Leaseholders and Managing Agents

Tuesday 28th February 2023 Westminster Hall

16:29

[Sir George Howarth (in the Chair)]

We are expecting a Division at any moment. When it is called, there will be a 15-minute suspension to enable Members to go and vote, but if there are two votes, there will be a 25-minute suspension, so do the maths.

[Barry Gardiner (Brent North) (Lab)]

I beg to move,

That this House has considered leaseholders and managing agents.

I am grateful to present this debate under your chairmanship, Sir George, because I know that you have significant involvement with your local leaseholders in Knowsley, for which they are very grateful. Saying the word “leasehold” to any Member of Parliament is likely to begin a long conversation on one of two things: fire safety or service charges. I could have phrased that better: it would be more accurate to say “unsafe homes caused by fire safety defects” and “rip-off service charges by unscrupulous managing agents”.

For many people, the issue of leasehold crystalised after the tragedy of the Grenfell Tower fire and the subsequent purgatory that hundreds of thousands of residents throughout the country found themselves living through as they waited to have their own buildings’ fire safety defects remediated. They are still waiting. It was about much more than cladding and EWS1 forms. Residents who found that their homes had been constructed without internal fire stopping, or with inappropriate materials or inadequate fire doors, were unable to sell their property and move on with their lives because construction companies, project managers, surveyors, developers, freeholders, building control, the National House Building Council and managing agents all sought to pass responsibility among themselves. Nobody wanted to pick up the bill for remediation.

In truth, the debate about a wholesale reform of leasehold goes back much further. In the modern era, it starts almost exactly 50 years before 14 June 2017, with the Leasehold Reform Act 1967, which gave qualifying long leaseholders of houses the statutory right to buy the freehold of their homes. In 1969, a problem arose: the Lands Tribunal ruling in Custins v. Hearts of Oak Benefit Society noted that the 1967 Act treated the open market for the reversion of the lease as including marriage value. That is why the Government promptly and rightly reversed that decision with section 82 of the Housing Act 1969. They did not wish to artificially increase the cost for people wishing to buy the freehold of their own home.

To see the injustice of marriage value, one need only to consider the price difference on the open market between a leasehold flat with a 125-year lease and the same flat with a share of freehold. The difference is nil, yet the first is on a yo-yo tender, whereby an owner, such as the Duke of Westminster, sells for the full market value, only to receive the entire property back at the end of the lease, allowing him to sell it all over again or, more often, to receive a large payment to extend the lease when the reduction in the term risks being so short that no lender will advance a mortgage on it and the property becomes unsaleable by the leaseholder, who sees the value of their asset diminishing to zero.

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

I am grateful to the hon. Gentleman for introducing this debate. May I, through him, point out that it is not just the traditional landlords, but some great charities? Wellcome went to the first-tier tribunal to get a judgment, but that decision should have been made by Parliament, not highly expensive lawyers arguing in court, given that it risked a knock-on effect on every other residential leaseholder who wants to extend their lease.

[Barry Gardiner]

I am most grateful to the Father of the House, who is also co-chair of the all-party parliamentary group on leasehold and commonhold reform, for his knowledge, his campaigning over many years and his intervention.

In the Housing Act 1974, which still related only to houses, and the Leasehold Reform, Housing and Urban Development Act 1993, which gave leaseholders the right, if more than 50% of them wished to, to purchase the freehold interest in their block, the concept of marriage value was sadly reintroduced. Marriage value has been at the heart of many of leaseholders’ problems for more than half a century, simply because the freehold title of the property is worth more to them than to anyone else by virtue of the fact that they live in it. The law allows the freeholder to benefit from that asymmetry and impose considerable extra costs on any leaseholder who wishes to purchase or extend the lease on their home. When the Government come to legislate for leasehold reform—they have promised to do so and I look forward to that—I trust that they will understand that it is that fundamental injustice that has kept leaseholders prisoner to the vagaries of their freeholder and, often, the outrageous services charges imposed by their managing agents.

[Mike Amesbury (Weaver Vale) (Lab)]

I thank my hon. Friend for securing such a vital debate. Here we are again. The National Leasehold Campaign—

[Sir George Howarth (in the Chair)]

Order. The Division bell has gone. If the hon. Member finishes his intervention, he might get a response when we come back, but he should be brief.

[Mike Amesbury]

Isn’t it time to abolish, rather than polish, the leasehold system?

[Sir George Howarth (in the Chair)]

Order. The sitting is suspended. If there is one Division, we will suspend for 15 minutes; if there are two, it will be 25 minutes.

16:36

Sitting suspended for a Division in the House.

16:46

On resuming—

[Sir George Howarth (in the Chair)]

Order. I think most people have now returned, so we can restart if people are ready to do so. Barry Gardiner was about to deal with an intervention from Mike Amesbury.

[Barry Gardiner]

Indeed, Sir George. My hon. Friend the Member for Weaver Vale (Mike Amesbury) is no stranger to witty epithets, and his suggestion that we should stop polishing and start abolishing was absolutely right.

Before I turn to some egregious instances of service charges and call out by name some of the managing agents that have played fast and loose with the Landlord and Tenant Act 1985, which provides that service charges must be “reasonable” and that services and works must be carried out to “a reasonable standard”, I wish to acknowledge some of the individuals who have championed the cause of leasehold reform over many years.

[Tom Hunt (Ipswich) (Con)]

Does the hon. Member agree that part of the problem is that rogue agents and freeholders believe they can act with impunity, and that it is incumbent on us to ensure that the regulations are in place to hold them to account and penalise them when they behave in an immoral way? They include Block Management, an agent in Ipswich, and Railpen, which is a freeholder that has behaved in a gross fashion and let down in a most egregious way almost 100 of my constituents.

[Barry Gardiner]

I am delighted that the hon. Gentleman has managed to get those condemnations on the record. I am sure that his constituents will be most grateful, as I am, for his doing so. He is right. The trouble is that the law is there: it is the Landlord and Tenant Act 1985, which makes it clear that unreasonable charges should not be levied, and that services and works have to be done to “a reasonable standard”. It is all there in statute; the trouble is that it is not enforced and that the mechanism for enforcement has gone awry, as I will come on to.

I already paid tribute to the Father of the House, whose long-standing campaign on this issue is an inspiration to us all. He co-chairs the all-party parliamentary group with my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders), who has also done so much on this issue. Not with us at the moment is my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Levelling Up, Housing and Communities Committee, who has done a huge amount over the years.

It is about not just those in this House; outside of the House there are many more. I pay special tribute to Charlotte Martin, who founded, with Nigel Wilkins, who is sadly no longer with us, the campaign against residential leaseholds, and who did so much, with Neil Mulcock, to usher in the Commonhold and Leasehold Reform Act 2002.

[Stephen McPartland (Stevenage) (Con)]

While the hon. Gentleman has a glass of water, I want to ask whether he agrees with the comments that my hon. Friend the Member for Ipswich (Tom Hunt) made about Railpen and the terrible impact it is having on leaseholders’ mental health up and down the country, including in the constituency of Stevenage. There have also been issues with the building that started the original campaign, as highlighted by my hon. Friend the Member for Southampton, Itchen (Royston Smith).

[Barry Gardiner]

I am grateful to the hon. Gentleman for that intervention. He highlights something that is really important to us all: the mental health problems that this issue causes. It is not just a financial issue; it has both physical and mental health implications.

There was one more person to whom I was going to pay tribute. If I left her out, I would be in deep trouble, because it is my own head of office, Jackie George, who keeps a database of more than 7,000 leaseholders in my constituency and who keeps in touch with them regularly.

In 2017, the then Secretary of State, the right hon. Member for Bromsgrove (Sajid Javid), committed the Government to act on leasehold abuses. Specifically, he committed them to legislate to prohibit the creation of new residential long leases on newly built or existing freehold houses, other than in exceptional circumstances; to restrict ground rents in newly established leases of houses and flats to a peppercorn; to address loopholes in order to improve transparency and fairness for leaseholders and freeholders; and to work with the Law Commission to support existing leaseholders. The Government said that would include making buying a freehold or extending a lease

“easier, faster, fairer and cheaper”.

In April 2018, the Government announced that managing agents in the sector would be subject to regulation by an independent body and that a code of practice would set out minimum standards for key areas of activity, including service charges. In October 2019, the then Minister for Housing, the right hon. Member for Tatton (Esther McVey), confirmed in a written statement the Government’s intention to take forward those measures. In 2020, the Law Commission published its report and recommendations.

It is not good enough to say that the Government have been busy with other priorities. Since 2017, we have had seven Secretaries of State and nine Housing Ministers, yet leaseholders are still being ripped off.

[Jim Shannon (Strangford) (DUP)]

I hope to give the hon. Gentleman a chance to clear the frog in his throat, and I congratulate him on securing the debate. Does he agree that the current arrangements, whereby there is no limit on the amount paid in service charges, insurance, ground rent and forfeiture charges, have left leaseholders at the mercy of the unscrupulous? Although we must allow the free market to prevail, that does not preclude the House and the Minister introducing and implementing fit-for-purpose regulation to protect the average leaseholder, who wants a fair bill for a fair service. That is not too much to ask for.

[Barry Gardiner]

The hon. Gentleman is absolutely right. Leaseholders are not asking for special favours; they simply want equity and justice.

The Government’s survey reported that more than 70% of leaseholders regretted buying a leasehold property. In London, and in my constituency of Brent North, the leasehold model accounts for more than 90% of properties sold. I do not believe that my constituents should have to wait a moment longer for basic rights over their own homes, the right to manage, and the right not to be subjected to unreasonable and sometimes fabricated service charges and then bullied into submission by managing agents who threaten legal proceedings and, ultimately, forfeiture.

For my constituents and millions like them throughout the country, the delay is imposing financial penury and severe impacts on their mental and physical health, as the right hon. Member for Stevenage (Stephen McPartland) said. The impacts include those on the residents of Williams Way in my constituency of Brent North, from where one resident wrote to me saying:

“My wife cried last night when I shared a few things about all of this. Management fees have increased: £5,600 in 2020 to £8,400 in 2022—I cannot afford to pay this significant increase. That is a 50% increase. Water storage has increased from £564 in 2020 to £1068—an 89% increase. The insurance premium charged at £5,820.76 in 2021 increased to £20,726.23 in 2022—a staggering 256% increase. A detailed explanation has not been provided.”

Hallmark Premier Estates is the managing agent there, but it is not providing a premier service—just as it is failing to do in Parkside Place in Barham village, where the insurance premium, which was £22,738 in 2021, has risen 108% to £47,415. No wonder I was told yesterday that the landlord would be replacing Hallmark as the managing agents for “unspecified reasons”.

One leaseholder in Lawns Court said:

“I have lived in my flat for 39 years, but I find I can no longer struggle to keep it - the service charges for my one-bedroom flat have risen from £1600 per annum to over £5000 per annum. That is a 212% increase.”

The managing agents there are Aldermartin, Baines & Cuthbert.

At the Living City development in Colindale in my constituency, leaseholders were advised in March last year that after the constant failure of the communal hot water supply to the building over three successive winters, they would receive a rebate on their service charge, only for that offer to be countermanded in October last year. Residents noted that their insurance cover appeared to be paying for associated commercial units, and found that the premium had been increased by 100%. Lift maintenance is also charged, conveniently, on a day rate rather than a job rate: the lift fails, and a day rate is charged to fix it. Strangely, it fails again the following day, and another day rate is charged to fix it again—and so on, day after day, until astronomical charges have been incurred, with the managing agents able to take a management fee every time, of course.

I have written to all these managing agents, challenging them to justify their service charges and other fees, and to none have I been writing longer than Freshwater and its associated companies—at the last count more than 150 linked under the same beneficial ownership. It is because of Freshwater that in 1999 I launched my original campaign for what became the 2002 Act. One of its leaseholders wrote to me from Barons Court in my constituency, saying:

“Dear Barry, every double bed apartment now costs £6000 up from £2600 per year a 130% increase in service charge and we had to pay for the Waking Watch. The management company will not tell us how much commission they receive from the insurance premiums. We arranged our own fire tests and paid for critical remediation work.”

The name of the company FirstPort is well known to many Members. Since 2013, my constituents in Chamberlayne Walk have been challenging unreasonable service charges by FirstPort management services. I say unreasonable but, in fact, the word “fraudulent” is closer to the truth: it even charged for the management of surrounding land that it did not own and was not its to manage. One resident wrote to me about a typical example of its practice, saying:

“I was charged £1725.88 for internal and external decorations (painting of the windows). My windows are UPVC - no redecoration was required.”

Another wrote to tell me:

“The back fill of the stack pipe which causes water to come up into my kitchen sink and has flooded my kitchen on many occasions is still an issue after 15 years of reporting it.”

Yet another person explained:

“My flat is a one-bedroom flat, one of the smallest on the estate and I was charged £2861 for redecorations - almost double the costs levied on the larger 2-bedroom flats this matter remains unresolved.”

FirstPort’s response to those and the more than 500 more complaints like them that I have received is to make no response and ignore things for as long as possible—for months and years, not days and weeks. There is a lack of accountability and transparency over what the residents are charged for and whether the costs are reasonably incurred and reasonable in amount. There is a total failure to provide leaseholders with a breakdown of service charges. Many of my constituents can wait more than 20 months for accounts to be finalised.

Even when FirstPort admits that refunds are owed to the leaseholder because of double counting, overcharging or charging for services not provided, the requests for the return of the overpayments are often ignored, or the returns can take many months to be made. FirstPort also charged multiple administration penalty charges of £60 each when someone queried the costs. One resident ended up being billed for more than £400 of admin charges and was then browbeaten into paying because of the threat of legal action.

In 2019, Nigel Howell, the then chief executive, conceded to me that it was unlawful for his company to impose late penalty fees on leaseholders who had disputed their charges—but not all leaseholders have been refunded. Nigel Howell also confirmed to me that his company had charged costs for areas not under FirstPort’s management and promised that a 20% refund would be given in the following year’s accounts. Strangely, Nigel Howell was removed from his post as chief executive.

After years of suffering, one brave, resilient resident finally took FirstPort to the tribunal. FirstPort sought to rely in its defence on two factors: it tried to rely on the payments made by leaseholders—in other words, by paying up they had intimated consent; and, especially ironic given the FirstPort practice of delay, it tried to rely on the length of time the leaseholder had taken in bringing the challenge to the tribunal.

On Friday 13 January, the last working day before the hearing, I received the following email in my office from my constituent at 5 pm:

“They are settling all of the claim. Their lawyers harassed me all week and made the offer on Friday afternoon, just hours before the hearing this Monday. They did not want this case heard as they have been lying to Barry. They owe money to 202 families.”

Of course FirstPort did not want the case heard in public: section 27A(5) of the Landlord and Tenant Act 1985 states that

“the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.”

Tenants often pay expressly disputed service charges to avoid the risk of forfeiture and preserve their home and the value of their lease.

Of course FirstPort did not want that in the public domain, but it now is, and 200 other families have now been given heart that it is possible to take FirstPort on and beat it. Already, 42 other leaseholders on the estate have signed up to a class action. But the point is that this should not be happening. A code of conduct for managing agents will not do any good. The 1985 Act already provides that service charges must be reasonable and services and works must be carried out to a reasonable standard. The problem is the whole imbalance of power between the leaseholder and the freeholder.

Leasehold tribunals were intended to be a cheap, efficient way of resolving normal disputes between reasonable people without enormous legal costs, but landlords have intimidated leaseholders by engaging vast arrays of lawyers and threatening them with forfeiture and bankruptcy. There is a way to end this misery, but it is not with a new code of practice. Companies do not obey the existing primary legislation; they will not abide by a new code of practice. The way to end this misery is not with the safety regulator. Company law allows companies to avoid their obligations, go into administration while the directors set up new companies and repeat their scams all over again. This misery will end only when we have an end to leasehold. Our country has put up with a feudal system of land tenure for almost 2,000 years. It is time it stopped.

[Several hon. Members rose—]

[Sir George Howarth (in the Chair)]

Order. I am going to impose a five-minute limit on speeches, in order to get everybody in.

17:05

[Andy Carter (Warrington South) (Con)]

It is a pleasure to follow the hon. Member for Brent North (Barry Gardiner). I agreed with pretty much everything he said. I am delighted to speak in this debate, because the issue is so pertinent to constituents in Warrington South. I am keen to hear from the Minister about progress on the promised reforms to leasehold that we expect to see announced in the King’s Speech.

My noble Friend Lord Greenhalgh, when he was the Minister responsible, made a promising start to the process when he brought in the first stage of leasehold reform, to crack down on exploitative freeholders by removing escalating ground rents. Now it is time to ensure that the next stage of reform delivers for those who are currently trapped in the leasehold system.

The north-west has one of the highest proportion of leasehold dwellings in the country, next to London. The most recent statistics for 2019-20 put the proportion at around 31%—the highest region outside of London. Throughout my time as the Member of Parliament for Warrington South, residents have raised issues regarding leasehold time and again. There are issues in Chapelford, Edgewater Park, Chaise Meadow—I could list endless developments in Warrington South that have been built over the past 20 years under the leasehold system and where problems have been raised.

Although I of course welcome the Secretary of State’s proposals to address the problems associated with leasehold sales, I say to the Minister that there is a growing worry among many of my constituents that the difficult situations they find themselves in may not be completely addressed by what we have heard so far. The constituents I talk to are concerned about those who have purchased properties in the past 20 years or so and are stuck with problems of ever-increasing service charges, although they receive very little for those charges, as the hon. Member for Brent North said.

If anything, the problems are growing and getting worse. That applies in particular to those who purchase leasehold houses rather than flats. Colleagues may recall that I raised this issue in a speech in the Christmas Adjournment debate, with particular regard to Steinbeck Grange in my constituency. I pay tribute to Mike Carroll, one of the residents who lives there, who was the first constituent to contact me when I was elected. He has persevered for about 14 years in trying to tackle this problem. He has said that it has affected his life so significantly that he has occasionally had to think hard about how to continue with the fight. He has been browbeaten at every opportunity and has required a tremendous effort to keep going.

Residents not only have to pay fees but run into difficulties when they try to approach the freeholder. They are faced with complicated, protracted processes, in which they cannot even get information about the leaseholds for their homes without having to spend money. If those constituents are trapped in leasehold, it makes selling those properties incredibly difficult. A number of solicitors have approached me in Warrington to say that they had been asked to act for people buying the properties and had advised them not to. Developers had then recommended solicitors who disappeared overnight, so that the process could go through. That strikes me as a real scandal.

The Competition and Markets Authority looked at this situation for two years and did not really conclude anything. I say to the Minister that that was a missed opportunity for a deep dive into what is going on, not just with developers but with freeholders. Will he ensure that the proposals that the Department brings forward in the next Session address these problems? It is vital that people wanting to get out of leasehold can do so without facing extortionate fees that either leave them trapped in leasehold indefinitely or result in their being short-changed when they leave the system.

That legislation is desperately needed. I want to see a solution, my constituents want to see a solution, and I sincerely hope that the Department will take heed of that when they present their leasehold reforms in the King’s Speech.

[Several hon. Members rose—]

[Sir George Howarth (in the Chair)]

Order. I am going to have to start calling the Front Benchers at 5.23 pm, so I will reduce the speaking limit to three minutes.

17:10

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Sir George. I pay tribute to my hon. Friend the Member for Brent North (Barry Gardiner) for securing this important debate. In my three years as a Member, I have had to speak on this issue so many times—I have joined long-standing Members in the queue of MPs talking about it—so this almost feels like déjà vu. It is a pleasure to follow the hon. Member for Warrington South (Andy Carter), who outlined many of the issues we are seeing up and down the country.

I will focus on the role of managing agents in the building safety crisis, which has impacted so many of my constituents in Vauxhall since the Grenfell tragedy—and, six years later, it is still happening. Just yesterday, I held an online surgery with a group of leaseholders whose managing agent has raised their annual service charge from £1,000 a year to over £30,000 a year. When I saw the email come into my inbox, I replied straightaway, because I could not believe those figures. That staggering increase was justified by fire safety problems but the agent will not even disclose the details of the defects to the leaseholders. I ask Members to pause for a second and think about what it would be like to receive such an email. Imagine the stress of being charged a thirtyfold increase in the middle of this cost of living crisis without any proper explanation.

The sad reality is that that case is not even rare. Since becoming an MP three years ago, I have had many constituents come to me in desperation because their managing agents are refusing to share the basic information about their building—somewhere they call home and have to sleep every night. The issue has been exposed by the cladding scandal. Agents were commissioning EWS1 inspections on behalf of freeholders, leaving leaseholders unable to sell their flats and liable for thousands of pounds of fire safety problems that they did not cause. Many agents would not even publish those reports.

[Munira Wilson (Twickenham) (LD)]

In my constituency of Twickenham, we do not have many high-rise blocks of flats, but we have quite a lot of low-rise blocks. I have had two cases come to me relating to two different blocks of flats in Twickenham, in which managing agents have wrongly commissioned fire safety assessments for buildings under 18 metres. In one case, the report has been shown to be flawed. The residents cannot sell their homes; they are trapped. In the other block, residents are potentially being charged up to £800,000 for remedial works that are not needed.

[Sir George Howarth (in the Chair)]

Order. Interventions should be brief, particularly given the time pressure.

[Florence Eshalomi]

I thank the hon. Lady for making that important point. That is the real insult that leaseholders face up and down the country: being forced to pay for the management of a block, even if the agent is not providing a worthwhile service. It is a slap in the face.

The sums we are talking about are not cheap; most end up being hundreds of pounds every year for leaseholders. We have to be clear that not all managing agents are like this; some are professional and diligent, and a number of them do a lot of great work. But the fundamental problem is that, whether agents are good or bad, leaseholders have no power to hold them to account. They do not even have a proper regulatory body that they can appeal to to enforce standards. Current arrangements leave leaseholders on the hook for almost everything, without having a say in how their building is managed.

The root of the conflicting motivations at the heart of this issue is the managing agents’ role. The problem is that, ultimately, they are not employed by the people who are paying—the leaseholders. We need freeholders to be accountable, and we need to ensure that they take responsibility.

I will leave my remarks there, but I hope that the Minister will hear the pleas from Members this afternoon. Instead of giving us warm words and telling us that he has heard us, he needs to outline a concrete plan for what he and the Department are going to do to empower leaseholders in a system where managing agents can be properly held to account, and we need a clear timescale for that work. My constituents in Vauxhall and leaseholders up and down the country cannot afford to wait any longer.

17:14

[Stephen McPartland (Stevenage) (Con)]

It is a pleasure to speak in this debate, and I am grateful to the hon. Member for Brent North (Barry Gardiner) for securing it.

We have spoken about leaseholders in this House for a number of years now, and one of the things that I always try to get across is that leaseholders are mentally, physically and financially broken. We talk about stuff in these debates, but they have lived it. I remember that during covid, when everybody was being told to stay at home, these leaseholders were being told to stay at home—and to keep their children at home—in buildings, flats and apartments that they had been told were unsafe and could burn down at any moment. When everybody else was being told to stay home in order to stay safe, they were being told that the safest thing for them to do was to get out. These people have been completely through the mill.

We have secured huge concessions from the Government, with over £10 billion in the Building Safety Act 2022. We have been back and forth, and I am delighted that the campaign led by many people in the Chamber, and by my hon. Friend the Member for Southampton, Itchen (Royston Smith), was successful in persuading the current Secretary of State to work with us to help to support these leaseholders. But what frustrates me is that, some years on, there are tenants still trapped in buildings such as Vista Tower in Stevenage, where the freeholder is Railpen. We know what is wrong with the building, and the Government have the money there to help to fix it. Why has it not been fixed? What is the delay? The building is there, and we know that—allegedly—it needs these works for it to be safe. The freeholder and the management agents need to work with the tenants to get the work done, but there are just delays. Leaseholders up and down the country are still trapped.

There is this weird combination of management agents, freeholders and leaseholders. We are talking about leasehold reform. My understanding was that, under the Building Safety Act, the freeholder was the backstop if nobody else was going to be responsible. If we are going to abolish freehold, we cannot be in a position whereby freeholders and management agents can just wait out all the current leaseholders, so that they then become responsible for all these bills in the future. We need to ensure, when we talk about leasehold reform, that leaseholders are at the heart of it. Leasehold reform should be for leaseholders, not to try to tidy up some property laws, or for freeholders, management agents or vested interests.

I would love to meet the Minister and officials to talk about how we can get the buildings that are out there at the moment made safe, so that leaseholders can all feel as though the jobs are being done.

17:17

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

It is a pleasure to see you in the Chair today, Sir George.

I thank my hon. Friend the Member for Brent North (Barry Gardiner) for introducing the debate and setting out clearly why leaseholders are at the mercy of freehold managing agents who—unsurprisingly—put the interests of the freeholder above all else, from ignoring building defects to rinsing the leaseholders through service charges. That can be done through the padding of bills, the use of preferred contractors, commissions and organising buildings insurance.

I can recall one example in my constituency where the insurance company for a block of flats just happened to operate from the same address as the managing agents and the freeholder. Under what other contract would someone be expected to pay all the costs but not actually be able to see the terms of the contract? Yet that is what we see with these insurance deals. Thankfully, that is being investigated by the Financial Conduct Authority. This may well provide us with yet another payment protection insurance-style scandal.

This is another outrageous example of the way that the dice are loaded against leaseholders, and the fact that anyone can set up as a property manager in this unregulated sector is unacceptable. Although leaseholders have the option, of course, of going to court to dispute charges, they will never get their legal costs back, even if they are successful. There could be the most egregious charges, and they could be thrown out of court as totally unreasonable, but it is still the leaseholder who ends up paying the bill for that legal action.

I also think that estate management companies on new-build estates, whether they are leasehold or not, need to be tackled, because the opportunities to inflate charges exist there almost as much as they do in a block of flats. Much as with leasehold itself, I do not accept that these arrangements are needed at all. The fact that developers choose not to pay a sum to the local authority for the financial commitment that is needed to maintain communal areas, instead saving themselves money by passing on the charge to homeowners, is another example of the rapacious nature of many in this sector. Not only do they make a saving at the start of the development, but they create an additional income stream by charging for communal services.

This situation will not end well. Sooner or later, residents who pay for the same service twice—once through their council tax and once through their service charge—will demand an end to this double-charging. However, as with leasehold, the guilty parties will have long since left town. These residents have even fewer rights than those in leasehold properties, but the central issue is the same: a system that puts power in the hands of those who have no business being involved with these people’s homes at all.

Finally, on leasehold more generally, the linking of ground rents to the retail price index is becoming a real issue, with inflation so high. It even makes some of the outrageous ground rent doubling clauses seem reasonable in comparison, and it is putting people in real hardship.

It is five years since we were promised that this feudal system of ownership would be ended, yet millions of people are still trapped in leasehold. We repeat our plea yet again—I am sure the Minister will hear this time and again today—for the Government to please get on and deliver the work of the Law Commission so that we can say goodbye to leasehold once and for all.

17:20

[Apsana Begum (Poplar and Limehouse) (Lab)]

In the interest of time, I will keep my remarks short and go straight into an example.

In the first quarter of 2022, one of my constituents paid just under a whopping £1,000 in electricity bills for a one-bedroom flat. She is obviously extremely concerned about how she will afford her bills when the energy price cap rises again in April. The electricity account is held by the freeholder of the building, which is a private company, and it is a commercial account. My constituent, who is a leaseholder, wishes to change her account type—indeed, she says that the majority of the units are residential anyway—but she is facing difficulties.

In particular, the energy provider has said it cannot have direct relationships with the leaseholders unless individual meters are installed. The managing agent has confirmed that the cost of installing individual meters would be passed on to the leaseholders and would be around £1,000 or £2,000. However, building-wide energy efficiency improvements are generally understood to be the freeholder’s responsibility. As a leaseholder, my constituent can make some energy efficiency improvements to her home, but at the very least she needs permission from the freeholder for major works.

Again, the leaseholder is trapped in this bureaucratic quagmire between an opaque rock and an even more oppressive hard place, thwarted by complex buck-passing that ends up with them being financially liable or financially disadvantaged, without rights or agency. That is because, essentially, a residential building of leaseholders is run almost entirely at the landlord’s discretion. I understand that leaseholders can dispute decisions and costs, which can amount to millions of pounds, but they will never get their legal costs paid, even if they are successful. On the other hand, the landlord almost always gets their legal costs paid as administrative charges under the lease. I repeat that the system does not work for residents.

Appointed managing agents have failed significantly, over and over again, to point out building defects in new blocks of flats. The truth is that there is a clear commercial incentive for building defects not to be highlighted. Indeed, if one were cynical, one might believe that a prime task of a developer-appointed manager is to ensure that the defects of a building are not revealed within the timescale of the warranty, after which date the cost can be placed on leaseholders’ shoulders.

In my constituency of Poplar and Limehouse, people view the Westferry Printworks debacle and the history of controversy as illustrating systemic priorities that lie in serving billionaires rather than the interests of local people. I appeal to the Government to put local people in need at the heart of their planning and housing agenda, and once and for all to end the scandal of leasehold for millions who have bought their home but do not feel like they own it.

17:23

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to serve with you in the Chair, Sir George. I start by declaring an interest: my wife is the joint chief executive of the Law Commission, whose work I intend to cite in my remarks.

I congratulate my hon. Friend the Member for Brent North (Barry Gardiner) on securing this really important debate. He has a long-standing interest in the matter and, in opening the debate, he made a powerful case both for regulating managing agents and reforming the leasehold system. I also thank the hon. Member for Warrington South (Andy Carter), the right hon. Member for Stevenage (Stephen McPartland) and my hon. Friends the Members for Ellesmere Port and Neston (Justin Madders) and for Poplar and Limehouse (Apsana Begum) for their excellent contributions. Above all else, they served as a valuable reminder of the scale and scope of the problem that we are considering this afternoon.

There are, of course, good managing agents who work hard to ensure that the residents they are responsible for are safe and secure and their homes properly looked after. However, the case for doing more to protect leaseholders from poor service and, indeed, exploitation at the hands of unscrupulous managing agents is as watertight as they come. We have heard numerous specific examples in this short debate of the kind of abuses that leaseholders across the country are routinely subject to by their managing agents. It is clear that relying on incremental improvement and the sharing of best practice to improve matters is simply not good enough. Government action to address those practices and improve the lives of leaseholders is necessary and long overdue.

The Government clearly recognise that there is a case for properly regulating managing agents, along with other property agents. As my hon. Friend the Member for Brent North mentioned, in 2018 the Government tasked a working group, chaired by the noble Lord Best, with bringing forward detailed recommendations on how a new regulatory framework should operate. The working group’s final report, which made a series of proportionate and sensible recommendations, was published in July 2019, yet in the intervening 43 months the Government have seemingly done nothing to implement the recommendations.

The Government’s failure to act on the recommendations has had very real consequences. The burdens that homeowners have long laboured under because of the dysfunction of the property agent market and the inherent flaws of the leasehold system have become more acute over recent years as a result of the building safety crisis and surging inflation, the combination of which has pushed many already hard-pressed leaseholders to the brink of financial ruin.

Time is short, and I will finish by touching on the issue of leasehold reform, because the deficiencies of the leasehold tenure are often the root cause of the abuse and poor service that so many homeowners experience at the hands of their managing agents. Although we may wish ultimately to go further than the Government in important respects, Labour is committed to fundamentally reforming the leasehold system, and we will support in principle any legislation that comes forward to that end. Significant reform is therefore dependent only on whether and when the Government will finally publish the second part of their legislative agenda in this area. Despite being announced two years ago, there is still no sign of a Bill.

I would therefore be grateful if the Minister could provide answers to the following questions. Will the promised second leasehold reform Bill definitely be in the King’s Speech later this year? Will the Government make available the necessary time to ensure that it receives Royal Assent before the end of the Parliament? Will the Bill include all the recommendations made by the Law Commission in its three residential leasehold and commonhold reports of 2020? Will the Government commit to ensuring that the Bill receives prelegislative scrutiny by the Select Committee, so that we get this important legislation right? I hope that the Minister can answer yes to each of those simple and straightforward questions and give concerned leaseholders watching the debate the reassurance they so desperately seek.

17:27

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Lee Rowley)]

Thank you for the opportunity to talk about this hugely important topic today, Sir George. I congratulate the hon. Member for Brent North (Barry Gardiner) on securing the debate. We have covered a significant amount of ground. I am not sure that I can do justice to the issue in the seven or eight minutes that I have if I am to allow the hon. Member a few moments to comment at the end, but I will try to cover as much as I can.

I am grateful to all hon. Members who have contributed. As hon. Members will know, there is a significant overlap between the people who are in the Chamber today and those who have stood up for their constituents and taken their concerns to the Department over the last few months. As hon. Members will know, we have been in correspondence on a number of occasions, and I am grateful to them for highlighting issues, particularly in my part of the portfolio, around building safety, in the Department for Levelling Up, Housing and Communities. I am grateful for their time and the efforts that they go to on behalf of their constituents in both those areas.

We have discussed two broad areas today. One is the broader situation with regard to leasehold and the reforms that are coming in, and the other is the more specific question of building safety. I will try to take those in two buckets, if I may, then talk about some of the specific points that hon. Members have raised. As numerous hon. Members have highlighted, we made a series of commitments from 2018 onwards on leasehold in general. Reform in this area is necessary, is important and needs to happen. That covers a number of things raised by the hon. Member for Brent North, and other matters.

As my predecessor, the noble Lord Greenhalgh, indicated, the Government have committed to abolishing marriage value at the earliest possible opportunity. On service charge transparency, the Secretary of State has highlighted the fact that we are absolutely committed to providing more information, for exactly that reasons that the hon. Members for Poplar and Limehouse (Apsana Begum) and for Ellesmere Port and Neston (Justin Madders) indicated: the importance of transparency in those discussions, so that people know what they are paying for when they are given bills and charges.

I have heard the comments about managing agents. We recognise that, as in all systems, particularly ones where there are multiple individuals and entities involved, there are people who are exemplars and who do things well, there are people who do things less well, and there are people who do things badly. It is important that we call out bad practice and we take the opportunities where we can and where it is proportionate and reasonable to do so, both now and in the future, to be able to reduce the propensity for bad practice. I know that my right hon. Friend the Secretary of State for Levelling Up, Housing and Communities will make that clear when we bring forward more information about our proposed leasehold reforms in due course.

In answer to the questions raised by the Opposition spokesperson, the hon. Member for Greenwich and Woolwich (Matthew Pennycook), while I cannot anticipate what will be in the package, we are committed to bringing forward those reforms. We have said that we want to undertake reform in this Parliament. There is still time to do that and my right hon. Friend the Secretary of State will provide more information in due course, when he is able to do so.

[Andy Carter]

This is a brief intervention. I have invited many of my hon. Friend’s predecessors to Warrington South. None have made it, because they have not been in position for long enough to get there. May I extend an invitation to him to come and meet some of the leaseholders who are facing problems in Warrington South, so that he can hear directly from them before the final piece of legislation is put forward?

[Lee Rowley]

I am grateful to my hon. Friend for his kind invitation to the north-west. I will speak to the Housing Minister, my hon. Friend the Member for Redditch (Rachel Maclean), who has been in post for a couple of weeks, because she is taking forward these specific points on leasehold and I want to ensure the right conversations are had with the right people.

I will respond to a few points on building safety, for which I am responsible in the Department; I am happy and keen to hear more about the issues that have been raised. Important points about significant increases in insurance were made, which we recognise and understand. The Association of British Insurers was asked to look at the issue a number of months ago and find a solution. I meet the Association on a regular basis—I did so most recently at the end of last week—and I will continue to do so. We hope that it will be able to bring forward a scheme on insurance in the coming months.

There was reference to lending. I hope hon. Members are starting to see a change with regard to building safety. I met all six big lenders before Christmas and we have come to an agreement with them through UK Finance. The market should now start to become more functional and successful again. I am receiving data from each of the banks on a regular basis—indeed, just a couple of days ago, I looked at the data I received from Santander and Barclays—in order to understand what is going on and how we can separate out, as much as we are able, the challenges that are known, understood and need to be remediated over a number of years, so that people can live their lives and get on with making choices about where and how they want to live. I welcome views from hon. Members in the months ahead about whether they have seen those changes.

I am conscious that I need to conclude in about two minutes. On building safety, my right hon. Friend the Member for Stevenage (Stephen McPartland) has been a stalwart; I give him huge credit for making progress on the issue with colleagues across the House, irrespective of their party. He made a vital point about lived experience; people have seen this, lived it and breathed it for many years. As the responsible Minister, I have tried to make visits. As my hon. Friend the Member for Ipswich (Tom Hunt), who is no longer in his place, indicated, I visited Cardinal Lofts and spoke to residents. I went to Wicker Riverside in Sheffield within a few weeks of becoming Minister, talking to leaseholders and people who were at the forefront; I appreciate the challenge and difficulty they face. That is reason why my right hon. Friend the Secretary of State is keen that we make progress. From the work we are doing on Vista Tower, my right hon. Friend the Member for Stevenage will know how important it is for us to call out bad behaviour and for us to make progress.

Finally, the hon. Member for Vauxhall (Florence Eshalomi) raised a case where charges have increased exponentially. Without knowing any of the detail, I would be very happy to receive additional information on that. I would be very happy, in principle, to come and visit, or to speak to those leaseholders. It is important, as a Minister, and for the Department, that we look at the macro level, at the changes and how that is occurring, and check that it is working in individual areas, so I would be very happy to see more information on that.

To conclude, these are hugely important issues that affect people’s lives, so I absolutely appreciate the points that have been made regarding both leaseholds and the reforms needed in general. I understand the urgency, and I hope that we can say something more corporately on that soon, particularly on building safety. We need to make progress on remediation, on top of the good progress that we have already made, but there is a long way to go. While I am in post, I am committed to trying to make as much progress as possible so that the people who are affected can get on with living their lives again, as we all want them to.

17:35

[Barry Gardiner]

I am very grateful to all hon. and right hon. Members who have spoken in this debate. It is clear that there is a compelling case for wholesale reform in this area. The hon. Member for Warrington South (Andy Carter) has done himself no harm in Steinbeck Grange today, I am quite sure, but the point that he made is one that we all share. It was ably made by the right hon. Member for Stevenage (Stephen McPartland) as well. He said that that resident had said that he had to reassess his life.

For so many people, that is what is happening. Millions of people in this country are having to reassess their lives and the possibilities that they thought were open to them—even on changing jobs—trapped in their own homes, unable to sell, unable to move to a new job, or trapped in a one-bedroom home, unable to have any more children. Their plans are on hold. Their lives are on hold.

It is really interesting to hear the case that my hon. Friend the Member for Vauxhall (Florence Eshalomi) made about a 3,000% increase in service charges. I am glad that the Minister has agreed to take up that case and look into it further, because it is astonishing.

There are two key points that I want to follow up. The first is the point made by my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders), who talked about the scandal of managing agents often being at the centre of a web of companies all linked to the same beneficial owners.

In Wembley Central Apartments in my constituency—I am not sure that I will get this entirely right—St Modwens and Sowcrest were the joint developers. Sowcrest sold to a Canadian company, which then sold to Wembley Central Ltd, which is established in Jersey. They claim that it is for them to do the remediation work on the building, yet Sowcrest was the original freeholder and the developer itself. Those are the sorts of entangled webs that we are dealing with here.

With that, I look to the Minister to do all that he can in government to bring forward the legislation. I hope that it conforms to the four points—the four challenges—that my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook), speaking from our Front Bench, mentioned. We all look forward, ultimately, to seeing an end to this appalling practice.

Question put and agreed to.

Resolved,

That this House has considered leaseholders and managing agents.

17:37

Sitting adjourned.