, and to consider how fees such as service charges should be presented to consumers. The working group published its final reports to the Government in July. We are considering its recommendations and will announce the next steps in due course.

[Sir Peter Bottomley]

The whole House is grateful to my right hon. Friend. There may not be time to get through all the things that the Government are doing and looking forward to doing, so would she consider making a written statement to lay things out and make them available to all, not just those who are here for the debate?

One thing that may not be dealt with straightaway is looking at the regulations on recognised tenants’ associations—in effect, recognising leaseholders, which I know is a tricky issue. The Government wrote to me saying that they would consult the property tribunal about how this was working. I do not ask for an instant response, but that is one of the issues that should go forward.

The Minister’s response to the Select Committee report is very good. The report was one of the best I have seen in all my time in the House, and the Government are responding to it well.

[Ms McVey]

My hon. Friend makes a good point. We should and will lay the matter down as a written statement. Everyone, across the House, appreciates that there is bad practice. Where bad practice happens, in whatever form, it should be taken to task.

It is unacceptable that some freehold homeowners are unable to challenge excessive fees for the maintenance of their estates. We are going to legislate so that residential freeholders will be given the right to challenge the reasonableness of such fees. They will also be able to apply to the tribunal to appoint a new manager. That will help to increase the transparency, accountability and reasonableness of the fees.

Many leaseholders have raised concerns because they believe they were mis-sold their properties—the leasehold tenure was not properly explained to them, and the onerous terms were not made clear. Some were told that they could buy the freehold for a certain price after a couple of years, only to find out that it had been sold on to an investor in that time and that either the price had gone up considerably or they could not buy it. I welcome the Competition and Markets Authority’s current investigation of the issue.

I appreciate that I am running out of time, but I will indeed meet with my colleagues. I thank my hon. Friend the Member for Worthing West for bringing this important matter to Westminster Hall. It is something that all colleagues want to get right. Abuses will not be accepted by any of us.

Question put and agreed to.