Criminal Justice Bill (Fifteenth sitting)
Tuesday 30th January 2024
(9 months, 3 weeks ago)
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The Chair
I remind Members that any speaking notes need to be sent by email to hansardnotes@parliament.uk. Please make sure that your devices are on silent. As you know, tea and coffee are not allowed during the sitting.
Alberto Costa (South Leicestershire) (Con)
On a point of order, Mrs Latham. I am wearing my spectacles today; I usually wear contact lenses. I have noticed that in this Committee room the LED lighting—I presume that is what it is—is perhaps set to cool white rather than warm white, and that has an impact on the sight of people like me.
Are you able to guide me on who I should speak to about this Committee room to ensure that the lighting is more appropriate for all Members, particularly people like me who find it very difficult to see in this cool light? Perhaps we could conduct a survey to see what type of optics LED lights work best with. Is Mr Speaker, somebody in facilities management or somebody else on the estate able to advise me on the best quality LED lights, whether warm or cool, for people with sight like mine?
The Chair
It is funny you should say that; I cannot see the Annunciator very well because of the lighting. You could go to the head of facilities or speak to Sir Charles Walker, who heads the Administration Committee where he will be able to bring the matter up. It meets every Monday.
Alberto Costa
Further to that point of order, Mrs Latham. I was desperately trying to hear you and I could not, which is another issue that we ought to take into consideration. I know that colleagues have from time to time raised the issue that the acoustics in these wonderful neo-gothic Committee rooms are not necessarily appropriate for the mid-21st century.
Again I ask, Mrs Latham: do you know what the appropriate body is when it comes to acoustic issues? We must ensure that all of us can hear, whether we have hearing aids or not—in my case, I do not have a hearing aid; I like to think that my hearing is okay. Nevertheless, I did have difficulty in hearing the response that you gave to my previous point of order. I would be grateful if you could repeat that response, in addition to giving me another one about the person to whom I should direct complaints when it comes to acoustics in these types of Committee rooms.
The Chair
I said that you could either go to Sir Charles Walker or the head of admin services. My response is the same for the hearing issue. I said that I cannot really see the Annunciator because of the angle of the lights, so that is a problem. I do not have problems here, but I have great difficulty hearing in Portcullis House rooms; I find they are very poor. It is worth reporting the matter to Sir Charles Walker because he can raise it in the Administration Committee. Several of us in this room are on that Committee. We have heard what you said and we can back it up.
New Clause 45
Administering etc harmful substances (including by spiking)
(1) In the Offences Against the Person Act 1861, for sections 23 to 25 substitute—
“23 Administering etc harmful substance so as to endanger life or inflict grievous bodily harm
(1) A person commits an offence if—
(a) the person intentionally or recklessly, and unlawfully, administers a harmful substance to another person, and
(b) the administration of the harmful substance endangers the other person’s life or inflicts grievous bodily harm on them.
(2) A person commits an offence if—
(a) the person unlawfully causes a harmful substance to be administered to or taken by another person,
(b) the administration or taking of the harmful substance endangers the other person’s life or inflicts grievous bodily harm on them, and
(c) the person intends that, or is reckless as to whether—
(i) the harmful substance is administered to or taken by the other person, and
(ii) the administration or taking of the harmful substance will endanger the other person’s life or inflict grievous bodily harm on them.
(3) In this section “harmful substance” means any poison or other destructive or noxious thing.
(4) A person who commits an offence under this section is liable—
(a) on summary conviction, to imprisonment for a term not exceeding the general limit in a magistrates’ court or a fine (or both);
(b) on conviction on indictment, to imprisonment for a term not exceeding 10 years or a fine (or both).
24 Administering etc harmful substance with intent to injure, aggrieve or annoy
(1) A person commits an offence if—
(a) the person unlawfully administers a harmful substance to, or causes a harmful substance to be administered to or taken by, another person, and
(b) the person does so with intent to injure, aggrieve or annoy the other person.
(2) In this section “harmful substance” has the meaning given by section 23.
(3) A person who commits an offence under this section is liable—
(a) on summary conviction, to imprisonment for a term not exceeding the general limit in a magistrates’ court or a fine (or both);
(b) on conviction on indictment, to imprisonment for a term not exceeding 5 years or a fine (or both).
25 Alternative verdict on trial of offence under section 23
A person who is—
(a) charged with an offence under section 23, and
(b) found not guilty of that offence,
may be convicted of an offence under section 24 (if it is proved that they committed it).”
(2) In consequence of the amendment made by subsection (1), in the following provisions for “maliciously administering poison etc” substitute “administering etc harmful substance”—
(a) paragraph 8(e) and (f) of Schedule 1 to the Suppression of Terrorism Act 1978;
(b) paragraph 5(g) and (h) of Schedule 2A to the Housing Act 1985;
(c) paragraph 10 of Schedule 15 to the Criminal Justice Act 2003;
(d) paragraph 11 of Schedule 5 to the Sexual Offences Act 2003;
(e) in Schedule 2 to the Counter-Terrorism Act 2008, paragraph (b) of the entry relating to offences under the Offences against the Person Act 1861;
(f) paragraph 7 of Schedule 4 to the Modern Slavery Act 2015;
(g) paragraph 4(c) of Schedule 1 to the Sentencing Act 2020;
(h) paragraph 23(f) of Part 2 of Schedule 9 to the Elections Act 2022;
and in section 72(2)(d) of the Domestic Abuse Act 2021 for “poison” substitute “harmful substance”.”.—(Chris Philp.)
This new clause re-casts the offences under sections 23 and 24 of the Offences against the Person Act 1861 (administration etc of harmful substances) and the procedural provision under section 25 of that Act relating to those offences
Brought up, read the First and Second time, and added to the Bill.
New Clause 46
Sexual activity in presence of child etc
(1) The Sexual Offences Act 2003 is amended as follows.
(2) In section 11(1) (engaging in sexual activity in presence of child), in paragraph (c) for the words from “he engages” to the end (not including the “and” at the end of the paragraph) substitute “A engages in it when another person (B) is present or is in a place from which A can be observed,”.
(3) In section 18(1) (abuse of position of trust: sexual activity in presence of child), in paragraph (c) for the words from “he engages” to the end substitute “A engages in it when another person (B) is present or is in a place from which A can be observed,”.
(4) In section 32(1) (engaging in sexual activity in presence of person with mental disorder impeding choice), in paragraph (c) for the words from “he engages” to the end substitute “A engages in it when another person (B) is present or is in a place from which A can be observed,”.
(5) In section 36(1) (engaging in sexual activity in presence, procured by inducement, threat or deception, of person with mental disorder)—
(a) in paragraph (c) for the words from “he engages” to the end substitute “A engages in it when another person (B) is present or is in a place from which A can be observed,”;
(b) in paragraph (d) for “paragraph (c)(i)” substitute “paragraph (c)”.
(6) In section 40(1) (care workers: sexual activity in presence of person with mental disorder), in paragraph (c) for the words from “he engages” to the end substitute “A engages in it when another person (B) is present or is in a place from which A can be observed,”.”—(Chris Philp.)
This new clause amends offences of engaging in sexual activity in the presence of a child or person with mental disorder (B) so as to remove the requirement that the person knows or believes that B is aware, or intends that B should be aware, that the person is engaging in it.
Brought up, and read the First time.
The Minister for Crime, Policing and Fire (Chris Philp)
I beg to move, That the clause be read a Second time.
It is a pleasure to serve under your chairmanship, Ms Latham, as we commence our final day of line-by-line consideration of the Bill. [Interruption.] I see that colleagues are very enthusiastic about undertaking the last lap.
My hon. Friend the Member for Newbury, who would ordinarily have moved this Government new clause, has just arrived. With your permission, Ms Latham, might I hand over to her so that she can speak to it?
The Chair
Yes, but let me correct the Minister: it is Mrs Latham, not Ms Latham. Having been married nearly 56 years, I do not think “Ms” is right.
The Parliamentary Under-Secretary of State for Justice (Laura Farris)
I apologise to the Committee for being late—I had left something behind.
The new clause amends a number of existing criminal offences in the Sexual Offences Act 2003. Currently, it is an offence for a person intentionally to engage in sexual activity where, for the purposes of obtaining sexual gratification, they do so when a child is present and they know or believe that the child is aware that they are engaging in the sexual activity. There are similar offences that target such behaviour where the victim is an adult with a mental disorder.
We have listened carefully to those on the frontline, who have identified a small category of cases involving this type of behaviour where there was insufficient evidence that the perpetrator knew, believed or intended that the child, or the person with a mental disorder, was aware of the sexual activity, most typically because the child was asleep. The new clause will expand the criminal law so that successful prosecution does not depend on the alleged victim’s awareness of the sexual act or the defendant’s intent. It will capture cases where, for example, a defendant masturbates over a sleeping child for the purpose of sexual gratification and subsequently seeks to argue that they did not believe the child was aware of the activity and did not even intend that the child should be aware of the activity. The new clause therefore alters the mental elements of the offences.
I thank the National Police Chiefs’ Council, a number of individual police forces and the Crown Prosecution Service for bringing to the Government’s attention these troubling cases, which have informed our response and led us to conclude that we should amend the existing offences to protect vulnerable adults and children. The amended offences will retain the need for a link between the child’s presence or observation and the perpetrator’s sexual gratification. That requirement is critical because of the risk of over-criminalising those who engage in sexual activity with no malicious intent where a child may be present, such as parents sharing a bedroom.
We want to ensure that these behaviours are prosecuted, not just to bring offenders to justice but, importantly, to enable the management of offenders and to prevent further escalation where there is the potential for a more serious sexual offence against children or vulnerable adults.
Alex Norris (Nottingham North) (Lab/Co-op)
It is a pleasure to serve with you in the Chair, Mrs Latham, for the Committee’s final day.
The new clause is a welcome addition to the Bill. Clearly, experts have identified that the person B knowledge gap is really important and is creating risk with respect to those who seek gratification in this way. It is right that that loophole is closed. My only question for the Minister is about the sort of scale we are talking about. She mentioned a small number of cases. Do the Government have an estimate of the number of cases that the measure is likely to apply to?
Laura Farris
I do not have any indication of the number of cases, but we have heard from the police that there have been problems with getting a prosecution where they cannot prove intent.
Question put and agreed to.
New clause 46 accordingly read a Second time and added to the Bill.
New Clause 47
Maximum term of imprisonment for certain offences on summary conviction
“In the following provisions for “6 months” substitute “the general limit in a magistrates’ court”—
section 1(6)(a) of the Prevention of Social Housing Fraud Act 2013 (unlawful sub-letting: secure tenancies);
section 2(7)(a) of that Act (unlawful sub-letting: assured tenancies and secure contracts);
section 30(3)(b) of the Modern Slavery Act 2015 (breach of certain orders or requirements);
section 339(2)(a) of the Sentencing Act 2020 (breach of criminal behaviour order);
section 354(4)(a) of that Act (breach of sexual harm prevention order);
section 363(2)(a) of that Act (breach of restraining order).”—(Laura Farris.)
This new clause provides that the maximum term of imprisonment for certain offences, on summary conviction, is the general limit in a magistrates’ court.
Brought up, read the First and Second time, and added to the Bill.
New Clause 3
Removal of parental responsibility for men convicted of sexual offences against children
‘(1) After section 2 (parental responsibility for children) of the Children Act 1989, insert—
“2A Prisoners: suspension of parental responsibility
(1) This section applies where—
(a) a person (“A”) has been found guilty of a serious sexual offence involving or relating to a child or children; and
(b) A had parental responsibility for a child or children at the time at which the offence was committed.
(2) A ceases to have parental responsibility for all children, for a time specified by the sentencing court or until an application by A to the family court to reinstate parental responsibility has been approved.””—(Jess Phillips.)
Brought up, and read the First time.
Jess Phillips (Birmingham, Yardley) (Lab)
I beg to move, That the clause be read a Second time.
I put my name to this new clause tabled by the Mother of the House, my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman)—she has had some mentions. I absolutely agree with it. It is important, but, to be completely honest, for me it is far too small in its approach. I believe that the family courts in our country are harming—well, killing—children. Yesterday, the head of the family court division said on BBC Radio 4 that austerity is harming children and putting more children into care. We have been campaigning on family court justice for a decade, and progress has been slower than slow; I cannot think of an adjective. But people who abuse their families should not be allowed access to their children.
The new clause is specifically about those convicted of sexual offences against children. To be completely clear, those convicted in our family courts of sexual offences against children are not barred from parental responsibility for their own children—they can be barred from seeing anybody else’s children, but their own children are not immediately excluded. I am afraid that child abuse cases are taking place in our family courts, and not only do we allow children to be alone with parents who are abusers, but we sometimes remove children from the person trying to keep them safe and place them with those abusers. The new clause would protect children specifically from fathers convicted of serious child sex offences.
When a man commits a serious sexual offence, he has to go on the sex offenders register and is prevented from working with children. That protects other people’s children but not his own, and he retains parental responsibility. Currently, a father convicted of child sexual offences automatically retains parental responsibility. My right hon. and learned Friend’s new clause would make the default position that he would lose his parental responsibility, subject to that being reinstated by a family court on his application if it is judged to be in the child’s best interest.
The new clause follows important work done on this issue by my hon. Friend the Member for Rotherham (Sarah Champion)—including through the Victims and Prisoners Bill Committee, which I was also on—and Jade’s law, which was added to that Bill to protect children by removing parental responsibility from a man who kills a child’s mother, or a parent who kills any parent. The new clause would similarly remove the parental responsibility of the father where he is convicted of sexual offences against children.
There is a BBC News article relating to Bethan in Cardiff, who has spent £30,000 protecting her daughter from the child’s father, who has been convicted of paedophile offences. The clause would make it the default position that parental responsibility is removed in such a case, meaning mothers do not have to go through such an arduous and expensive process. It could, however, be reinstated by the family court on application if it is judged to be in the best interests of the child.
Alex Cunningham (Stockton North) (Lab)
It is a pleasure to serve under your chairmanship this morning, Mrs Latham. I welcome the new clause tabled by my right hon. and learned Friend the Member for Camberwell and Peckham and outlined by my hon. Friend the Member for Birmingham, Yardley. New clause 3, as we have heard, seeks to remove the parental responsibility of people convicted of sexual offences against children and I welcome the tremendous cross-party support it has received. The new clause’s core aspect is the welfare of the child. I am one of those whose ambition in being elected to this place was to work for the benefit of young people, and the new clause does that.
The proposal would go some way to strengthening the law around the welfare of a child whose parent has been convicted of sexual offences against children. There are very limited cases where the court has allowed an application to terminate a person’s parental responsibility. They include a 1995 case in which the court terminated the parental responsibility, acquired by a parental responsibility agreement, of a father who had been sent to prison for causing serious injuries to his child.
In 2013, the court removed the parental responsibility of a father who had been imprisoned for sexual abuse of his child’s half-sisters. In a further case in 2013, the court terminated the parental responsibility of a father who was serving a prison sentence for a violent attack on the child’s mother. Finally, in a 2021 case, the court terminated the parental responsibility of a father who had a significant offending history, including sexual offences against children. In other words, this is already happening.
On Second Reading, I spoke about the need to amend the Bill so that offenders who have sexually harmed children and are sent to prison as a result lose the ability to control their own children from behind bars. That measure is long overdue and will ensure all children are safe from those dangerous predators, including their own parents. The key problem to address is: how can a man—it is usually a man—considered too dangerous to work with or be around other people’s children be allowed to have parental responsibility that effectively makes him responsible for all manner of decisions affecting their child’s life, but which may not be in the best interests of the child? Why should any child be subject to any form of control by a convicted sex offender who is unlikely to be part of their lives for years ahead, and possibly forever?
In response to a question on the proposed new clause, Dame Vera Baird told Committee members that she had reservations about the definition of a sexual offence in the context of the Bill as she felt it might be too wide. That said, I hope the Government will at least support the new clause in principle and perhaps return to the issue on Report so that we can take another step in the quest of all of us here to protect children. I look forward to the Minister’s response.
Laura Farris
The new clause seeks the automatic suspension of parental responsibility where a parent has been convicted of a serious sexual offence against a child. We understand fully the motivation in bringing the new clause. We have discussed it and I respect the remarks that have been made. I want to confine my remarks to the contours of the current system and where that fits in relation to Jade’s law, which the hon. Member for Birmingham, Yardley has already alluded to, and how that was introduced in the Victims and Prisoners Bill.
Starting with the current state of the law, the paramountcy principle is the cornerstone of the family justice system. There must be full consideration of the best interests of the child as a starting point. The hon. Member for Stockton North has just given an example of a number of cases where the parent had committed a very serious sexual offence and the family court acted accordingly to suspend parental responsibility.
Jess Phillips
Perhaps the Minister would like to see my email account, which has a folder specifically for the thousands of cases from the family court where the cornerstone is absolutely not the safety of the child. There are lots of cases where that does not happen—far more than the handful that have been referred to.
Laura Farris
I noted what the hon. Lady said in her opening remarks, but I will go through the legal landscape before I come to other issues. As I say, we are carefully considering the force of the new clause.
In cases in which a parent has been convicted of a child sexual offence, the family court has the power to strip out parental responsibility. That decision is made only after careful consideration of the best interests of the individual children, to ensure that their needs are the driver for action. Decisions about suspending or restricting parental responsibility have significant ramifications for children, which is why judges prefer to consider each case on its individual merits and make a decision that is specific to the best interests of that child.
We must not conflate suspending an individual’s parental responsibility with a punishment. It is a step that is taken to protect the child from harm, and because of that it must be taken when it is in the best interests of the child. The new clause, as drafted, makes no provision for the consideration of the best interests of the child. For that reason, we think it engages article 8 consideration under the European convention.
Members are of course aware that the Government recently tabled an amendment to the Victims and Prisoners Bill that will automatically suspend parental responsibility where a parent has been convicted of the murder or the manslaughter of the other parent. We wish to make clear that distinction. In many cases in which one parent has killed the other, the children involved will have no one left to exercise parental responsibility, apart from the killer of their other parent. In such circumstances, we think that it is right that whoever is left caring for the child, whether that be a grandparent or even the local authority, is spared the onus being on them to commence family proceedings to restrict the offender’s parental responsibility.
Where a parent has committed a serious offence other than murder or voluntary manslaughter, it is likely that there will be another parent able to exercise parental responsibility and apply to the family court.
Jess Phillips
Does the hon. Lady think it is okay for a woman who has been abused and had her husband convicted of paedophilia to pay £30,000 in order to keep her children safe?
Laura Farris
I thank the hon. Lady for her intervention. That case has caused concern, and we have been looking carefully at the legal aid position, which I will come on to.
As I was saying, where a parent has committed a serious offence other than murder or manslaughter, it is likely that there will be another parent able to exercise parental responsibility and make the application to the family court—I will come to legal aid in a moment—for the well-established method of restricting the offender’s parental responsibility.
Lord Meston, a family court judge who sits in the House of Lords, made a speech on the Victims and Prisoners Bill in which he warmly welcomed the inclusion of Jade’s law as a way of automatically restricting the rights of the other parent. I just say this in passing. He was invited to consider whether there should be the automatic suspension of parental responsibility if another kind of crime was committed. He said something that we have noted as part of our thinking:
“However, on reflection, I do not think that the Crown Court should be expected, as part of a sentencing exercise, to make automatic prohibited steps orders”
in different cases. He continued:
“The Crown Court will not have, and cannot be expected to have, a full appreciation of the family’s structure and dynamics, and of the circumstances of the children concerned, and will not have input from Cafcass.” Lords—[Official Report, House of Lords, 18 December 2023; Vol. 834, c. 2094.]
That is not determinative of our thinking, but it is the reflection of a family court judge who sits in the other place. That is what he said in relation to Jade’s law while, of course, welcoming it.
The automatic nature of the new clause would mean there would be no space for the court to consider the wishes of the other parent or the wishes of the children as to whether the matter should be brought to a family court.
Jess Phillips
The new clause clearly states that the other parent can apply to the court to have their wishes heard, but it is not the responsibility of a completely innocent mother, in most cases, to have to protect her child from a sex offender.
Laura Farris
I accept that the new clause gives the other parent the right to return to the family court, but effectively it could force a child to make applications to the family court to have their wishes considered.
Laura Farris
Because there has to be an application for the reinstatement of parental responsibility. That is what the new clause states at proposed new section 2A(2).
Jess Phillips
The hon. Lady said that a child would have to make an application to the family court. How is that the case?
Laura Farris
The child would have to advance what their best interests are to the family court, if parental responsibility has already been suspended.
Laura Farris
We have carefully considered the case in Cardiff. I want to make it clear that legal aid is available for a prohibited steps order and specific issue order in specific circumstances, subject to means and merits tests and evidence requirements relating to domestic abuse or the protection of children being met. Where the subject of an order has a relevant conviction for a child abuse offence, it is likely that the application would satisfy the relevant evidence and merits criteria. We are looking into why that was not the case for the lady in Cardiff.
Jess Phillips
Could I also open all the other cases with the Legal Aid Agency? The vast majority of people I encounter—there are thousands, and I have sat in the family court for hours—have not been able to access legal aid. Every one of them is a victim. Perhaps the Minister could look into that.
Laura Farris
That warrants a response, and the hon. Lady will get one.
My final point, to which the hon. Lady alluded in her opening remarks, when she said she hoped the provision might go wider, is that one of the conceptual difficulties with the new clause is that it would seek to remove parental responsibility in cases of serious child sexual abuse, but it is silent on, for example, child murder. Or what about perhaps a serious case of terrorism, where we could advance a plausible argument? We think there are issues around the scope of the new clause.
Jess Phillips
I could not agree more—the scope needs to be much wider—so will the Minister and the Government, by Report stage or in the Lords, finally act on the harms review by tabling amendments to the Bill that we can all be proud of?
Laura Farris
As I say, we are looking at the definitional issues. We are also looking carefully at the paramountcy principle, which underpins the way in which cases are approached in the family court. The new clause has a worthy aim. We have huge sympathy for families in these circumstances and want to do as much as possible to support them in getting the right outcome for their children. At present, we do not think the new clause is the right way to do that, and we urge the hon. Lady to withdraw it.
Jess Phillips
For nearly 10 years I have had Ministers stand in front of me and say, “We are a bit worried about” some legal word or other. How many children have died because of family court proceedings in the 10 years that we have been trying to raise the alarm? The family courts in our country will be the next Rotherham or Rochdale. State-sanctioned child abuse is going on and we all just turn a blind eye. The things that I have seen in courts are harrowing. I have watched children being removed from their loving mothers and placed fully in the care of paedophiles—proven child abusers. For me, we cannot casually sit here and pretend that that is okay.
Funnily enough, one of the people I started this campaign with, all those years ago, was the current Justice Secretary. Why is it taking so long to do something about the family courts in our country? They are actively dangerous, everybody knows it and nobody is doing anything about it. It is like the Post Office; I will not be one of those people who sat by and did nothing.
I will not press the new clause to a Division, because its scope is not wide enough and does not deal with half the harms that I see. If the Minister wants to take away the parental responsibility for children from terrorists she can knock herself out—I will support it. I will support any movement towards progress in the family court, because I have seen none. I look forward to the Government coming forward with an all-singing, all-dancing proposal that will make children safe. I beg to ask leave to withdraw the motion.
Motion, by leave, withdrawn.
Vicky Ford (Chelmsford) (Con)
On a point of order, Mrs Latham. I find it really hard to hear my colleagues in this room. Could I ask you, and other hon. Members, to please speak as loudly as possible?
The Chair
I agree. I do not think the microphones are doing a very good job today, so I will try to speak up.
New Clause 5
Sexual interference with a corpse
“(1) The Sexual Offences Act 2003 is amended as follows.
(2) After section 70, insert—
‘70A Sexual interference with a corpse
(1) A person “P” commits an offence if—
(a) P intentionally performs an act of physical interference with the body of a dead person, and
(b) the physical interference is sexual.
(2) For the purposes of this section, physical interference may include—
(a) P touching the body of a dead person with any part of P’s own body, and
(b) P causing any item or substance to make contact with the body of a dead person.
(3) A person guilty of an offence under this section is liable on conviction on indictment to imprisonment for a term not exceeding 10 years.’”—(Stephen Metcalfe.)
Brought up, and read the First time.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
I beg to move, That the clause be read a Second time.
This new clause, tabled in my name and the names of my right hon. Friend the Member for Tunbridge Wells (Greg Clark) and my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch), is a distressing one, and I apologise in advance for any upset that my speech causes, either in this Committee Room or to those who may read the Hansard report. I know that the Minister has been discussing the matter with my colleagues, who are more versed on the issue, and I know that the shadow Minister has been briefed, so I will not go into more detail than is necessary for the purpose of moving the new clause.
In 2021, David Fuller was convicted of the historic murder of two young women in Tunbridge Wells following a cold case review that eventually led to his identification. In the course of the police gathering evidence for his conviction—for which he received a whole-life tariff—video recordings were recovered of Fuller, who was an electrician at the Maidstone and Tunbridge Wells NHS Trust, that showed him sexually assaulting the dead bodies of women and girls in the hospital mortuary.
There were more than 100 female victims of Fuller’s abuse, ranging in age from nine to 100. He received convictions for sexually penetrating corpses, which under current law carries a maximum sentence of two years in prison. However, the evidence gathered by the police showed that Fuller also seriously sexually assaulted victims in a non-penetrative way—I will not go into the details here for it to be clear as to what is meant by that.
Unfortunately, the current law only applies to penetrative assault and does cover any form of sexual assault that is non-penetrative. Fuller committed heinous acts such that, had the victims been alive, he would have been convicted and sentenced to lengthy terms of imprisonment for each offence, but as they were sadly not alive, he was not. There is clearly a loophole in the legislation that I am sure everyone will agree needs to be closed; that is what the new clause aims to do.
The new clause creates a new offence of sexual interference with a corpse and provides for a maximum sentence of up to 10 years’ imprisonment—which I, my colleagues and, I hope, the Committee agree would be fitting for such a disgusting crime. I know that the Minister is meeting my colleagues soon, so I will not press the new clause to a vote, but I suspect the Committee would be very keen to hear the Minister’s response and a commitment to amending the legislation.
Victims of Fuller had already been robbed of their lives. Fuller then robbed them of their dignity, and then suitable justice. The hurt, distress and damage done to the families of Fuller’s victims is immense. They had the unimaginable shock of being told what that vile man did to the bodies of their loved ones—their daughters, sisters, nieces, aunts, wives, mothers and grandmothers—when they were in the protected space before they were laid to rest. I do not want to think there will be future cases like that, but if there are, I hope we can make a difference by making sure that such acts are crimes and providing sentences that fit their gravity.
Alex Cunningham
I will be brief. As the hon. Gentleman said, this is a distressing new clause, but the Opposition believe it is very much necessary. I was briefed on it last week by the right hon. Member for Tunbridge Wells, and I was really shocked by what he had to tell me about the murderer David Fuller. The facts have been outlined to the Committee today. Fuller was of course jailed for murder, but that someone could carry out the assaults that he did on dead people and not be prosecuted beggars belief. None of us can comprehend the distress caused to the families of the deceased people Fuller violated. It is important that we ensure that anyone who acts as he did is suitably punished.
I note that the hon. Member for South Basildon and East Thurrock does not intend to press the matter to a vote, but I hope the Minister will be sympathetic to his cause and that of the right hon. Member for Tunbridge Wells. I reiterate our support for the new clause and ask the Government to bring forward a new clause, perhaps on Report, to deal with this most horrendous crime.
Laura Farris
I thank my hon. Friend the Member for South Basildon and East Thurrock for his speech. I am grateful for the opportunity—
The Chair
Order. May I intervene? I have been passed a note to say that the mics in the room are for the audio recording of proceedings, not for amplification in the room, so Members should be advised to speak up if others are having difficulty hearing. I understand that when somebody has their back to the people they are speaking to, it is very difficult to hear, so would the Minister mind speaking up a little?
Laura Farris
Thank you, Mrs Latham. I am grateful for the opportunity to speak about the new clause. I hope people can hear me this time.
It is actually quite rare in this place that we find that there is a crime that is not reflected at all in the law. This is one of those examples. It follows the truly disgusting offending by David Fuller. I want to start by acknowledging the experience of his victims’ families and how distressing it has been for them. I thank my hon. Friend the Member for Chatham and Aylesford and my right hon. Friend the Member for Tunbridge Wells for their work on this matter.
The Government have been reviewing the sexual penetration of a corpse offence in section 70 of the Sexual Offences Act 2003, which currently carries a maximum penalty of two years’ imprisonment following conviction on indictment, and we agree that there is a gap in the law. Section 70 applies only to sexual penetration of a corpse, so any form of sexual touching falling short of penetration is not currently a criminal offence. The Government have therefore concluded that the criminal law should be expanded to include non-penetrative sexual activity with a corpse.
The Government have also concluded that the current statutory maximum does not adequately reflect the harm caused by an offence of this nature, and that it should be increased from two years’ to five years’ imprisonment. We therefore support my right hon. and hon. Friends’ laudable aims in tabling their new clause.
In the interests of completeness, I will set out why we cannot accept the new clause as drafted. It would not repeal section 70 of the Sexual Offences Act but would create a new offence, in proposed new section 70A, with a higher maximum penalty than the behaviour already covered by section 70. It would also introduce the concept of interference with a corpse. With respect, we say that is unnecessary, because touching is already defined in section 79(8), and we think that section can be expanded and read across to apply to victims in the circumstance we are discussing. Introducing a new concept of interference, which could arguably be interpreted differently, could lead to confusion in the prosecution of the offence, which we think is not necessary.
In addition, the offence in the new clause as drafted does not require the offender to know or be reckless to the fact that what is being interfered with is a dead body. We think the mental element of the offence is important so that we capture those who are genuinely committing a criminal offence.
Again, I thank all the Members who have spoken on this matter, particularly my right hon. Friend the Member for Tunbridge Wells and my hon. Friend the Member for Chatham and Aylesford who have been to see me. They continue to make efforts on behalf of their constituents who have been so badly affected by this uniquely disgusting and horrific crime. We support the intentions behind the new clause, and I look forward to working with hon. Friends to find a way to bring forward the necessary legislation in this Bill. With that reassurance, I urge my hon. Friend to withdraw his new clause.
Stephen Metcalfe
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 16
Complicity in joint enterprise cases
In section 8 (abettors in misdemeanors) of the Accessories and Abettors Act 1861, after “shall” insert—
“, by making a significant contribution to its commission,”.—(Peter Dowd.)
This new clause would clarify the definition of ‘joint enterprise’ (or secondary liability), so that an individual must make a “significant contribution” to an offence committed by another to be criminally liable.
Brought up, and read the First time.
Peter Dowd (Bootle) (Lab)
I beg to move, That the clause be read a Second time.
It is a pleasure to see you in the Chair, Mrs Latham.
New clause 16 mirrors the Joint Enterprise (Significant Contribution) Bill introduced by my hon. Friend the Member for Liverpool, Riverside (Kim Johnson) in attempting to amend the Accessories and Abettors Act 1861. It clarifies that a person must make a significant contribution to a crime to be guilty of it. The private Member’s Bill, which has cross-party support, will have a Second Reading debate on Friday 2 February. The 1861 Act states that those
“who aid, abet, counsel or procure the commission of ”—
an offence—
“…shall be liable to be tried, indicted, and punished as a principal offender.”
However, the doctrine of secondary liability or joint enterprise, as it is more commonly known, is still older. Through common law, developed by the Court, “aid” or “abet” has now shifted to “assist” or “encourage” for establishing secondary liability. In many situations, this test is entirely reasonable. Most people would agree that an armed robber at a bank heist gone wrong, for example, can be deemed as culpable as their partner who actually shot a person, because they make a significant contribution to the crime by carrying or supplying a gun and threatening the cashier, for example. The problem, according to many legal experts, is that joint enterprise laws are sometimes used in a much wider way, often to convict people who have made no significant contribution to the crime at all. Campaigners have long warned that these laws can be used as a racist dragnet to maximise convictions.
Recent Crown Prosecution Service data, recorded and released as a result of legal action by Liberty and the campaign group Joint Enterprise Not Guilty by Association, suggest that black people are 16 times more likely than white people to be prosecuted for homicide or attempted homicide under joint enterprise laws, yet no assessment of the reasons for this shocking statistic—and it is shocking—has been made by the Crown Prosecution Service, or, as I understand it, by the Government.
In 2016, the Supreme Court, in the case of R v. Jogee, said that the law on joint enterprise had taken a “wrong turn” for more than 30 years. It restored the proper law of intentions so that those who intended to commit or assist a crime, rather than those who only might have foreseen it, could be properly convicted. That was, as the BBC said, a moment of “genuine legal history”. Research by the Centre for Crime and Justice Studies identifies that the judgment has had little to no effect from joint enterprise changes, charges or convictions, and the Court of Appeal has decided that prisoners whose juries had only been directed to consider foresight, rather than intention, should not have a retrial. The situation is gravely unjust for many prisoners, and my hon. Friend the Member for Huddersfield (Mr Sheerman) tried to address it in his Criminal Appeal (Amendment) Bill.
It is a myth that the Supreme Court fixed joint enterprise in 2016. It left under-addressed what constitutes “assist” or “encourage”. There is currently no threshold or test for whether someone made a significant contribution to a crime to be convicted of it. That flexibility gives rise to uncertainties and injustice. For example, joint enterprise laws are being used to convict young people who are seen fighting, but not with the victim; young people who are not present at the scene; women who have no control over their boyfriends’ conduct; and young people who listen to certain kinds of music, where trials focus on character and culture rather than on contribution to a crime. In the recent case of Fiaz, the Court of Appeal suggested that a jury need not be specifically directed by the judge to consider the legal significance of a defendant’s contribution towards an offence. Unfortunately, the Supreme Court declined to hear that case, so it falls to Parliament to enact safer legal frameworks.
What would the new clause do? It would simply add weight to the words of the 1861 Act, inserting:
“by making a significant contribution to its commission”
and thereby enshrining in statute a common-sense safeguard against inappropriate or over-zealous prosecutions. That is an important principle in a fair and effective justice system. By clarifying that someone must make a “significant contribution” to an offence in order to be criminally liable, the new clause seeks to restore Parliament’s original meaning and to correct a second wrong turn by the court with respect to joint enterprise. That would help to ensure that persons who make no significant contribution to a crime are never again convicted of being complicit in that crime.
Of course, that would not prevent the use of alternative charges in cases involving multiple accused persons, nor would it prevent the prosecution of multiple persons for a crime in which they all made a significant contribution. It would not help anyone who is already convicted under this doctrine—I referred to the Bill introduced by my hon. Friend the Member for Huddersfield—but it would be an important step in preventing the unfair and unjust use of joint enterprise laws against innocent people in the future. I understand that there may be some objections; as far as I am aware, the Government have not made any formal response to the proposed change but have let it be known that they are potentially resistant to the idea. I hope that the Minister's response to the Committee will clarify any of those objections.
In my view, it would be hard to object to the new clause on the grounds of unintended consequences as to do so would be an acknowledgement of the belief that some people deserve to be found guilty of offences—sometimes very serious offences, such as murder—despite making no significant contribution to the commission of those offences. As such, Ministers may claim that the amendment is unnecessary on the grounds that our current laws—whether “aid” or “abet” in statute or “assist” or “encourage” in common law—already imply a significant contribution or that the current flexibility of the law is part of its strength, as it means that it is for the jury to weigh up and decide on the facts of a particular case.
That is not the case according to Dr Felicity Gerry KC, who was lead counsel in the Jogee case. She described the following generic examples, all of which are based on real cases: a boy, cycling to and from an incident, who has no contact with the victim; a driver who drops friends off to collect drugs, and a fight happens outside the car; a passenger in a taxi, where others get out of the taxi and go to an area where a stabbing occurs, but that passenger has no contact with the victim; schoolchildren who gather for a fight and one of them dies, but they are all prosecuted even when they have had no contact with the victim and have no weapon, putting them all in risk of being convicted, without separating those who contribute and those who do not contribute; autistic children who find it difficult to assess what others will do; children exploited to sell drugs who get caught up in the actions of others; a woman whose violent boyfriend gets angry with some people and runs after them around a corner—she follows a short while later and pulls another person’s hair when she thinks he is being attacked; and a woman looking for her shoes during violent disorder.
All those scenarios describe circumstances in which people can be convicted of serious crimes, despite making no significant contribution to that crime, so it is not correct to claim that “significant contribution” is already implied by law—it is not.
Jess Phillips
In a case that I have come across, a woman who was a victim of domestic abuse was charged under the crime of joint enterprise and received a longer sentence—because she pleaded not guilty—than the person who abused her and killed somebody by pulling the trigger of a gun. Is my hon. Friend concerned that in some cases of joint enterprise, those who have not had it proven that they had a significant part to play get longer sentences than those who did?
Peter Dowd
My hon. Friend gets right to the nub of this matter, and she is absolutely right. I agree with her point. Dr Gerry points out that the case of Fiaz, in which she was lead counsel, highlights the need for legal clarity. Judges are currently required to direct juries to consider the significance of a defendant’s contribution to an offence, and that is leading to numerous miscarriages of justice. Only Parliament can fix that.
I have a number of questions for the Minister. If the new clause is unnecessary, as may be claimed, can the Minister explain why when schoolchildren spontaneously gather for a fight and one of them unfortunately dies, they are sometimes all prosecuted even when they have had no contact with the victim and no weapon? That is one of the many such examples provided by Dr Gerry, who, as I said, was the lead counsel in the landmark Jogee case.
Is the Minister be willing to meet Dr Gerry and other experts in this field who can explain why this change of law is so badly needed? Can the Minister explain why the Crown Prosecution Service’s own database suggests that black people, as I indicated earlier, are 16 times more likely than white people to be prosecuted for homicide or attempted homicide under joint enterprise laws? What assessment have the Government made of the reasons behind that remarkable statistic? It is shocking. Is it not obvious why campaigners say that joint enterprise is too often used as a racist dragnet? Finally, will the Minister agree that it is not in the public interest to prosecute those who have not made a significant contribution to a crime?
Alex Cunningham
I begin by paying tribute to the work of my hon. Friend the Member for Bootle on the new clause, and the ongoing work of my hon. Friend the Member for Liverpool, Riverside (Kim Johnson), who we have already heard has introduced a private Member’s Bill to the House on the same issue. I am sure that Members across the Committee will share my admiration and respect for the campaigners from JENGbA, who have been tirelessly working on challenging injustices in joint enterprise convictions for well over a decade.
As we have just heard, the new clause mirrors the Joint Enterprise (Significant Contribution) Bill, which we hope will receive its Second Reading on Friday 2 February. I would prefer to see the Government making commitments on this matter, as it is a complex area of law and practice and any reforms will need careful consideration and monitoring to ensure that they are working, especially after the unexpected absence of change following the Jogee decision in 2016, which I will come back to later.
I am glad that the new clause has been tabled to enable a discussion in Committee, because the issue deserves more parliamentary time. Even though we have had many criminal justice Bills before this House in the past 10 years, all while alarms have been raised about continuing problems with joint enterprise law, Parliament has not engaged substantially with the issue for some time. During my tenure as shadow Justice Minister, I met the Centre for Crime and Justice Studies and the PCS, among others, and heard about ongoing challenges with joint enterprise convictions, despite the decision in Jogee and the very active collaboration between campaigners, legal practitioners and academics over the last decade. So I will be very interested to hear from the Minister about the work her Department has been doing in this area and, indeed, about any ongoing engagement it has had with campaigners, experts and practitioners who are collaborating on reform in this area.
The processes of prosecution and conviction in our criminal justice system should be fair, transparent and accountable, but joint enterprise law can be vague and confusing, and it can lead to apparently unjust outcomes. Some examples of individuals who are potentially at risk of being prosecuted under joint enterprise have been provided by Dr Felicity Gerry KC, who was the lead counsel in the case of Jogee. My hon. Friend the Member for Bootle has already outlined them to the Committee.
In 2016, when the Supreme Court ruled that the law of joint enterprise had taken a “wrong turn” for over 30 years, it restored the proper law of intention so that those who intended to commit or assist a crime, rather than those who might have foreseen it, could be properly convicted under joint enterprise law. These are all based on real cases, and as I have said, my hon. Friend has given the example of the taxi passenger getting out and becoming involved in a stabbing, or the woman who pulled somebody’s hair while trying to defend her boyfriend who may well have carried out a serious offence. Those individuals were charged under joint enterprise law, and they were at risk of extremely lengthy sentences, as if they were the primary offender, even when it is very difficult to discern how they contributed to the crime in question. Joint enterprise law has been used to convict young people who have not been present at the scene of the crime, and young people who listen to certain kinds of music, and there is a risk that such a trial focuses on character and culture, not contribution to a crime. My hon. Friend spoke about that in some detail. It is clear that joint enterprise law needs to be reformed in some way.
Last September, the CPS finally recorded and published a set of pilot data about joint enterprise cases, as a result of legal action by Liberty and JENGbA. While the results were shocking, they were, sadly, not surprising, as they confirmed much of what has been said by joint enterprise reformers for years. The data revealed that over half of those involved were aged under 25. Some 30% of the defendants in the cases were black, compared with the 4% of black people in the wider population, and black 18 to 24-year-olds were the largest demographic group identified in the pilot data. The data illustrated what we already knew about joint enterprise, which is that there is a serious racial disproportionality in its use.
The CPS pilot data suggests that black people are 16 times—I repeat, 16 times—more likely than white people to be prosecuted for homicide or attempted homicide under joint enterprise laws, which is a very significant divergence. I would be grateful to hear from the Minister the results of the data analysis, particularly about what she believes are the reasons behind the shocking disparities, given that the CPS has said that no conclusions about its decision making can be drawn from the pilot data. At the very least, we have to ask questions about the possibility that this level of divergence is at least in part caused by discriminatory practices in our criminal justice system. Looking at those figures, is the Minister confident that the framework for joint enterprise prosecutions is fit for purpose?
It has taken a number of years for the CPS to finally publish data on this important issue, but now that we have it, we must ensure that the Ministry of Justice is using that data to explore how it can best improve practice. I would also be grateful if the Minister could share any other plans for data collection and analysis in relation to the application of joint enterprise law, and anything she is aware of in the Ministry of Justice, the CPS or other Government body that is happening to progress this.
I was personally quite surprised at the scale of joint enterprise prosecutions, with the CPS data showing 680 defendants in 190 cases of homicide or attempted homicide across six of 14 CPS areas in just six months. That number is considerably higher than I would ever have anticipated. If the Minister has any thoughts on the number of prosecutions, I ask her to share them with the Committee. The high level of joint enterprise prosecutions demonstrates that at the very least it is an issue deserving of considerably more active consideration by parliamentarians and the Government.
Finally, I would be grateful if the Minister could speak to any discussions that she has had in her Department about the recent Fiaz case, in which the Court of Appeal suggested that a jury need not be specifically directed by the judge to consider the legal significance of a defendant’s contribution towards an offence. Dr Gerry has argued that the case highlights the need for additional legal clarity, as judges do not always direct juries to consider the significance of a defendant’s contribution toward an offence. Does the Minister also recognise the need for additional clarity in that area, and has her Department considered any means by which that may be achieved? It is an area with substantial cross-party recognition that more needs to be done to increase the fairness, transparency and accountability of prosecutions, and I look forward to hearing the Department’s position on the matter.
Laura Farris
I thank the hon. Member for Bootle for tabling new clause 16, which would amend section 8 of the Accessories and Abettors Act 1861 to provide that a person must have made a “significant contribution” to an offence committed as part of a joint enterprise to be indicted or punished as a principal offender. Its effect would be that the prosecution would have to identify the precise nature of the defendant’s role in aiding, abetting, procuring or counselling the commission of a crime committed in order to prove that the defendant had made a significant contribution—a threshold that need not currently be met.
Joint enterprise is a common law doctrine used in a variety of situations, most commonly to describe a situation in which two or more individuals have a common purpose to commit any criminal offence, or a secondary party encourages or assists the principal offender to commit an offence. It is a long-standing principle of criminal law that in either of those situations, both or all of the offenders may be held equally responsible and could be subject to the same penalty.
The hon. Member for Bootle has set out a number of examples, but I will start with a high-profile one. Members of the Committee may well recall the Victoria station attack in 2010, when a group of young men chased another young man over the ticket turnstile and down the escalator, where they set upon him. In the course of that attack, the young man was kicked in the head and torso repeatedly and was stabbed, and he died. At the end of it, the cause of death was multiple injuries, but it was impossible for the coroner to say who had struck the fatal blow with the knife or who had administered the fatal kick to the head. The whole group of assailants was put on trial; a number were convicted of murder and a number were convicted of manslaughter. That was classic joint enterprise, where they went with a common purpose to attack seriously an individual, and it could not be identified who had made the significant contribution, but the young man—the victim—was killed.
I say with great respect that R v. Jogee, which went before the Supreme Court in 2016 and to which the hon. Members for Stockton North and for Bootle both referred, was not an ordinary case. It was not even close to being an ordinary case. The Supreme Court reviewed 500 years of common-law jurisprudence on joint enterprise, and not only changed the law but issued really important guidance. I would like very briefly to talk the Committee through the framework that the Supreme Court applied, because it will help to explain why the Government will not accept new clause 16 today.
The Supreme Court said that it circumscribed the ambit of the offence and removed, as a matter of common law, the principle of parasitic accessory liability. To give an example that is sometimes given in case studies, if two people go to a farm with the purpose of stealing some farm machinery, and the farmer approaches them, and then person No. 1 pulls out a weapon and uses it on the farmer, that would not be decisive evidence that person No. 2 intended to kill or cause serious harm. That would previously have been the case under the principle of parasitic accessory liability, but the Supreme Court said that that went too far. In plain English, it said that joint enterprise cannot be inferred from the fact that it was foreseeable that a secondary offence would take place; there has to be an intention to assist. It said that the existence of foreseeability was something that the court should treat as evidence of intent, but was not necessarily decisive of it.
The judgment concluded by saying that joint enterprise essentially requires two elements. The first is a conduct element: the accessory must encourage or assist the crime committed by the principal. Secondly, the prosecution must show that the mental element existed, in other words that the accessory intended to encourage and assist the commission of the crime committed by the principal.
I have done a bit of a review of the case law—although I question whether it is helpful or unhelpful to go through case law during a Bill Committee in which nobody has the opportunity to read the case report—and am satisfied that there have been examples of case law since the Jogee case that show that approach being fairly applied. One example is of a group of young men who undertook a burglary on a care home. One person was tasked with searching the rooms before the others went in. In the course of events, one of the residents of the care home was brutally attacked. The young man who had done the search went in to try to stop it; he established that in court. He was convicted of burglary but not of the secondary attack, because that had not been his intention as part of the joint enterprise exercise.
Jess Phillips
Can the Minister tell me what protections are in place for the woman in the case that I outlined? She was considered to be an accessory to a crime. She was a victim of coercive and controlling behaviour, and the crime was a part of a pattern of domestic abuse.
Laura Farris
In that circumstance, the defence of duress would be available to the victim in the ordinary way.
Jess Phillips
Currently, that is absolutely not what is happening in our criminal courts. It is currently no defence for victims of domestic abuse in these cases to say, “I’m a victim of domestic abuse: that’s why I ended up here.” The Minister is saying that there is the defence of duress; I am saying that it never gets used. It does not stack up, and this is not happening in reality. She has spoken of her pride in the Government over coercive control. Does she think that there need to be specific elements, within this conversation about joint enterprise, to protect people who are coerced into such behaviours?
Laura Farris
We will come on to some amendments of that nature and I will deal with them in due course, but the defence of duress is a standard defence in the criminal context. [Interruption.] These are the criminal defences that get advanced.
In response to the hon. Member for Bootle, this is an area of the law that is intrinsically linked with other inchoate offences such as encouraging or assisting a crime. We think that it is too difficult to require the prosecution to prove a significant contribution; as we say, the very important case of Jogee has set clear parameters for both the conduct element and the mental element, which we think creates the correct framework of common law. For those reasons, the Government are unable to support the new clause, and we ask the hon. Member for Bootle to withdraw it.
Peter Dowd
I take the Minister’s points in good faith. Nothing that I say today—nothing whatever—condones any attempted criminality, but the question of proportionality, which we have discussed several times, is key. The Minister gave the example of a young man breaking into a care home, who was able to prove that he assisted the person. In that case, he was having to prove that he was not guilty. A fundamental element of British law is that someone is innocent until proven guilty, not the other way round. I see the perplexed look on the Minister’s face, but the young man in that case had to prove that he was not guilty. This was not about the prosecution proving that he was guilty.
I do not want to go into the detail of these cases; I am just trying to make the point that the Jogee case went so far, but it still did not deal with the question of proportionality. One defence solicitor said:
“They don’t need to prove that you did anything. If you’re part of a gang, it doesn’t matter, because the actus reus”—
that is, being there—
“and the mens rea”,
the state of mind,
“is being in the gang”.
That could be applied in so many different cases. It could apply in boardrooms, and right across the piece: “You were there. You are guilty.” That is almost what it is saying, and that is what lawyers and Dr Gerry are trying to get the Government to consider.
Let us have the debate and have the discussion with the experts. The whole point of British justice is that when issues are raised and potential injustice arises, we think it through and work it out, instead of just closing the door. The danger in this situation is that the Government are closing the door and effectively saying that the Jogee case is the final say on this matter. I do not think it is.
However, my hon. Friend the Member for Liverpool, Riverside, who has done sterling work, will be addressing the issue in the debate on Friday 2 February. On that basis, I will withdraw the new clause, but I ask the Minister to give careful consideration to what I have said. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 17
Offence of failing to remain at the scene of a traffic collision
“In section 170 of the Road Traffic Act 1988, after subsection (4) insert—
‘(4A) A person guilty of an offence under subsection (4) is liable—
(a) If a person other than the driver of the vehicle suffered a fatal injury—
(i) on conviction on indictment, to imprisonment for a term not exceeding 14 years.
(b) If a person other than the driver of the vehicle suffered a serious non-fatal injury—
(i) on summary conviction, to imprisonment for a term not exceeding 10 years or a fine not exceeding £20,000 or both;
(ii) on conviction on indictment, to imprisonment for a term not exceeding 10 years.
(c) In any other case—
(i) on summary conviction, to imprisonment for a term not exceeding 10 years or a fine not exceeding £20,000 or both;
(ii) on conviction on indictment, to imprisonment for a term not exceeding 10 years.’”—(Peter Dowd.)
This new clause would expand the existing offence of failing to stop after a road collision to create more serious penalties for failing to stop after collisions which result in death or serious injury.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss the following:
New clause 18—Time to report road collision—
“In section 170 of the Road Traffic Act 1988, omit subsection (6) and insert—
‘(6) In complying with a duty under this section to report an accident or to produce such a certificate of insurance or other evidence, as is mentioned in section 165(2)(a) of this Act, it is an offence for a driver—
(a) not to do so at a police station or to a constable as soon as is reasonably practicable, and
(b) not to do so within two hours of the occurrence of the accident in relation to reporting an accident, or within twenty-four hours of the occurrence of the accident in relation to the production of a certificate of insurance or other evidence.’”
This amendment would amend the Road Traffic Act 1988 to reduce the time within which a driver must report a road collision in which they were involved from twenty-four hours to two hours, and make it an offence not to report an accident.
New clause 49—Amendments to the Road Traffic Act 1988—
“(1) The Road Traffic Act 1988 is amended as follows.
(2) In each of the sections listed below, after ‘a road or other public place’ insert ‘, or a private place adjacent to a road,’—
section 1 (causing death by dangerous driving);
section 1A (causing serious injury by dangerous driving);
section 2 (dangerous driving);
section 2B (causing death by careless, or inconsiderate, driving);
section 2C (causing serious injury by careless, or inconsiderate, driving);
section 3 (careless, and inconsiderate, driving).”
This new clause would extend the Road Traffic Act 1988 so that a range of driving offences can be committed in private places adjacent to roads as well as on public roads or in public places.
Peter Dowd
New clauses 17 and 18 relate to the offence of failing to remain at the scene of a traffic collision. My new clause 17 is clear and unambiguous. As Members will see from the explanatory statement, it would expand the existing offence of failing to stop after a road collision and would create a more serious penalty for failing to stop after a collision that results in the death or serious injury of the person hit by the vehicle. I emphasise the element that refers to victims of serious injury or death.
I put on the record the support provided to me by RoadPeace, particularly by Lucy Harrison. I want to mention Pauline Fielding, who died last year; her son was killed in an accident several decades ago, and she was a sterling advocate and campaigner on the issue in the north-west. I put on record my thanks for the work that Pauline did. I also thank Cycling UK, particularly Roger Geffen; Amy Aeron-Thomas at Action Vision Zero, who has worked on the issue; and a number of other organisations that have campaigned for many years. However, everything I say today is my responsibility and not that of others.
Why have these measures not been put on the statute book before? Promises to review the law have been made in the past and, to be fair, have been partly fulfilled, but there remains a great deal to do. It has been 10 years since the Government said that they would undertake a full review and consultation on traffic offences. Regrettably, as we discuss these issues, no full review has taken place. It seems to me that there is an irrefutable case for introducing these amendments, or a variation of them, on potential penalties. I am not servile to the wording of the new clauses; there can be variations on a theme. I recognise the legislative pressures on the Government and the workloads within Departments, but sometimes there are issues that have to be faced up to. In my view, this is one of them.
Let me set the context for these proposals. Every 16 minutes, someone is killed or seriously injured on a road in the United Kingdom. That is quite a stark figure, as I am sure hon. Members will agree; it is an official figure based on the average over the 10-year period from 2013 to 2022. To put it into an annual context, it means that 31,000 men, women and children were killed or seriously injured in collisions, out of a total of about 135,000 casualties right across the piece, including very minor collisions. In a year, 1,766 people killed were killed—1,711 in Britain and 55 in Northern Ireland—and 28,941 seriously injured: 28,031 in Britain and 910 in Northern Ireland. Road deaths have increased by 10% since 2021 and are close to pre-pandemic levels. Serious injuries are up 8% since 2021. I stand to be corrected, but on average, if I have my figures right, 85 people are killed or seriously injured every year in each of our constituencies. That is seven every month. The lives of our constituents are lost or irreparably damaged or changed.
Meanwhile, many drivers simply leave the scene of the collision—as many as 17,000, according to figures from the Motor Insurers’ Bureau. Not all of those are related to serious injury or fatality, which this clause deals with, but many families are left bereft and victims are left to carry on with their lives while perhaps very physically or neurologically damaged, not to mention the ongoing psychological impact of not knowing who was responsible and of not being able to settle. Let us say that families approached us in our constituency surgery having found out that some of the drivers involved in collisions had fled the scene—in other words, they had hit and run—and had avoided potentially more serious consequences as a result. What would we say to our constituents?
In preparing this speech, I pondered whether to give case examples of lives destroyed and families left shattered. I decided not to. Members have had so much to take in already—we have heard that today—that I do not think that adding to that with more tragic narratives would be appropriate, but I will challenge them in a different way. For the purposes of the debate, I will set aside the emotional effect on the victim’s family, knowing that their daughter, son, brother, sister, mother, father or other relative has been left on the road or the side of the road to die by a fleeing driver because the driver decided not to stop, or, having stopped, got back into the car and drove off.
Carolyn Harris (Swansea East) (Lab)
I rise to speak to new clause 49 on behalf of my hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones) and others. The new clause would amend the Road Traffic Act 1988 to provide that dangerous and careless or inconsiderate driving offences may be committed on private land adjacent to the highway. In August 2017, 22-month-old Pearl Melody Black from Merthyr Tydfil was tragically killed while walking with her father and brother. Pearl was killed by an unoccupied vehicle that rolled from a private drive in Merthyr on to a highway and down a hill, crashing into a wall that subsequently crushed Pearl and injured her father and brother.
In the months after the incident, officers from the serious collision unit of South Wales police worked tirelessly to put together a case to provide justice for the family. In short, all tests concluded that the car was mechanically sound and that it had rolled because the handbrake was not fully engaged and the automatic transmission was not fully placed in park mode. The case was sent to the Crown Prosecution Service in March 2018 and was worked on by the London office as well as by an independent QC hired by the CPS. Everyone was hopeful of a conviction under the causing death by dangerous driving category, and the CPS looked at other possible options. However, in June 2018 the CPS stated that it was unable to send the case to court as a glitch in the law states that the vehicle must have started its journey on a public road for a prosecution under the Road Traffic Act 1988. Even though Pearl was killed on a public road, the fact that the vehicle started its descent from a private drive meant that prosecution was not possible.
The coroner stated that the vehicle was well maintained and it seemed that the issue was very much driver operation. The inquest heard that the handbrake had not been fully applied in park mode. The inquest into Pearl’s death was heard in October 2018 and the outcome was that it was an accident. However, with the support of South Wales police and the CPS, Pearl’s parents have been seeking a change in the law to prevent other families from being unable to secure justice due to a legal loophole following such a tragic and completely preventable accident as this. As Gemma and Paul acknowledge, it will not help to bring justice for Pearl, as legislation is not retrospective, but if this law can be changed to prevent anyone else from suffering this injustice again, it may provide some comfort.
My hon. Friend the Member for Merthyr Tydfil and Rhymney put forward a ten-minute rule Bill that had cross-party support, including mine, but it fell due to a lack of parliamentary time. Meetings with various Justice and Transport Ministers have been helpful in that they were all sympathetic, but there is currently no major transport Bill that could provide a vehicle for this change. This new clause would therefore allow for the change to be made.
It is wholly wrong that, in cases as tragic as the one I outlined, justice cannot be achieved. There can be no conviction simply because the land on which the incident took place is not classified as public. If the law were changed in relation to driving offences occurring on private land adjoining public land, that would be a powerful deterrent to road users being careless, as well as those who have no doubt exploited the current loopholes in the law to avoid conviction when they have undoubtedly been at fault. People would be more likely to take care and pay more attention when parking or driving on private land close to public land if they knew that there could be serious consequences for their careless and reckless behaviour.
There are a huge number of instances where private land adjoining public land is readily used and potentially dangerous to those around it, including residential driveways, schools and nurseries, supermarkets, shopping centres, hospitals and doctors’ surgeries to name some of the more common ones. When we consider those examples, we can see that driving on that specific category of land can present a high risk to people in everyday situations, and especially children, the elderly and some of the most vulnerable among us.
I am sure that all hon. Members agree that nobody who has suffered the loss of a loved one or had an accident or an injury as a result of a driving offence should have to endure the injustice of seeing those responsible go free simply because of a loophole in the law. Prosecutions for driving offences—indeed, for any illegal action—should be based on what happened, not where it happened.
Alex Cunningham
I shall be brief. My hon. Friends the Members for Bootle and for Swansea East have addressed new clauses 17, 18 and 49, and I pay tribute to them and to my hon. Friend the Member for Merthyr Tydfil and Rhymney for the work they have done on road traffic incidents. All three new clauses illustrate the need for a sentencing review for serious road traffic offences, and Labour is committed to doing that alongside sentencing for other serious crimes across the system.
The Minister and the Committee heard the tragic accounts outlined by my hon. Friends, including that of a runaway car that killed a young child. Sadly, in that case, there could be no justice for the child or her family as no offence related to the circumstances of her death. Surely that cannot be right. I am sure the Minister agrees that we have a duty to act in all three areas outlined in the new clauses. Has she examined the impact of those measures on cost, particularly in relation to the additional cost of prison places? If she has not, will she consider doing so before Report and share that information with the Committee, so that we are better informed? If she cannot support the new clauses today, I would be obliged if she told us what action, if any, her Department is considering for such offences and whether the Government plan to address them in the Bill at a later stage, or perhaps during Committee of the whole House on the Sentencing Bill, which I believe is due within the next few weeks.
There can be no doubt that the new clauses would close loopholes in the law that currently prevent families of loved ones killed in tragic circumstances from achieving either justice or closure. I look forward to the Minister’s response.
Laura Farris
I thank the hon. Members for Bootle and for Swansea East for compellingly setting out the impact of various forms of driving offence that are raised in our surgeries. When we talk about driving offences, there is often a narrow focus on things such as drink-driving for which the penalties are serious; we do not talk enough about things such as causing death by dangerous driving, which can be unbelievably reckless and irresponsible and cause the most serious harms.
The hit and run that the hon. Member for Bootle so powerfully described was an extension of dangerous driving. Whether panic, cowardice or other offences that the perpetrator is concerned about come to the fore, such incidents are absolutely devastating for the families of the victim. I therefore pay tribute to those hon. Members for the way in which they presented the new clauses.
It was helpful to hear that the hon. Member for Bottle is not wedded to the language he has used in his new clause. I had some remarks to make about that, but I will not spend too much time on that because of his indication. I do not know whether this applies to the hon. Member for Bootle too, but I understand that the hon. Member for Merthyr Tydfil and Rhymney is having conversations with the Department for Transport. I hope the hon. Member for Bootle will allow time for those conversations to happen and for us to engage with them before the Bill comes back. With all that in mind, I will lay out the framework for how we deal with the hit and run issue and I will then come on to the other points and where the Government’s thinking lies at present.
Laura Farris
Hon. Members will know what I mean: those things that are not cars. There is, therefore, quite a lot of classification. We have a two-part system.
Mark Garnier
I am slightly confused. I get all the stuff about not being insured and not needing a driving licence, but surely if a person clobbers somebody with a quad bike and causes them injury, there has to be some recourse?
Laura Farris
My hon. Friend is correct, but that would be a civil action for negligence, for which remedies would be available. We treat private land separately, but I think the was saying something rather different, about where private land becomes public land. When the index offence takes place, it relates to a motor vehicle on public land; we are not dealing with particularly difficult definitional issues. I undertake to take that point away; I had not understood it from the motion and the explanation of the hon. Member for Swansea East, so it might require some further thought. I hope conversations are happening in the Department for Transport, but I will ensure that that point is included in the Department’s thinking.
I point out, in the interest of completeness, that there is a broad definition of land that is defined as “private”. Some complications may exist around the classifications of private land, such as that used for military, commercial or other official purposes or land that is exempt from legal proceedings for offences committed there. There is a legal framework in place. Accidents on private land are covered by civil law and compensation—I talked about negligence in relation to a quad bike. In extreme cases such as gross negligence manslaughter or breaches of the Offences Against the Person Act 1861, the criminal law may be engaged too. With all that in mind, I urge hon. Members to withdraw the motion.
Peter Dowd
I hear what the Minister says, and I will withdraw the motion. It was a probing amendment in an attempt to give consideration to this issue, which affects so many people—our constituents—day in, day out; I gave the figures. As I said, I recuse myself from giving examples, because they are dreadfully distressing for people and I do not want to distress Members any more than I need to. I recused myself from giving examples, of which there are so many, but I hope the Minister hears the spirit of what I tried to say. It is not about people wanting vengeance; it is about getting an element of justice. I hope the Government will give serious consideration to these matters, because at some point they will come back.
I acknowledge and accept that this is not a transport Committee, but my proposals are within the scope of the Bill, so the Government have the power to pursue them if they wish. I ask the Ministers to take them away and think about them. I will be in touch with the Department for Transport, although, as I mentioned earlier, Departments are often packed out with work. None the less, this issue is of such import—it impacts on the lives of our constituents day in, day out—and we and the Government must consider it very carefully as early as practically possible. I beg to ask leave to withdraw the motion.
Motion, by leave, withdrawn.
New Clause 19
Use of another person’s dwelling place for criminal purposes: cuckooing
“(1) A person ‘P’ commits an offence if—
(a) P makes regular use of or takes up residence in a residential building lawfully occupied by another person ‘R’,
(b) P uses the residential building as a base for criminal activities including but not limited to—
(i) dealing, storing or taking unlawfully held controlled drugs,
(ii) facilitating sex work,
(iii) taking up residence without a lawful agreement with R in circumstances where R is under duress or otherwise being coerced or controlled, or
(iv) financially abusing R.
(2) For the purposes of this section—
(a) ‘building’ includes any structure or part of a structure (including a temporary or moveable structure), and
(b) a building is ‘residential’ if it is designed or adapted, before the time of entry, for use as a place to live.
(3) A person who commits an offence under this section is liable—
(a) on summary conviction, to imprisonment for a term not exceeding the general limit in a magistrates’ court or a fine (or both);
(b) on conviction on indictment, to imprisonment for a term not exceeding 5 years or a fine (or both).”—(Alex Cunningham.)
This new clause would make cuckooing an offence. Cuckooing is where the home of a vulnerable person is taken over by a criminal in order to use it to deal, store or take drugs, facilitate sex work, as a place for them to live, or to financially abuse the occupier.
Brought up, and read the First time.
Alex Cunningham
I beg to move, That the clause be read a Second time.
The new clause would make cuckooing a specific offence. I believe that action on what should be a clearly defined crime has support across the House—including, I understand, from the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) and the hon. Members for Hornchurch and Upminster (Julia Lopez), for Eastbourne (Caroline Ansell) and for Hertford and Stortford (Julie Marson), among others.
I have also received support from the Police Superintendents’ Association for the new clause. The PSA states:
“There is clear need for legislation of this kind, with evidence showing that cuckooing is a widely used tactic in many serious offences, including those linked to serious and organised crime, such as county lines drug supply and human trafficking. Vulnerable people are often targeted and exploited to facilitate long-term criminal operations, through the use of their property. These amendments would provide police and partners with an effective means of tackling this and better safeguarding those at risk.”
It goes on:
“Any legislation would need to ensure that evidence thresholds are clear and that exact wording around offences is robust, so that vulnerable people can be appropriately safeguarded. Vulnerability must be reflected in this legislation, with clear reference to those victims who consent to criminal activity under duress or who are unaware of the activity being carried out.”
The PSA raises other points that it believes should be considered:
“Inclusion of reference to evidence of a written legal agreement or clear proof which must be provided by a suspect, to show compliance on the part of any individual suspected of being subjected to cuckooing; Including local authorities as interested parties, with reference to ‘R’, as properties owned by local authorities or housing associations are typically used in the committing of these offences; Wider legislation for repeat offenders that move on to additional victims/properties.”
The National Crime Agency explains that cuckooing occurs when drug dealers or other criminals
“take over a local property, normally belonging to a vulnerable person”
and use it as a base from which to run their criminal activities, with the person still living in the property. I hope that, working across the Benches, we can ensure that those who prey on such people are properly held to account. Cuckooing is often associated with county lines drug supply, in which illegal drugs are transported from one area to another, often by children or vulnerable people who are coerced into doing so by organised criminal groups. It cannot be stressed enough that it can also be an independent venture, with one or more people preying on individuals by taking over their homes and controlling their lives. As well as having to live with what is effectively a drugs—or other crime—den in their own home, the victims may see their home being used for accommodating sex work, or be financially abused by the criminals.
Cuckooing is a terrifying experience for the vulnerable adults who are targeted by these criminals. I do not think that any of us can comprehend what it would mean to have our home taken over in such a way. I suspect that there is not a member of this Committee who does not have a vulnerable adult in their constituency or know someone who lives alone and could be targeted by such unscrupulous criminals. Everyone should feel safe in their home.
Police work with local authorities to deliver a safeguarding response for victims of cuckooing. For example, the Metropolitan Police Service has dedicated cuckooing officers, who work with partners to safeguard victims and divert them from the criminal justice system. However, cuckooing is not defined in legislation and is not a specific offence, and data on cuckooing is limited. An article in Inside Housing in November 2023 showed that only seven police forces recorded cases of cuckooing, and many local authorities do not record cases either, as analysis by the London Assembly Labour group last year showed. I do not know why we do not have more records of this kind of behaviour. I suspect that it goes on across the country, particularly in areas of deprivation and areas where vulnerable people do not have the support that some of us would hope for and expect. Perhaps the Minister could outline any plans she may have to require crimes of this nature to be reported.
Because of the sensitive nature of the crime and the vulnerability of the victims, it is difficult to illustrate it in any detail. One example that has come to light involves a vulnerable man in Leytonstone whose mother died two years ago. His life effectively fell apart, and he had difficulty coping. His house was taken over by a criminal—or perhaps criminals—who has been using it for drug dealing, possibly prostitution and other criminal activities. I am told that the takeover of this vulnerable person’s home happened in what is considered a nice residential street, so as one can imagine it has been a massive shock for all the neighbours.
As it stands, the law does not provide sufficient authority to enable the police and local authority to address the situation properly. If our new clause had already existed, there could have been an earlier and therefore more effective intervention to protect this man, whose life in his own home has been made hell. I hope, for that reason alone, that the Committee and Government will support our new clause. The Ministers and Government Members can feel entirely comfortable in doing so, as it is Conservative policy—or, at least, it was until late last year.
Jess Phillips
I support the shadow Minister’s every word and point out, as he has done, the level of cross-party support for a change to this particular piece of law. In some way, I hope to outline some of the reasons why not many cases of cuckooing have been brought forward. I saw a case of a young woman, who was exploited from childhood into adulthood through the care system—and then in her own private property; men would come around to rape, sexually assault and sell her in her own property. People might, perfectly reasonably, say, “Why wouldn’t you call the police?” Well, there were kilos of cocaine and heroin left in her property, and she was absolutely convinced—nothing that I could convince her otherwise—that she would be criminalised if she called the police to her home. In other cases, there might be a cannabis farm in the ceiling, for example, and people are convinced that they will be criminalised.
Without doubt, there are more people in our prisons who have been victims of human trafficking than there are human traffickers. Certainly, for those charged under any of the crimes in the Modern Slavery Act, there will be many more people in our prisons who should actually have been saved by the provisions in that Act that say that criminalisation should not occur—yet it does, every single day; we continue to criminalise people in that manner, even when they are the victim of the crime. The vulnerable people in these cases know that, so they do not report the crimes.
We have had lots of discussions about finding weapons that are not just a kitchen knife in people’s houses. If authorities were to go into the home of a young woman who had been in the care system and had been difficult at times, and they found lots of drugs and weapons, do we honestly think that she would not be convicted of that crime? If we do, we are not living in reality at all. It is vital to have an understanding of what happens in these cuckooing cases. We need to recognise it to try to overcome some of the criminalisation, and the threat of criminalisation, that already exists.
I have met girls who have had photographs taken of them holding guns that have been used in fatal injuries, as a threat to them that they will be put up for that crime. When somebody has been groomed that well, they will believe it, no matter what I say—even if I say, “I will stand next to you in the courtroom and I will make sure this doesn’t happen.” It does happen. Recognising in law that this crime is specifically about taking over a home, and leaving incriminating evidence around the place, is really important in changing that.
Chris Philp
It is, as always, a pleasure to serve under your chairmanship, Mrs Latham. I thank the hon. Member for Stockton North for the thoughtful and considered way in which he moved the new clause. He and the hon. Member for Birmingham, Yardley both expressed sentiments about protecting vulnerable individuals from the practice known as cuckooing, and I will start by saying that the Government are just as concerned as they are. We are united in our shared desire to protect vulnerable people from the exploitation that they both described, so we are unanimous in our objectives in this area.
As the hon. Member for Stockton North said, most commonly the practice of cuckooing is associated with drug dealing, but it can be associated with other forms of criminality. I will raise a couple of points about his new clause. First, as it is currently drafted, there would be no requirement for there to be any coercion. For the proposed new offence to be made out, it would simply be sufficient for somebody—the perpetrator or alleged perpetrator—to occupy a residential building lawfully occupied by another, and then to commit a criminal offence.
The new offence of cuckooing would be made out even if there was no coercion and, in fact, even if it was done consensually. If the person who owned the house gave their free consent, without coercion, to the alleged perpetrator, the new offence proposed by the new clause would be committed. As I say, there is no requirement in the drafting for any form of coercion or even non-consent, whether or not there was coercion or exploitation. The way it is drafted goes beyond what I would expect in a cuckooing offence, where I imagine there would be some form of coercion, and non-consent by the person who owns the property.
Alex Cunningham
Subsection (1)(b)(iii) includes
“taking up residence without a lawful agreement with R in circumstances where R is under duress or otherwise being coerced or controlled”.
It does address coercion.
Chris Philp
With respect, those sub-limbs of paragraph (b) say “or”. It is only one of those requirements that needs to be met, not all of them. Although it is true that in the hon. Member’s drafting, subsection (1)(b)(iii) does require coercion or duress, the other sub-limbs—(i) and (ii) in particular—do not require duress. If that had been an “and”, it would be different. That would require all the conditions to be met, including criminality and duress. However, because the end of the line in sub-paragraph (iii) says “or”, that is only one possible sub-limb that can be met. The other sub-limbs, which the criminal offence includes but is not limited to, could be engaged as well. For example, if somebody was dealing drugs, that would engage paragraph (b)(i) even if there was no control or coercion. I think the Committee can see that because of that word “or”—
Leasehold and Freehold Reform Bill (Ninth sitting)
Tuesday 30th January 2024
(9 months, 3 weeks ago)
Public Bill CommitteesRead Full debate Leasehold and Freehold Reform Act 2024 View all Leasehold and Freehold Reform Act 2024 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 30 January 2024 - (30 Jan 2024)
The Committee divided: - Ayes: 1 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 6 - Question accordingly agreed to.
Richard Fuller (North East Bedfordshire) (Con)
I beg to move amendment 145, in clause 41, page 66, line 28, at end insert—
“(c) only where they are incurred in the provision of services or the carrying out of works that would not ordinarily be provided by local authorities.”
This amendment would mean that services or works that would ordinarily be provided by local authorities are not relevant costs for the purposes of estate management charges.
The Chair
With this it will be convenient to discuss the following:
Amendment 150, in clause 41, page 66, line 28, at end insert—
“(c) where they are incurred in the provision of services or the carrying out of works, only where the requirement for those services or works is not the result of defects in the original construction.”
This amendment would ensure that services or works on private or mixed-use estate that are required as a result of defects in its construction are not relevant costs for the purposes of estate management charges.
Clause stand part.
Richard Fuller
It is a pleasure to serve under your chairmanship, Sir Mark. I remind colleagues that we have moved from the clauses that relate to what was termed the “feudal” system of leasehold to the rather more modern problem of estate management charges, which in large part, although not exclusively, are incurred by those who own their homes. Essentially, the charges have arisen because of issues to do with adoption by local authorities. They are charges for a range of services in what might be termed, but are not necessarily, public areas, and for what might be, but are not necessarily, services or provisions that would normally be provided by a local authority.
It is worth bearing in mind how rapidly the issue of estate management charges has grown. From being essentially non-existent, or at least very rare, I think the charges now cover at least 1 million or 1.5 million homeowners—perhaps the Minister will tell us it is an even higher number. One issue is that we are essentially creating a two-tier society of council tax payers: people who pay council tax once to cover a range of public services, and residents in parts of our country who pay for those services twice—once through their council tax and again through their estate management charges.
The provisions in part 4 deal with a number of changes that seek to improve the rights of those subject to estate management charges and to improve access to redress. I commend a number of my local residents and councillors, most importantly Councillor Jim Weir of Great Denham, as well as 30 of my Conservative colleagues who wrote with me to the Prime Minister and Secretary of State to ask them to include the provisions in the Bill. I am grateful to them for doing so. Most particularly, I thank the former Minister—my hon. Friend the Member for Redditch—and the current Minister for their help and guidance on these matters. The provisions will enable us to make a great amount of progress. However, it is clear—and it was clear from the evidence the Committee received—that there is another path, or at least it is clear that the public also desire to abolish or reduce the current system of estate management charges, rather than improving it and the rights that people have. That is what the amendment seeks to achieve.
At issue is the matter of adoption. In the summary on page 4, paragraph 2 of the Competition and Market Authority report that looks into estate management charges and other issues, it states that
“evidence gathered in our market study to date has shown that, over the last five years or so, amenities on new housing estates that are available for wider public use (ie not for the exclusive use of households on the estate), are increasingly not being adopted by the relevant authority. This appears to be driven by the discretionary nature of adoption, housebuilders’ incentives not to pursue adoption and by local authority concerns about the future ongoing costs of maintaining amenities”.
That gets to the crux of the issue. The decision process for creating estate management charges takes place in a cosy discussion between the developers of new estates and the local authorities, both of which have an interest in ensuring that they are not the ones to carry the cost for a range of communal services. Guess who ends up paying the bill? It is homeowners up and down the country, who have no role in that cosy discussion. I wish to influence that cosy discussion through my amendment.
It is tricky to change the process of adoption, and I think you would consider it out of scope, Sir Mark, if we sought to do so in the Bill. In the evidence session, I heard colleagues talk about some of the risks involved in leaving councils with unadoptable roads and poor-standard infrastructure that the council tax payer has to pay to bring up to standard. No one on the Committee wishes to see that happen. My amendment would not force adoption, then, but essentially take the payer—the householder or homeowner—out of the equation for paying for those costs. It would exclude services or works that would ordinarily be provided by local authorities so that they would not count as costs that could be incurred by estate management charges.
My hope is that the amendment would pour a dose of reality on to developers by saying that they could no longer pass the buck for the costs of poor-standard infrastructure used by the public to homeowners on their estates. They would have to bring them up to standard, and then councils could adopt them.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
It is a pleasure to continue our line-by-line consideration of the Bill with you in the Chair, Sir Mark. I rise to speak to amendment 150, tabled in my name and that of my hon. Friend the Member for Weaver Vale. As we have heard, part 4 of the Bill deals with the regulation of estate management. The hon. Member for North East Bedfordshire provided an extremely comprehensive overview of the problem and its prevalence.
The distinct set of problems faced by residential freeholders on private or mixed-tenure estates that part 4 seeks to address is well known and well understood. Those problems include: excessive or inappropriate charges levied for minimal or even non-existent services; charges imposed for services that should by right be covered by council tax; charges that include costly and arbitrary administration fees; charges hiked without adequate justification; and charges levied when residential freeholders are in the process of selling their property.
In addition to a general lack of clarity and transparency about how estate management charges and fees are arrived at and how they break down—these problems are not dissimilar to those experienced by long leaseholders in respect of service charges—residential freeholders on privately owned and managed estates clearly suffer from inadequate transparency in other unique respects. For example, as I have said in past debates on the subject in the House, it would appear to be fairly common for residential freeholders not to be notified of their future liability for charges early in the conveyancing process; many learn of their exposure only at the point of completion. Even in instances in which residential freeholders are notified about their future liability in good time, many have to confront the fact that their contracts do not specify limits or caps on charges and fees.
There is clearly a distinct problem with management fragmentation on many privately owned estates that have been constructed throughout the country in recent years, with residential freeholders even on relatively new estates frequently having to navigate scores of management companies, each levying fees for services in a way that further exacerbates the general lack of transparency and potential for abuse that they face in respect of charges and fees. Underpinning all those issues of concern is a fundamental absence of adequate regulation or oversight of the practices of estate management companies and the fact that residential freeholders currently do not enjoy statutory rights equivalent to those held by leaseholders.
There has been a broad consensus across the House for some time that residential freeholders on new build private and mixed-tenure estates require greater rights and protections, and the Government have recognised publicly—for at least six years, by my count—that they need to act to address the range of problems that freeholders face. Labour therefore welcomes the Government’s decision to use the Bill to create an entirely new statutory regime for residential freeholders based on leaseholders’ rights and is fully supportive of the intent behind the provisions in this part of the Bill.
Although part 4 sets the broad framework for regulating estate management, much of the detail necessary to bring that framework into force will come via regulations. We take no issue with that, and do not intend to pre-empt the regulations by attempting to prescribe a series of requirements on the face of the Bill. However, we believe that, where possible, we should seek to use part 4 not only to provide greater protection to residential freeholders who live on the estates, but to contribute to a reduction in the prevalence of such arrangements—a point that the hon. Member for North East Bedfordshire was driving at.
Although additional protections of the kind introduced under part 4 will almost certainly still be required, in its “Private management of public amenities on housing estates” working paper, published on 3 November last year, the Competition and Markets Authority stated that
“we consider that reducing the prevalence of private management arrangements would be the most direct route to address the root cause of our emerging concerns”.
The CMA made it clear in that working paper that reducing the prevalence of private management arrangements would require a mix of legislative and policy changes more fundamental than the introduction of regulatory protection, and drew attention to the fact that it would result in a wider set of consequential changes, not least the potential for
“significant impact on local authority finances and resources at a time when local authority funding is already stretched.”
That is why, while we very much sympathise with its intent of ensuring that residential freeholders on private or mixed-tenure estates are not charged for services that should by right be covered by council tax, we have reservations about amendment 145. We are concerned that it will, in effect, force local authorities to adopt public amenities on new housing estates, irrespective of circumstance, or—if compulsion is not the intent of the hon. Member for North East Bedfordshire—would see those amenities degrade and deteriorate as a result of not being maintained by either the private management company or the local authority.
Richard Fuller
I am grateful to the shadow Minister for his detailed look at my amendment. First, will he explain to the Committee where he sees compulsion on local authorities in the amendment? I cannot see it. Secondly, will he explain why his more material concern about the possibility of items degrading and estate management not doing anything would not be addressed by the strengthening provisions that the Government are putting in the Bill on behalf of homeowners?
Matthew Pennycook
Under my reading of the hon. Gentleman’s amendment, if it is ensured that services or works that would ordinarily be provided by local authorities are not relevant costs for the purposes of charges in this part, who will pick up the bill? If the local authority is not compelled to adopt the amenities, our concern is that no one will maintain them. To address his point directly, I worry that his amendment would not ensure that the private estate management company picks up the charge. I will come to why I think our amendment is a superior way of addressing this very real problem.
Barry Gardiner (Brent North) (Lab)
I am listening carefully to my hon. Friend. It may interest him to know that I was on a private estate in Kingswood at the weekend, for some reason. It soon became apparent that the developer had gone into liquidation and the estate was being run down in a quite dreadful way. As my hon. Friend said, in that situation, the developer itself and the management of the estate had, to all intents and purposes, ceased—residents were very voluble on things not being done—but the local authority had not adopted the road in the first place, and the services were suffering accordingly.
Matthew Pennycook
We are all driving at the same point. I was very much taken by the CMA’s conclusion that reducing the prevalence of these arrangements requires a combination of the mandatory adoption of amenities and putting in place corresponding common adoptable standards. If we do one without the other, we risk some unintended consequences.
My concern about the amendment tabled by the hon. Member for North East Bedfordshire is that we cannot simply remove from estate charges costs that should in an ideal circumstance be borne by local authorities and then expect the private management company to simply pick them up. I fear that the more likely scenario will be that the amenities are not properly maintained. That is a real concern, and should be for residential freeholders on the estates. As the hon. Member for North East Bedfordshire outlined, there are some good reasons why local authorities are reluctant to adopt public amenities on private or mixed-tenure estates.
Richard Fuller
I would hate to detain the Committee because we have a lot to go through, but let us understand the economic process here. Initially, the local authority and the developer will work out whether to adopt roads. The developer will then have to decide whether to set up an estate management company, which may or may not deliver facilities and services that would normally be covered by council tax. If the amendment is part of legislation, no property manager in their right mind will accept taking on the responsibility because they will not wish to be liable. Here is the flow of responsibility: one cannot lumber home owners with the cost, the property manager will not be lumbered with the cost for the reasons outlined—it may go bust—so the developer will then have to recognise that there is nowhere for it to turn.
Matthew Pennycook
We fundamentally disagree on where the logic chain leads. I do not think that, on the basis of the amendment, the developer will be forced to pick up the costs. It is far more likely that they would build below what would be considered a common adoptable standard and then leave residential freeholders to live with substandard amenities. We could debate this further, but that is my take on the hon. Gentleman’s amendment: it would not force the management companies to do that. That is a real concern.
As I said, there are a variety of reasons why local authorities often do not take on responsibility. The most common one is that the public amenities on new housing estates are not built to a determined, adoptable standard. In those circumstances, one can hardly blame the local authority in question for a reluctance to adopt roads and common services that it will have to repair and maintain a great cost. My central argument is that if we are to reduce the prevalence of these arrangements, we must ensure that we introduce a common adoptable standard for public amenities on estates at the same time as we require mandatory adoption, as the CMA advises.
Eddie Hughes (Walsall North) (Con)
It is a pleasure to serve under you, Sir Mark. The civil engineer in me rises to agree with the hon. Gentleman completely; it is slightly embarrassing that we once again find common cause. The point is well made: if a set standard is identified that will be accepted universally by councils as one they would be prepared to adopt, and forced on the developers, the developers will meet that standard, but if they are left with any opportunity to build something substandard, they will always take it and they will frequently try to go further and not even meet the standard that they have prescribed in their own design work. I am sure that all Committee members will have seen examples of that in their constituencies. I again find common cause, and I hope the Minister considers these points.
Matthew Pennycook
I thank the hon. Gentleman for that intervention; it is a habit that I hope he continues because I think there is common ground here. When it comes to common adoptable standards, Ministers have often put it to me—the Minister no doubt will; previous Ministers have done—that local authorities have the tools they need to drive up the standards of public amenities that are constructed, but there is clearly something going wrong in that they are not ensuring that those standards are in place. As a consequence—not in every instance, but in many—local authorities have good reason to be reluctant to take them on.
We have tabled amendment 150 in an attempt to challenge the Government to consider how they might utilise the regulatory framework introduced by part 4 to drive up the standards of public amenities on the estates in question—that is the other half of the equation that I think we are all agreed we need. Our amendment would ensure that services or works on private or mixed-tenure estates that are required as a result of defects in construction are not relevant costs for the purposes of estate management. I think that, rather than the amendment of the hon. Member for North East Bedfordshire, would be the incentive that developers need to ensure that high standards are in place at the point that they hand the estate over. Ours is consciously a probing amendment and I hope the Minister will understand and appreciate the problem that it attempts to address, as does the hon. Member’s amendment. I look forward to hearing the Minister’s thoughts on it.
Alistair Strathern (Mid Bedfordshire) (Lab)
I rise briefly to add my weight to the comments of the shadow Minister, my hon. Friend the Member for Greenwich and Woolwich. I wholeheartedly share the concerns on this issue expressed by my Bedfordshire neighbour, the hon. Member for North East Bedfordshire. I know that, like me, he has received a lot of correspondence from constituents who find themselves with a variety of challenges and exposed by a situation whereby regulation simply has not kept pace with best practice.
As the CMA outlined last year, we have gone from a situation in which it was simply the norm that estates were adopted by the local authority to one in which that is far from the norm. In the last week, I have spoken to residents right across my constituency who have faced incredibly high service charges. Estate management companies are looking for the next frontier for their rent-seeking behaviour, often by charging fees for services that would normally be covered by council tax. Such is the fragmentation on estates, as the shadow Minister set out, that they sometimes even duplicate the fees charged by other management companies on the same estate.
Barry Gardiner
The Minister will recall that in response to a Government consultation in 2018, the Government committed to introducing a section 24 right for freeholders on housing estates, but that has not appeared in the Bill. It would have given those freeholders the right to go to a first-tier tribunal and appoint a court protective manager. The Minister and his officials may wish to reflect on and remedy that failing in the Bill. However, even that would be an imperfect measure, because it would not ensure that leaseholders in homes on estates had the same rights as leaseholders in a development block, for whom the Bill seeks to facilitate the right to manage. Will the Minister look at that issue and ensure that that provision is realised?
The Minister for Housing, Planning and Building Safety (Lee Rowley)
It is a pleasure to serve under your chairmanship, Sir Mark, and it is good to continue debating these issues this morning. I am grateful to all hon. Members who have raised such important points. I do not think that the disagreement between Members on any of the Benches is about whether there are issues; the question is rather about the technicalities of how to approach them, what to do and what is proportionate.
I will talk briefly about the amendments. Although the Government cannot accept them now, I hope that my hon. Friend the Member for North East Bedfordshire and the shadow Minister will listen to the points that I make; the broader point is that I am listening carefully and have a lot of sympathy for the underlying point, which we are all trying to solve. The question is about how we do it and whether we need to go further.
There was an extended debate between my hon. Friend the Member for North East Bedfordshire and the hon. Member for Greenwich and Woolwich. I will not try to repeat that, but not because I do not want to give due regard to everything that my hon. Friend put on record or to his underlying point. He is absolutely right that there is a problem; we all see it in our constituencies. The challenge, as I see in my constituency of North East Derbyshire, is that there is now a move towards greater estate management outside the demise of the local representation of the state. It works in some areas and for some elements, but there are specific areas and specific estates in which it clearly does not work. We have all heard the stories about the issues that are visible.
In the past, it would have been typical for local authorities to have adopted estates, but that is moving further and further away from reality. There is a question about whether there are some elements of estate management where it is reasonable to have some kind of arrangement outside the aegis of the state, but equally I accept the argument that that has gone too far in certain areas.
Rachel Maclean (Redditch) (Con)
I have listened carefully to the debate. I thank my hon. Friend the Member for North East Bedfordshire for his reference to the work that we did together.
I want to ask the Minister to expand a bit more on his comments, as I am sure he will. The argument has often been made that if we make clear to the people who are buying those homes what they are actually getting into, and if we give them a schedule of charges, the regime will be more acceptable. That is the heart of the issue: if customers know what they are buying, presumably they can freely choose whether to buy that property or a different type of property.
I think we all agree that there should be freedom of choice and that the buyer should take responsibility for their choices. However, does the Minister think that the current regime and framework are adequate to provide choice? My personal view is that we do not have that, and that that is at the heart of the problem. But even if we provide that choice, a fundamental philosophical problem remains. I am interested in his view on the balance of those two issues.
Lee Rowley
I am grateful to my hon. Friend, who has a huge amount of knowledge, expertise and background in the subject. She is right to highlight the tension with agency. As long as there is sufficient knowledge in the decision being made, the logical extension is that the decision was made on the basis on the preponderance of the facts, and people should therefore be willing to accept the consequences of their choices.
Equally, through colleagues and in our postbags, we have all seen the reality that this does not work in all instances, and it is not necessarily clear where it works. We have examples of where an indication was given about some of these things, but the reality is very different from what may have been said during the sales process. A different estate manager may take over, the developer may disappear or things may change. The reality of what happens on the ground with estate management charges can be very different from what has been talked about.
The question is therefore not whether there is an issue, but how we drive up standards. Clause 41, which I will address in a moment, seeks to drive up standards through transparency. There is a perfectly legitimate question—it has been correctly posed via the amendments tabled by my hon. Friend the Member for North East Bedfordshire and by the hon. Member for Greenwich and Woolwich, and has been outlined by the hon. Member for Mid Bedfordshire and others—as to whether that is sufficient or whether additionality is needed. Although I cannot accept the amendments today, because I think that there are genuine questions about whether they would work, the Department wants to continue looking at the issue. I would be happy to talk about it at a future stage.
Andy Carter (Warrington South) (Con)
I am listening carefully to the debate. Warrington is a new town. Over the past 60 years, about 100,000 homes have been built in total. From looking carefully at the borough council’s own details on estate adoption, it is clear that there are currently 13 estates that are not adopted, where there have been agreements in place with the council but, for all kinds of reasons, developers are not doing anything. One problem seems to be that in many cases the estates are built out over many years and things change. Some estates have been building for 13 years. The builders have changed, the involvement of council officers has changed and the structure of how things are built out has changed.
There seems to be no redress for householders so that what was promised in the first place can be delivered. That is a real problem. When the Minister is looking carefully at the issue, can he bear in mind that it is not a straightforward case of “The developer promised to do this, but they haven’t”? Things can change dramatically over time, and there is a complicated path. I think that that is what the Minister is saying; it is certainly my experience in Warrington.
Lee Rowley
My hon. Friend is absolutely right. If the Committee will indulge me, I have personal experience of examples of this in North East Derbyshire, and I know the complexity involved in getting this correct. I have an estate by an unnamed developer in the south of the constituency, near Wingerworth, where this discussion is going on already. Before Christmas, I spent two hours talking to representatives of owners on the estate and to the estate management company itself. I recognise the complexities on an estate that was being managed relatively adequately from afar but clearly still had issues.
The second example—this is why we have to be so careful to get this right—is from the other side. Fenton Street in Eckington has been unadopted for more than a century. The residents recognise that it is unadopted and have bought their houses understanding and acknowledging that. Possibly it was been adopted many decades ago, but there is no record.
We have to make sure that this works for everybody. In an ideal world, everybody would be scooped up and this would all be fixed in one fell swoop with whatever a benevolent Government could do, but that is not the reality of the choices that we face. Nor is it often the reality of what happens when a Government try to do things that work in the way that we all intend. Although I understand the intention behind the two amendments, I encourage hon. Members to withdraw them.
Barry Gardiner
The Minister has not responded to the point about a section 24 court-appointed manager. Would that not give a power enabling redress for residents in situations such as the one he outlines, where there has been a complete failure to adopt and maintain? Will he commit to considering that point as part of the mix?
Lee Rowley
We may touch on some of those elements under later clauses. The hon. Gentleman’s core point is about whether the Government are willing—without providing any guarantees in this place—to look at additionality. Of course we are. There are the usual caveats, which I have explained in previous sittings, about what we can do, how we do it, and the priorities, but this is an area in which we are listening carefully.
In conclusion, I ask my hon. Friend the Member for North East Bedfordshire and the hon. Member for Greenwich and Woolwich to consider withdrawing their amendments. I hope that they have heard that I am serious and willing to look at the issue again, although I cannot offer guarantees at this stage.
I will turn briefly to clause 41, to put on the record exactly what the clause contains and what we are voting for. Freehold homeowners on private and mixed-tenure estates who pay estate management charges have fewer protections than leaseholders paying the service charges that we have spoken about. Clause 41 will introduce limitations on what estate management companies can charge homeowners through estate management charges. Subsection (1) states:
“Costs incurred by an estate manager are relevant costs…only to the extent that they are reasonably incurred.”
Clause 41 will ensure that where these costs are incurred in the provision of services or the carrying out of works, they will be relevant costs only if the services or works are of a reasonable standard.
Subsection (2) makes it clear that when an estate management charge is payable in advance, only reasonable costs are payable. Furthermore, after reasonable costs have been incurred, any necessary adjustment must be made to the charge by repayment, reduction of subsequent charges or any other method. Those new rules are equivalent to requirements in the leasehold regime and provide homeowners with more confidence that they will not be overcharged. We seek to provide increased protections for homeowners through the clause. I commend it to the Committee.
Matthew Pennycook
Amendment 150 was a probing amendment. I take on board the Minister’s statement that the Government are looking at the issue and that they do not believe that this legislation is the appropriate vehicle to deal with it.
If the Minister is willing to respond again, I would like a bit more clarity on precisely why in many cases amenities on estates are not being built to an adoptable standard. I think we all agree that we would like to see such a system. The Minister introduced a different problem, namely circumstances in which residents might not want their amenities adopted; I think that that would be a relatively small number of estates, but we would have to account for them. In general, we want to reduce the prevalence of arrangements and see adoption becoming mandatory in most circumstances.
Will the Minister expand on why the Government think the common amenable standards are not being met across the board? In a previous debate, the then Minister stated:
“The local authority has powers to ensure that developers build and maintain communal facilities to the standards and quality set out in the planning permission.”—[Official Report, 22 January 2019; Vol. 653, c. 132WH.]
Is something going wrong with the standards that most local authorities require at the planning permission stage? Is the section 106 agreement breaking down in some way? What is the reason? That might give us an insight into the solution that the Government have in mind and into why common adoptable standards are not currently the norm.
Lee Rowley
The hon. Gentleman is absolutely right that there are a variety of scenarios. I am not sure that residents of Fenton Street would not take the opportunity to adopt if they were given the opportunity; it is more about the broader challenges of getting a single coherent answer to a very complicated set of questions that have come about in the past few decades or over a longer period.
The hon. Gentleman raises a valid point about the outcome of the planning system. Everybody, irrespective of party, would want the planning system to work to a point where there are common standards for roads and public spaces. There is an interesting question as to why that is not the case. It is an area that as a Minister I intend to look into in more detail.
The question is whether is it a systemic problem or a matter of individual circumstances, where it is working okay in some areas but not in others. Anecdote leads to bad policy and bad law, but in my experience as a constituency MP it has worked in a number of areas and not in others. That suggests that there is variability and that it is therefore not a systemic issue, but that might be different elsewhere in the country. It is an area that I think we should look at more; I am not sure whether it needs legislation. That is an open question, but it is definitely something that I am keen to understand more.
Richard Fuller
I have listened with interest to hon. Members’ contributions, particularly in respect of my amendment 145. I strongly believe that we need to close down the trend to create two tiers of council tax payers —those who pay once and those who have to pay twice—and ensure that we all pay only once. My amendment would directly address that issue. I would therefore like to put it to a vote.
Question put, That the amendment be made.
Lee Rowley
Clause 42 introduces new obligations on estate managers where the costs they wish to charge a homeowner exceed an appropriate amount. It mirrors sections 20 and 20ZA of the Landlord and Tenant Act 1985. Subsection (1) places an obligation on estate managers to consult homeowners where the costs for works or services exceed a given threshold. Subsections (2) to (4) confer a power to allow the Secretary of State to determine the appropriate threshold in regulations; the Secretary of State may also determine whether the threshold is to be a total sum or if the costs for individual homeowners exceed an appropriate amount.
Subsections (6) and (7) confer a power on the Secretary of State to set out in regulations the consultation require-ments and the provisions that may be included in the consultation process. Issues that may be in regulations are not exhaustive, but may include matters of relevance, including details of the proposed works, the provision of estimates, and requirements to have regard to homeowner observations and to specify reasons for carrying out the works if they proceed. We recognise that there are occasions where it may not be appropriate or possible for estate managers to consult homeowners—for example, where urgent or emergency works need to be carried out. Subsections (5) and (8) to (10) therefore allow estate managers to seek dispensation from the relevant tribunal of the need to consult. However, should estate managers fail to obtain dispensation or follow the consultation requirements, individual homeowner contributions are capped at the appropriate amount. The Government will engage extensively with stakeholders to determine the appropriate threshold for consultation and what the detail of the consultation arrangements should be. I commend the clause to the Committee.
Matthew Pennycook
I wish to probe the Minister a little further on the clause. As he said, it introduces requirements for estate managers to consult managed owners if the costs of any works to be charged as an estate management charge exceed an appropriate amount, which will be set out in regulations. Overall, the Government’s aim in this part of the Bill is clearly to introduce statutory protections for residential freeholders equivalent to those enjoyed by long leaseholders with regard to service charges.
If I understood the Minister correctly, he has confirmed that the Government’s intention with the clause is to establish for residential freeholders an equivalent to section 20 of the Landlord and Tenant Act 1985. If that is the intention, can the Minister confirm that the new requirements provided for by the clause will include requiring estate managers to have regard to written observations from residential freeholders on charges in excess of the to-be-determined appropriate amount, and where necessary to justify in writing the reasons why they awarded a contract to a tenderer that neither submitted the lowest estimate nor was nominated by a resident?
Furthermore, if the clause is indeed intended to mirror the operation of the existing section 20 consultation process, I urge the Minister to consider what might be done to address the known deficiencies of the process, including the fact that a leaseholder’s sole means of redress if they take issue with the landlord’s decision is the tribunal, and that there is no statutory meaning of what “have regard to” means in the context of the consultation. While he does so, I encourage him to take the opportunity to overturn, or at least modify, the decision of the Supreme Court in the 2013 Daejan Investments Limited v. Benson case, which has proved so detrimental to the consultation rights of leaseholders. I make this series of points because the Homeowners Rights Network, among others, has questioned the logic of extending to privately managed estates a regime that is not always effective in protecting residential leaseholders from unreasonable charges associated with major works.
Lee Rowley
The hon. Member for Greenwich and Woolwich encourages me to seek to overturn decisions of the Supreme Court! That could start a whole heap of discussion early on a Tuesday morning, but I will withhold further comment for now.
The hon. Member is absolutely right that clause 42 is intended to mirror section 20 of the 1985 Act. He is correct that the intention is to consider written responses as well; I hope that that reassures him. We will need to go through a consultation process: although we have said that our intention is to mirror section 20 of the 1985 Act to give confidence about the direction of travel, what is appropriate for these individual circumstances will need to be discussed, and I hope that we can pick up that discussion within the consultation.
Question put and agreed to.
Clause 42 accordingly ordered to stand part of the Bill.
Clause 43
Limitation of estate management charges: time limits
Lee Rowley
I beg to move amendment 53, in clause 43, page 68, line 7, leave out from “not” to end of line 12 and insert
“given a future demand notice in respect of the costs before the end of the period of 18 months beginning with the date on which the costs were incurred.
(2) A ‘future demand notice’ is a notice in writing that—
(a) relevant costs have been incurred, and
(b) the owner will subsequently be required to contribute to the costs by the payment of an estate management charge.
(3) A future demand notice must—
(a) be in the specified form,
(b) contain the specified information, and
(c) be given in a specified manner.
‘Specified’ means specified in regulations made by the Secretary of State.
(4) The regulations may, among other things, specify as information to be contained in a future demand notice—
(a) an amount estimated as the amount of the costs incurred (an ‘estimated costs amount’);
(b) an amount which the owner is expected to be required to contribute to the costs (an ‘expected contribution’);
(c) a date on or before which it is expected that payment of the estate management charge will be demanded (an ‘expected demand date’).
(5) Regulations that include provision by virtue of subsection (4) may also provide for a relevant rule to apply in a case where—
(a) the owner has been given a future demand notice in respect of relevant costs, and
(b) a demand for payment of an estate management charge as a contribution to those costs is served on the owner more than 18 months after the costs were incurred.
(6) The relevant rules are—
(a) in a case where a future demand notice is required to contain an estimated costs amount, that the owner is liable to pay the charge only to the extent it reflects relevant costs that do not exceed the estimated costs amount;
(b) in a case where a future demand notice is required to contain an expected contribution, that the owner is liable to pay the charge only to the extent it does not exceed the expected contribution;
(c) in a case where a future demand notice is required to contain an expected demand date, that, if the demand is served after the expected demand date, the owner is not liable to pay the charge to the extent it reflects any of the costs.
(7) Regulations that provide for the relevant rule in subsection (6)(c) to apply may also provide that, in a case set out in the regulations, the rule is to apply as if, for the expected demand date, there were substituted a later date determined in accordance with the regulations.
(8) A statutory instrument containing regulations under this section is subject to the negative procedure.”
This amendment would require notice of future service charge demands (as envisaged in clause 43(b)) to be given in accordance with regulations.
Lee Rowley
We are aware that there is no clear limit on when homeowners on private and mixed-tenure estates can be charged for works and services, regardless of when the costs were incurred. Homeowners could therefore be subjected to unexpected estate management charge demands, making it difficult for them to plan for and finance those costs. That could be the case if in future there are long-term works that take some time to complete.
Clause 43 introduces a new 18-month time limit for estate management companies to demand payment for works that have been carried out. If they fail to issue a demand within this period, the costs will not be recoverable and homeowners will not be required to pay them. Paragraph (b) sets out arrangements making it clear when the homeowner will not receive a demand for payment within the 18-month period. It requires the estate manager to notify in writing before the end of the period that the costs have been incurred and that the homeowner will be required to contribute through their estate management charge. If the estate manager does not notify, the homeowner is not liable to pay. The clause seeks to provide greater certainty for homeowners; I commend it to the Committee.
Currently, when works are undertaken estate managers may require a homeowner to pay the costs up front or pass on costs to the homeowner once the work has been carried out. Clause 43 will require estate managers to charge homeowners for works within 18 months. Amendment 53 introduces new subsections (2) to (9), which require estate managers to specify the costs incurred, the expected contribution of homeowners and the date by when the demand will be served. The intention is to give homeowners certainty about the costs that have been incurred by the manager, their own individual liability, and when they are likely to receive the demand. The amendment requires estate managers to issue a future demand notice if they will be passing on costs more than 18 months after works are carried out. Subsection (2) defines a future demand notice as a notice in writing that the relevant costs have been incurred and the homeowner is required to contribute.
New subsection (3) sets out that the Secretary of State and Welsh Ministers can, by regulations, specify the form, the information to be included and the manner in which the future demand notice must be given to the homeowner. Subsection (4) details that regulations made by the Secretary of State and Welsh Ministers may specify as information to be included in the future demand notice an estimated amount of the costs incurred, an amount that the homeowner is expected to contribute, and a date by which it is expected that the service charge will be demanded. We will work with estate managers, managing agents and homeowners to set out what a future demand notice may contain, to ensure that notices have the right level of information.
New subsection (5) lays out that regulations may provide for a relevant rule to apply where the homeowner has been given a future demand notice and the demand for payment is served more than 18 months after costs were incurred. New subsection (6) details the relevant rules and the homeowner’s liability to pay the estate management charge where a future demand notice contains estimated costs, an expected contribution or an expected demand date. New subsection (7) allows estate managers to extend the expected demand date in cases specified by regulations, for example because of unexpected delays in completing the work.
Through these measures, we seek to provide homeowners with more certainty about costs. I commend amendment 53 to the Committee.
Amendment 53 agreed to.
Clause 43, as amended, ordered to stand part of the Bill.
Clause 44
Determination of tribunal as to estate management charges
Richard Fuller
I beg to move amendment 139, in clause 44, page 68, line 31, at end insert—
“(3A) Where the appropriate tribunal has made a determination on an application under subsection (1) or (3) that an estate management charge is not payable because the costs incurred by an estate manager are not relevant costs under section 41(1)(b) (services or works to be of a reasonable standard), the tribunal may impose a penalty on the estate manager which is payable to the residents of affected managed dwellings; and the tribunal may determine how much of the penalty is to be paid to the residents of each affected managed dwelling.”
This amendment would enable the tribunal to impose a financial penalty, payable to residents of affected managed dwellings, where estate management work has not been completed to a reasonable standard.
The clause is an excellent step forward in ensuring that freeholders will have rights to access a tribunal when there are errors and poor provision of services on their estate, so I very much welcome it. Through the amendment, I seek to probe the Minister about whether we have got the balance right to enable effective use of the tribunal. The amendment essentially says that in addition to requiring that poor-standard, poorly provided services are brought up to standard, the tribunal could impose a financial penalty on the management company.
It requires a tremendous effort for people to take cases to a tribunal: they often have to make a collective effort and gather evidence about what has gone wrong, and they may have to go through weeks, months or potentially years to get to the point where they can take a case successfully to tribunal. If the only remedy at the end of that is that those services have to be brought up to standard, where is the incentive not to provide defective services in the first place? By enabling the tribunal to impose financial penalties, the amendment would redress the balance, with the bias more towards those suffering from poor service in the first place.
Lee Rowley
I am grateful to my hon. Friend for tabling this probing amendment. I agree that where works and services are provided and charged for on freehold estates, their costs should be charged to residents only if they are of a reasonable standard. As he indicated, clause 41 makes progress in that regard. Clause 44 allows for the appropriate tribunal to determine whether an estate management charge is payable. Should the tribunal find that services or works charged for have not been carried out to a reasonable standard, it will determine the amount that the homeowner is liable to pay. That is equivalent to the leasehold regime, and I do think that tribunals are the best placed to make that decision.
On whether additionality is required, the appropriate tribunal is not an enforcement body; it is not a weights and measures authority or a district council. If a financial penalty were applied for works not completed to a reasonable standard, the appropriate tribunal would need to be satisfied beyond reasonable doubt that that was the case. My hon. Friend may say—I have some sympathy with the point—that people would probably not go to tribunal, given its complexity. In addition, if people want to sue for defective works and such things, they can do so through other parts of the legal system; that form of redress is available if necessary.
If we were to introduce penalties for works or services not completed to a reasonable standard on freehold estates, the challenge would be in the implications for the tribunal and the equivalent leasehold regime. Therefore, while I have a lot of sympathy with my hon. Friend’s point, I hope that he will consider withdrawing the amendment it on the basis that it would probably move the tribunal too much in one direction and create a whole heap of other consequences that we would need to think carefully about, and which I do not think we can accept at the current time.
Richard Fuller
I am grateful for the Minister’s comments. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Richard Fuller
I beg to move amendment 140, in clause 44, page 69, line 6, at end insert—
“(7) The Secretary of State must by regulations provide—
(a) that an estate manager’s litigation costs incurred as a consequence of an application under this section may not be recouped through the estate management charge, except where the tribunal considers it just and equitable for such costs to be so recouped;
(b) for the right of an applicant under this section to claim litigation costs incurred as a consequence of an application under this section from the estate manager, where the tribunal considers it just and equitable in the circumstances.
(8) Regulations under subsection (7) may amend primary legislation.”
This amendment would require the Secretary of State to make regulations preventing estate managers from passing their litigation costs on to residents through the estate management charge, and providing for residents to be able to reclaim their litigation costs from an estate manager.
The amendment, which is in a similar vein to the previous one, is designed to probe the Minister on whether we have got the balance right in the clause to enable effective use of the tribunal by those who would wish to bring a case against estate managers. As we heard when we discussed the clauses on leasehold, one of the biggest concerns that people have is that they will face open-ended litigation costs. In this case, the litigation costs will essentially be cycled back through the estate management charges, and therefore effectively end up being paid by homeowners on the affected estates.
Amendment 140 is designed to prevent that passing on of litigation costs. It also recognises that many homeowners may wish to take action but not have the wherewithal to pay the litigation costs. Paragraph (b) of the amendment therefore enables residents to claim the litigation costs arising from their application. I am interested in the Minister’s view on the balance of litigation in such circumstances—we have spoken about it in relation to other circumstances. I think we all want the tribunal to work, but for that to happen, people must not be put off by the fear that they may face significant direct or indirect litigation costs.
Matthew Pennycook
I rise to support the amendment. We discussed litigation costs in relation to clause 34; we strongly argued for a general prohibition with very limited exceptions. The hon. Gentleman is right to draw attention to the fact, which applies to part 4 as a whole, that we should not replicate the flaws of the leasehold system in the newer system of estate management charges. Our arguments in relation to the leasehold regime therefore apply equally here, and the hon. Gentleman is right to raise the point.
Lee Rowley
I will try directly to address the point made by my hon. Friend the Member for North East Bedfordshire, to which we are sympathetic. It is important that litigation costs are not passed on. On the leasehold side, there is clear evidence that that is happening, but the question is whether there is clear evidence of it happening in the area of estate management. From speaking to officials, we do not see that clear evidence at the moment. However, if any members of the Committee or others have such evidence, I would welcome it. If it is happening, I am sure that we would be happy to consider the issue as the Bill progresses.
Richard Fuller
With the Minister’s assurance that he will keep a watching brief on the issue, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Clause 44 grants homeowners a new right to apply to the appropriate tribunal for a determination on whether their estate management charge is payable, and if it is, how it should be paid, by whom and to whom it should be paid, and the date by which the payment should be made. Under this provision, the tribunal will enforce the newly established reasonableness principle set out by clause 41, which requires estate management services to be reasonable, and any works or services to be of a reasonable standard.
The clause requires estate management companies to charge the correct fees from the outset, thereby reducing the number of homeowners being overcharged for works and services on their estate or being at risk of legal action. The clause also sets out the circumstances in which an application cannot be made, including when the homeowner has already agreed to, but not paid, the charge, or in which the issue has already been subject to a decision by a court. That will prevent homeowners from bringing unjustified or vexatious claims, which can lead to delays in the payment of valid estate management charges and negatively impact the upkeep and good management of the estate. The clause delivers on a Government commitment to increase protections for existing homeowners, and I commend it to the Committee.
Question put and agreed to.
Clause 44 accordingly ordered to stand part of the Bill.
Clause 45
Demands for payment
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Where homeowners on a managed estate pay an estate management charge, it is essential that they have transparency about what they are paying for. Currently, there is no universal approach for demanding payment of such a charge, so there can be inconsistencies between estates and potential confusion for homeowners. Clause 45 mirrors the obligations that we introduce for leaseholders elsewhere in the Bill. Subsection (1) enables the Secretary of State to prescribe a standard form for demanding payment and the information that it should contain. We will work closely with the sector to ensure that that is the right level of information and detail. Subsection (2) makes it clear that failure to provide information in the new standard format means that homeowners do not have to pay the charge, and any provisions in the deed, lease or any other contractual document for non-payment will not apply. The Secretary of State will also have the power to create any exemptions if our work with stakeholders demonstrates a good case for them both now and in the future. I commend the clause to the Committee.
Question put and agreed to.
Clause 45 accordingly ordered to stand part of the Bill.
Clause 46
Annual reports
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Clause 46 introduces a new obligation for estate management companies to provide homeowners on their estates with an annual report, which might cover issues such as budgets for the year ahead and details of planned works.
Subsections (2) and (5) require that the report must be provided within one month of the end of the 12-month accounting period, although it may be provided earlier if it is practical and expedient to do so. Subsection (4) defines the 12-month accounting period as starting either on a date agreed between the company and homeowner or, if no period is agreed, on 1 April. Subsection (3) allows the Secretary of State to prescribe the detailed contents of the report, while subsection (6) allows the Secretary of State to provide exceptions from the duty to provide a report.
The detail will be set out in secondary legislation and allows the Secretary of State to respond effectively to changing market circumstances. We will work closely with the sector and relevant parties to ensure that we have the right level of detail and consider the case for any exceptions.
Matthew Pennycook
Briefly, when we discussed the regulation of service charges in clauses 26 to 30, we made a number of specific arguments about how those clauses might be tightened and strengthened. Can the Minister give us a commitment that if the Government determine to amend those clauses in any way, they will seek to read across the equivalent changes to this part of the Bill or, if they do not think that they apply, to justify where wider deviations between the two regimes are necessary? As I said, we are mirroring broadly the statutory protections in place for long leaseholders here, but where they differ, the Committee would certainly welcome clarification as to why.
Lee Rowley
I am grateful to the hon. Gentleman for his question. He tempts me into hypotheticals, but I hope that we are demonstrating our willingness to try to work constructively to see where areas can be improved. I must caveat that with clarity that we will not be able to improve every area; of necessity, prioritisations will need to be made. Of course there will be disagreements in this place and elsewhere about what is possible, but we shall see; if there is read-over, we shall see.
Question put and agreed to.
Clause 46 accordingly ordered to stand part of the Bill.
Clause 47
Right to request information
Question proposed, That the clause stand part of the Bill.
Lee Rowley
As part of our reforms to drive up transparency, clause 47 introduces new provisions to enable freehold homeowners of managed dwellings to request information from their estate manager.
Subsections (1) and (3) give owners of a managed dwelling the right to require an estate manager to provide information. As per subsection (2), that information may relate to estate management. One example of such information might be a health and safety assessment of communal areas. The estate manager will be required to provide relevant information that they have in their possession.
We know that, sometimes, the estate manager will not have that information to hand, so subsections (4) and (5) introduce an obligation for the estate manager to request the information from a third party and, if they hold it, that the third party is required to provide it. Subsections (6) and (7) create an obligation where the other person under subsection (4) does not have it, but knows who does. This person must make the request to the person who does have it, who in turn must provide the information, and—presumably—so on and so on.
Subsections (1) and (8) allow the Secretary of State to prescribe further details of these requirements in secondary legislation, such as the type of information to be provided, how a request can be made and when the request can be denied. We will consult on that to make sure that it works effectively. I commend the clause to the Committee.
Richard Fuller
I beg to move amendment 141, in clause 49, page 72, line 26, leave out “£5,000” and insert “£50,000”.
This amendment would increase from £5,000 to £50,000 the maximum amount of damages which may be awarded for a failure on the part of an estate manager to comply with the obligations imposed by clauses 45 to 48 (rights relating to estate management charges).
Richard Fuller
The Minister or shadow Minister will correct me if I am wrong, but I believe we covered issues to do with penalties earlier. The intent of this proposal is to ensure that damages in the leasehold and freehold system are the same. I therefore think I ought to ask leave to withdraw my amendment.
Matthew Pennycook
Without rehashing the debate on clause 30, I rise briefly to put on record that the Opposition think that the point the amendment is driving at is well made. We need equivalence between the two regimes, but we were concerned, notwithstanding damages versus penalties and all the rest, that the proposed financial penalty is too low to act as a serious deterrent to the type of behaviour that we are trying to do away with.
Richard Fuller
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 49 ordered to stand part of the Bill.
Clause 50
Meaning of “administration charge”
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Currently, freehold homeowners on managed estates have very few protections relating to the cost of administration charges they may be liable to pay. This can leave homeowners paying excessively high administration charges that they are unable to challenge. We will address this issue and give homeowners greater protection. We intend to do that by mirroring the existing framework in place to protect leaseholders.
Clause 50 provides a definition of an administration charge. It is
“an amount payable…by an owner of a dwelling”.
That amount must be in connection with applications or approvals in connection with a relevant obligation, the provision of documents, the sale or transfer of land, a failure to make a payment by the owner, or a breach of a relevant obligation. Subsections (2) and (3) allow the Secretary of State and Welsh Ministers to amend the definition of an administration charge by regulations, which must be done using the affirmative procedure. I commend the clause to the Committee.
Question put and agreed to.
Clause 50 accordingly ordered to stand part of the Bill.
Clause 51
Duty of estate managers to publish administration charge schedules
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 143, in clause 52, page 74, line 10, leave out “£1,000” and insert “£10,000”.
This amendment would increase from £1,000 to £10,000 the maximum amount of damages which may be awarded for a failure on the part of an estate manager to comply with the provisions of clause 51 (duty of estate managers to publish administration charge schedules).
Amendment 144, in clause 52, page 74, line 13, at end insert—
“(5) An estate manager may not for any purpose set off damages payable by the estate manager to the owner under subsection (2)(b) against any present or future liability of the owner to the estate manager.”
This amendment would prevent estate managers from recouping damages from residents through subsequent charges.
Clause 52 stand part.
Lee Rowley
Homeowners on managed estates can be subject to high and unreasonable administration charges, as I indicated. Part of the problem is the lack of clarity or transparency surrounding them. Clause 51 introduces a duty for an estate manager to publish an administration charge schedule if they expect to impose an administration charge.
Subsection (2) requires that the schedule should include the detail of administration charges that the estate manager considers to be payable and their associated costs. Where the cost cannot be confirmed before a charge is payable, the method of determining the cost should be included. Subsection (3) requires a revised schedule to be published if an estate manger revises the administration charges. Subsection (5) allows the Secretary of State and Welsh Ministers to prescribe in regulations the form and content of the administration charge schedule and how it is to be provided to homeowners. We will work with all relevant partners to ensure that we obtain the right level of detail in regulations.
I thank my hon. Friend the Member for North East Bedfordshire for his amendment 143, which would increase the maximum amount of damages from £1,000 to £10,000. I hope that, potentially, our discussion on the previous clause would apply here, and I repeat that the Government intend to write to all Committee members about this issue in the days ahead.
Amendment 144 seeks to ensure that any damages that the tribunal orders payable under Clause 52 (2)(b) cannot be recouped from residents through subsequent charges. I agree with my hon. Friend that residents should be protected from future charges. An estate manager can only recover costs incurred in estate management. A tribunal order to pay damages would not be regarded as falling within the definition of costs of estate management.
The transparency measures included in clauses 46 and 47, in the form of the annual report and the right to obtain information upon request, would also deter estate managers from attempting to recoup these costs. That is because it would become obviously visible and it would be clear that it was not related to estate management. I note, however, my hon. Friend’s concerns and I am listening carefully on this matter. I hope that he might see fit to withdraw his amendment, having heard the Government’s response.
Finally, clause 52 sets out the enforcement provisions that reinforce the new duty in clause 51 to publish a schedule. A freehold homeowner on a managed estate may make an application to the appropriate tribunal if an estate manager has not published a schedule, or has done so but contrary to any provisions determined by the relevant Ministers.
The appropriate tribunal may order that the estate manager provides a correct schedule within 14 days of the order being made, and it may also order that the estate manager pays damages not exceeding £1,000 to the homeowner. We believe that this is a proportionate and effective enforcement mechanism where an estate manager fails to comply with its obligations. I commend the clause to the Committee.
Richard Fuller
Many thanks to the Minister, again, for proposing further changes to help homeowners who are affected by estate management charges. I am pleased to hear him reiterate that he will consider the issues raised in my amendment 143 about the appropriateness of charges. The shadow Minister raised similar concerns about those being set at an effective level.
On amendment 144, will the Minister consider writing to the Committee about how, in practice, not passing on damages, fees or charges to residents will work? Great Denham is a new part of my constituency, and in an estate of a few thousand houses, there may be 50, 60, 70 or more property management companies. All of them are discrete limited companies and all were set up as subsidiaries of one or more parent company. We need to be sure, from the Government’s point of view—given that some of these limited companies could go bust—about where the trail leads to. Under corporate law, as I understand it, there is no requirement for a parent company to be liable for the losses of a subsidiary that goes bust, and we want to ensure that liabilities flow upwards to the ultimate holding company.
Presumably, the payment of administration fees or dividends may go from subsidiary companies to the very large companies that are the ultimate parents. Is the Minister able to explain how he sees that working in practice? If not, or if it is too detailed to talk about now, perhaps he could agree to write to give some examples to the Committee in due course.
Lee Rowley
My hon. Friend highlights an important point. I think it is better that I write, but in principle, the transparency we seek to bring and the requirement to clearly articulate the charges that have been made, either in the annual report or elsewhere, aim to provide the sunlight that means that it is clear who is paying for what, and, if it is not a reasonable charge, there is a process that can be followed. But I will write to him with more on that, if that is helpful, because we all want to get this right.
Matthew Pennycook
I rise briefly to support the argument made by the hon. Member for North East Bedfordshire. There is a specific problem on privately managed estates, which I referred to when speaking to clause 41, relating to the fragmentation of multiple estate management companies. I share his concern, which partly speaks to whether the penalties are appropriate in terms of enforcement. On some estates, residential leaseholders will face a situation where, yes, there may be a requirement for an annual report and there may be a degree of transparency, but the onus will be on them to go through six or seven sets of accounts from the different subsidiaries. We need to look at how we can simplify some of the management structures that companies use, which could cause huge amounts of confusion for residential leaseholders, and, as I say, put the onus on them to try to work through different sets of accounts in a way that they might find difficult to do.
Question put and agreed to.
Clause 51 accordingly ordered to stand part of the Bill.
Clause 52 ordered to stand part of the Bill.
Clause 53
Limitation of administration charges
Question proposed, That the clause stand part of the Bill.
Lee Rowley
I hope that some of the comments I am about to make will reassure my hon. Friend the Member for North East Bedfordshire that we are keen to get this right.
Homeowners on managed estates can be subject to excessive administration charges, with little understanding of what fees they may be liable to pay. Subsection (1) puts a stop to that by introducing a requirement for all administration charges to be reasonable. Subsections (2) and (3) require that an administration charge is payable only if the amount or the description of how the amount is to be calculated has been published on an administration charge schedule for 28 days. Subsection (4) sets out other conditions under which an administration charge is not payable to the estate manager. They include circumstances where the estate manager is charging homeowners on the same estate different amounts for carrying out similar tasks, and therefore prevents them from being charged at different rates. I commend the clause to the Committee.
Question put and agreed to.
Clause 53 accordingly ordered to stand part of the Bill.
Clause 54
Determination of tribunal as to administration charges
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Clause 54 introduces a new right for homeowners on managed estates to challenge the reasonableness of administration charges they are liable to pay. This approach delivers on a Government commitment to give freehold homeowners the equivalent right as leaseholders with regards to the charges they pay, and allows homeowners to get an independent assessment of whether the charge they are being asked to pay is justified and appropriate.
Subsection (1) sets out the basis on which homeowners may make an application to the appropriate tribunal and describes those issues on which the tribunal is able to be determined. They include: whether the administration charge is payable and, if so, by whom and to whom it is payable; the amount that is payable, as well as the date by, or on which, it is payable; and the manner in which it is payable. Subsection (2) is clear that this application can be made whether or not any payment has been made. Subsection (4) confirms that any payment made by the homeowner does not mean that they have agreed or admitted to its reasonableness. Subsection (3) sets out instances when an application may not be made to the tribunal. These measures mirror those provisions that apply to leaseholders under the Landlord and Tenant Act 1985.
This clause, alongside clauses 50 to 53, brings the rights of homeowners on managed estates in line with those of leaseholders with regard to administration charges. I commend the clause to the Committee.
Question put and agreed to.
Clause 54 accordingly ordered to stand part of the Bill.
Clause 55
Codes of management practice: extension to estate managers
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Clause 55 amends section 87 of the Leasehold Reform, Housing and Urban Development Act 1993. It enables the Secretary of State to approve or publish a code of practice in relation to managed estates. The effect of this clause mirrors the position in leasehold, for which the Government have approved two codes of practice. These codes outline best practice for managing agents, landlords or other relevant parties in relation to residential leasehold property management. An approved code of practice may be taken into account as evidence of a breach of an estate manager’s obligation at a tribunal or a court. I commend this clause to the Committee.
Question put and agreed to.
Clause 55 accordingly ordered to stand part of the Bill.
Clause 56
Part 4: application to government departments
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Clause 56 deals with the issue of Crown land, and makes it clear that the measures in part 4 should apply in circumstances where estate management functions are carried out by or on behalf of Government Departments. We consider that there are no grounds to exclude homeowners who live on land owned by Government Departments where they pay a contribution. They have as much right to hold the estate manager accountable for the charges it spends. There may be a very small number of locations where land that could now or in the future be built on is owned by His Majesty or other parts of the Crown Estate. In such circumstances, the Crown will act by analogy—in other words, it will ensure homeowners on such estates have access to equivalent rights. Prior to Second Reading, the King and the Prince of Wales granted consent in writing. I commend the clause to the Committee.
Question put and agreed to.
Clause 56 accordingly ordered to stand part of the Bill.
Clause 57
Interpretation of Part 4
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Clause 57 provides a comprehensive definition of terms used in part 4 of the Bill. For key terms used in the Bill, such as “estate manager” or “relevant costs”, it points to other parts of the Bill where they are defined. Subsection (2) sets out the definition of an “owner” of a dwelling as being either the person who owns the freehold land that comprises a dwelling, or the person who is a leaseholder of a dwelling under a long lease. This ensures that all homeowners who pay a contribution can enjoy the new protections in this part. It also makes it clear that, where homeowners rent out their property or let it out under an assured tenancy, they—not the occupants of the dwellings—are entitled to these protections. This clause provides the more comprehensive definition of relevant measures that inform the regulatory framework in part 4. I commend the clause to the Committee.
Question put and agreed to.
Clause 57 accordingly ordered to stand part of the Bill.
Clause 58
Meaning of “estate rentcharge”
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Part 5 of the Bill addresses issues relating to rentcharges. Since the Rentcharges Act 1977, the creation of most types of rentcharge has been prohibited. The main class of rentcharge excepted from the general prohibition is known as an estate rentcharge. Estate rentcharges are usually mechanisms for a management company to obtain contributions towards the costs of maintaining communal areas.
Part 4 of the Bill creates new protections for homeowners who pay an estate rentcharge to an estate manager for the provision of estate management services. Clause 58 makes a minor amendment to the Rentcharges Act 1977 to amend the definition of “estate rentcharge” in section 2 of the Act. The effect of the amendment is to ensure that payments may be made to cover improvements to communal areas as well as maintenance and repairs. This ensures that it aligns with the definition of the service charges that leaseholders must pay, and allows estate managers to pass on costs of any improvements to the areas they look after, and will ensure that they meet their legal obligations as well as having sufficient funds to carry out such works. The sums paid for improvement will still be subject to the protections in part 4—for example, the requirement to be reasonable. This is a clarificatory amendment, and I commend clause 58 to the Committee.
Matthew Pennycook
This is a clarificatory amendment, and we do not take issue with it. I will speak on our concerns about rentcharges in relation to clause 59.
Question put and agreed to.
Clause 58 accordingly ordered to stand part of the Bill.
Clause 59
Regulation of remedies for arrears of rentcharges
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss new clause 4—Remedies for the recovery of annual sums charged on land—
“(1) Section 121 of the Law of Property Act 1925 is omitted.
(2) The amendment made by subsection (1) has effect in relation to arrears arising before or after the coming into force of this section.”
This new clause, which is intended to replace clause 59, would remove the provision of existing law which, among other things, allows a rentcharge owner to take possession of a freehold property in instances where a freehold homeowner failed to pay a rentcharge.
Lee Rowley
An income-supporting rentcharge is an annual sum paid by a freehold homeowner to a third party who normally has no other interest in the property. Under the 1977 Act, no new rentcharges of this type may be created, and all existing ones will be extinguished in 2037. Most income-supporting rentcharges can be for relatively small amounts—typically between £1 and £25 per annum—and the majority of freehold properties affected by these rentcharges are located in the north-west and the south-west of England.
However, a loophole remains. Failure to pay a rentcharge within 40 days of its due date means that, under section 121 of the Law of Property Act 1925, the recipient of the rentcharge may take possession of the subject premises until the arrears and all costs and expenses are paid. The rentcharge owner may alternatively grant a lease of the subject premises to a trustee that the rentcharge owner may set up themselves. The Government believe that that law is unfair and can have a grossly dispro-portionate consequence for a very small amount of money not being paid. This clause seeks to address that and ensure that freeholders cannot be subject to a possession order or the granting of a lease for rentcharge arrears.
Subsection (2) introduces new sections into the 1925 Act. Proposed new section 120B details that no action to recover or require payment of regulated rentcharge arrears may be taken unless notice has been served and the demand for payment complies with the new requirements. Those requirements set out what information the notice must include. The section also sets out that the homeowner does not have to pay the rentcharge owner any administrative fee.
Proposed new section 120C sets out various requirements relating to the serving of notice under proposed new section 120B, aimed at ensuring that freeholders receive the demand of payment at the address of the charged land. Proposed new section 120D confers powers on the Secretary of State to set out in regulations a limit on the amounts payable by landowners, indirectly or directly, in relation to the action of recovering or requiring payment of regulated rentcharge arrears. That provision seeks to avoid abuse of administration costs charged when simply accepting payment of arrears, and the process of removing any restriction on the freehold title at the Land Registry. The charge does not affect the cost that is paid directly to the Land Registry itself.
Clause 59 (3) and (4) to clause 59 seek to disapply rentcharge owners from using the provisions set out in sections 121 and 122 of the 1925 Act. In doing so, they provide additional protection to avoid rentcharge owners rushing to invoke those provisions. The effect of those subsections is to make any action to reclaim arrears using the 1925 Act void retrospectively once the provisions are introduced. Subsection (5) ensures that the provisions of the clause apply to rentcharge arrears that have arisen before and after the changes come into force. Subsection (6) inserts new section 122A into the 1925 Act, which details that an instrument creating a rentcharge, contract or any other arrangement is of no effect to the extent that it makes provision contrary to the provisions in this clause. Clause 59 delivers on a Government commitment to protect freehold homeowners from the disproportionate effects of falling into arrears in the payment of their rentcharge.
I turn to new clause 4, for which I thank the shadow Minister, the hon. Member for Greenwich and Woolwich. It seeks to abolish section 121 of the 1925 Act. The effect of the new clause would be that a failure to pay any form of rentcharge would prevent the owner of the rentcharge from granting a lease on the property, or from taking possession of it until the fee was paid. We are sympathetic to the issue raised by the shadow Minister, and we have recognised that forfeiture is an extreme measure and should only be used as a last resort. Although in practice it is already rarely used, I recognise that the potential consequences may feel disproportionate. That is why we have included clause 59, which disapplies this remedy for income-supporting rentcharges where we know that homeowners pay nominal sums for very little in return.
As with leasehold forfeiture, any changes will require a careful balancing of the rights and responsibilities of interested parties. We are concerned as to what this new clause could mean where a homeowner pays estate rentcharges that are essential for the management of their estate, or any other form of legitimate rentcharge. The Government want to ensure that where they are required to be paid, these charges are paid in a timely manner so that the smooth running of the estate can continue. If estate management companies are unable to recover these sums, there is the potential that the costs will fall to other homeowners or that the upkeep of the estate will worsen. We are keen to understand any unintended consequences before abolishing section 121 of the 1925 Act all together. We need to weigh up the needs of the estate with the stress and uncertainty that we know this law can cause for some homeowners and lenders. We are listening carefully to the arguments, and I am happy to give the hon. Gentleman that commitment. I hope that, with those reassurances, he may consider not moving his new clause.
Matthew Pennycook
I was slightly surprised, in a welcome way, by the Minister’s response, in that he seemed to indicate that the Government are open to considering the abolition of section 121 of the 1925 Act all together, notwithstanding the need to ensure that there are no unintended consequences, but we are debating clause 59 as it stands, which does not propose that, so I hope to convert the Minister’s sympathy into agreement with our position if I can.
Part 5 of the Bill concerns rentcharges, which in general terms can be understood as an indefinite, periodic payment made in respect of freehold land by the current freeholder to a third party or “rent owner” who has no reversionary interest in the charged land in question. In some cases, the charge relates to the provision of a service; in others it is, in effect, simply a profit stream for the interested third party. All rentcharges, as the Minister made clear, are covered by the Rentcharges Act 1977, which prohibited the creation of new so-called income-only rentcharges and provided that all such rentcharges will be extinguished in 2037.
The 1977 Act does not detail the remedies available to a rentcharge holder whose rentcharge is not paid, although any can simply sue for a money judgment. It is section 121 of the Law of Property Act 1925 that creates two additional remedies for rentcharge non-payment. First, unless excluded by the terms of the rentcharge itself, there is a right for the rentcharge holder to take possession of the charged land in question and retain any income associated with it so long as the money owed, whether demanded or not, is unpaid for 40 days. Secondly, unless prohibited by the terms of the rentcharge, and assuming that the money owed is outstanding for at least 40 days, there is a power to demise the land to a trustee by way of a lease in order to raise the funds necessary to pay the arrears and costs.
In short, the 1925 Act provides for the power to seize freehold houses for non-payment of a rentcharge, even if the arrears are merely a few pounds, and allows the rentcharge holder to retain possession or render it in effect worthless by means of maintaining a 99-year lease over it, even if, as demonstrated by the 2016 case of Roberts v. Lawton, the rentcharge is redeemed or the underlying debt cleared. In our view, the remedies provided for by the 1925 Act are a wholly disproportionate and draconian legacy of Victorian-era property law. As I have said, the 1977 Act prohibited the creation of new rentcharges and provided for existing rentcharges to be abolished in 2037, but 13 years from now is still a long time away and any lease granted prior to the abolition will remain in force. Rentcharges are therefore an area of law in respect of which legislative reform is long overdue, and the need to protect rent payers from what amounts, essentially, to a particularly severe form of freehold forfeiture as a result of the relevant remedies provided for by the 1925 Act is pressing.
With clause 58 having amended the definition of estate rentcharge, clause 59 seeks to provide for revised remedies for arrears by amending the 1925 Act. As the Minister has set out, clause 59, in place of the existing two remedies for rentcharge non-payment under the Act, proposes requiring the third party or rent owner to issue an appropriate demand before they can seek to recover or compel payment, and gives the Secretary of State the power by regulation to limit the amount payable by the freehold homeowner in respect of rentcharge arrears or to provide that no amount is repayable. Although we appreciate that the intent of the clause is to better protect freehold homeowners from the existing disproportionate remedies that are available to rentcharge holders when rentcharges go unpaid, we believe it is an overly complicated and onerous attempt to make more palatable the methods of enforcing rentcharges provided for by the 1925 Act that are simply not justifiable in any form.
No one disputes that there might be a need for legitimate and reasonable rentcharges. Indeed, if and when the Government finally deliver on the pledge to require all new houses in England and Wales to be sold as freehold properties, such charges will become even more important as a means to ensure that freehold houses contribute towards communal estate services. However, the threat of their being enforced by means of the draconian remedies in section 121 of the 1925 Act must, in our view, be removed.
Lee Rowley
I am grateful to the hon. Gentleman. He makes a strong case for his arguments. As I have indicated, although I will not accept new clause 4, we do think there is an argument that is reasonable to be had here, while recognising that we need to consider the consequential potential of any change. I am happy to discuss that further with him separately to see whether we can make further progress at a later stage of the Bill.
Matthew Pennycook
I thank the Minister for that answer. I am tempted to not move the new clause, but I can only deal with the piece of legislation in front of me. What is in front of me is not a placeholder clause that says, “We will review the 1925 Act”; it is a clause that puts in place an amended version of the remedies. We feel so strongly about this point that we will vote against clause stand part, but I will take the Minister up on his offer to discuss a more sensible way of dealing with the types of contraventions that we have discussed.
Question put, That the clause stand part of the Bill.
Lee Rowley
Clause 60 sets out the meaning of references throughout the Bill to other Acts. I commend the clause to the Committee.
Question put and agreed to.
Clause 60, as amended, accordingly ordered to stand part of the Bill.
Clause 61
Power to make consequential provision
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Clause 61 gives the Secretary of State the power to make provision that is consequential on the Bill through regulations, including provision amending an Act of Parliament. We do not take such a power lightly and, in drafting this legislation, we have sought to identify necessary consequential amendments on the face of the Bill. Long residential leasehold is, however, a complex and interdependent area of law. Therefore we consider it prudent to take the power in Clause 61 in order to ensure that, should any further interdependencies be identified at a later date, those can be addressed appropriately.
There are various precedents for such provisions, including section 92 of the Immigration Act 2016, section 213 of the Housing and Planning Act 2016, section 42 of the Neighbourhood Planning Act 2017, and section 20 of the Leasehold Reform (Ground Rent) Act 2022.
Question put and agreed to.
Clause 61 accordingly ordered to stand part of the Bill.
Clause 62
Regulations
Lee Rowley
I beg to move amendment 55, in clause 62, page 80, line 33, at end insert—
“(1A) A power to make regulations under Part 4A also includes power to make different provision for different areas.”
This amendment would expressly provide that a power to make regulations under the new Part to be inserted after Part 4 includes the power to make different provision for different areas.
The Chair
With this it will be convenient to discuss the following:
Government amendment 56.
Government new clause 9—Appointment of manager: breach of redress scheme requirements.
Government new clause 15—Leasehold and estate management: redress schemes.
Government new clause 16—Redress schemes: voluntary jurisdiction.
Government new clause 17—Financial assistance for establishment or maintenance of redress schemes.
Government new clause 18—Approval and designation of redress schemes.
Government new clause 19—Financial penalties.
Government new clause 20—Financial penalties: maximum amounts.
Government new clause 21—Decision under a redress scheme may be made enforceable as if it were a court order.
Government new clause 22—Lead enforcement authority: further provision.
Government new clause 23—Guidance for enforcement authorities and scheme administrators.
Government new clause 24—Interpretation of Part 4A.
Government new schedule 1—Redress schemes: financial penalties.
Lee Rowley
Turning first to new clause 15, some leaseholders and homeowners on freehold estates do not currently have access to redress outside of the tribunal or the courts. I should note that part 4 of the Bill will give comprehensive rights and protections to homeowners on freehold estates, including access to the relevant tribunal. Though property managing agents are required by law to join a Government-approved redress scheme, there is no such requirement for leasehold landlords and freehold estate managers who manage their property or estate themselves. This means that for issues that fall outside the court or tribunal’s jurisdiction, such as poor communication or behavioural issues, those leaseholders and homeowners on freehold estates can make a complaint only through their landlord or estate manager’s own complaints process. If there is no complaints procedure, or once the leaseholder or homeowner has exhausted it, their access to redress is exhausted.
New clause 15 will fill this gap by providing that leasehold landlords and freehold estate managing agents who manage their property or estate can be required to join a redress scheme. The redress scheme will independently investigate and determine complaints made by a current or former owner. A redress scheme will need to be approved by, and administered by or on behalf of, the “lead enforcement authority”—the Secretary of State or other designated body. The Government have taken powers that will allow us to make exemptions to the requirement in specific circumstances and also a power to amend the definitions in this section. New clause 15 will fill gaps that leaseholders and homeowners on freehold estates currently experience in access to redress. I commend the clause to the Committee.
New clause 16 makes it clear that the redress scheme provided for under this part may act under a voluntary jurisdiction. That means they may allow for members to join the scheme who are not required to join under new clause 15. The scheme may also investigate and determine complaints outside their jurisdiction at their discretion, including complaints by people who are not current or former owners of a relevant dwelling. The scheme may offer voluntary mediation services and allow for certain complaints or circumstances to be excluded from their remit. The voluntary jurisdiction may be subject to the approval conditions that the redress scheme must comply with under new clause 18, which I will come to in a moment.
New clause 17 gives the Secretary of State the power to make payments, including loans, or give financial assistance to establish or maintain a redress scheme. The Government expect the costs of the redress scheme to be funded by the scheme themselves—for example, through charging membership fees. However, there may be some circumstances where the provision of funding is needed. The clause offers flexibility in that instance.
New clause 18 makes provision for the approval and designation of redress schemes. The approval conditions will apply to the future redress scheme and must be satisfied before the redress scheme is approved or designated. The approval conditions will be set out in regulations made by the Secretary of State and will include, but are not limited to, those conditions set out in subsection (3). In addition, new clause 18 allows the Secretary of State to make regulations to provide for the process for making applications for the approval of a redress scheme, the time the approval or designation remains valid, and the process for approval or designation to be withdrawn or revoked. It also allows for a scheme to set membership fees to cover the cost of providing the service.
I will now turn to new clauses 19, 20 and 9, and new schedule 1. To ensure compliance from landlords and freehold estate managers who are required to join a redress scheme, we need to ensure that robust enforcement mechanisms are in place. New clause 19 does that by allowing an enforcement authority to impose financial penalties where breaches of regulations by not joining a redress scheme occur. It also allows for the Secretary of State to make regulations to allow for the investigation of suspected breaches, and for co-operation and information sharing between enforcement authorities for the purposes of investigation.
New clause 20 sets out the amounts of the financial penalty that enforcement authorities may impose on landlords and freehold estate managers who do not comply with the requirement to join a redress scheme. An initial penalty for breaching the requirement may be up to £5,000. However, repeated breaches could lead to a penalty of up to £30,000. The new clause also allows the Secretary of State to amend the amount of financial penalty in regulations to reflect changes in the value of money.
New clause 9 provides a route for leaseholders to apply to the tribunal for an order to appoint a manager in place of their landlord if their landlord has failed to join the redress scheme. As with other “reasons”, leaseholders can apply for an order that a manager be appointed, and the tribunal will make one if
“it is just and convenient to make the order in all the circumstances of the case”.
Richard Fuller
The Minister will be aware of concerns about the practical application of this provision when it is put into practice, and the pressures on the tribunal. Under new clause 9, as I best understand it, homeowners will have the right to go to the first-tier tribunal to ask to change from company A to company B as their estate manager. If that is the case, why does it have to go through a tribunal? Why is it not feasible for people to determine that themselves without referring to a tribunal?
Lee Rowley
My hon. Friend raises an important point. I recognise the significant body of views in this place and elsewhere about the ability to appoint a right to manage company or a representative directly, and I have certainly heard those concerns. In this case, working within the framework of the proposed legislation, we wanted to ensure that there is a route to allow a manager to be appointed if a landlord refuses to comply. Of course, we would hope that a landlord would not refuse in the first instance.
The Government have also provided in new clause 13 that homeowners on freehold estates can apply to the tribunal for an order to appoint a new manager for the estate if a relevant estate manager has breached the requirement to join a redress scheme. New schedule 1 sets out further provisions relating to the penalties set out in new clause 19. It will require an enforcement authority to give a landlord or freehold estate manager whom they suspect of breaching the requirement to join a scheme a notice of its intention to issue a financial penalty before issuing a final notice. Those who are given a notice by the enforcement authority may make representations. The schedule sets out that where an enforcement authority imposes a financial penalty, it may apply the proceeds towards meeting the costs and expenses incurred in carrying out its functions. Any proceeds that are not so applied will be paid to the Secretary of State.
New clause 21 gives the Secretary of State the power to provide that a future redress scheme provider may apply to a court or tribunal for an order that a decision made under the scheme be enforced as if it were an order of the court. That may be necessary if there is an issue with landlords or freehold estate managers not complying with the redress scheme’s decisions.
New clause 22 makes the necessary provisions for the role of the lead enforcement authority. That is defined by new clause 15 as the Secretary of State, or another person designated by the Secretary of State. New clause 22 provides that the lead enforcement authority will have necessary oversight of the scheme. It also provides that if the Secretary of State decides to designate the role of the lead enforcement authority to another person, the Secretary of State will still have the appropriate power to direct the lead enforcement authority. That includes provisions to make payments and to bring the arrangement to an end.
New clause 23 provides for the Secretary of State to issue or approve guidance for enforcement authorities and the administrator of the future redress scheme about co-operation. It makes clear that the Secretary of State will exercise powers under new clause 18 to ensure that the administrator of the redress scheme has regard to guidance issued or approved under the section. Importantly, the amendment also requires the enforcement authority to have regard to the same guidance. New clause 24 makes necessary provision for the interpretation of this part of the Bill, including the definitions used. I commend the clauses to the Committee.
Lee Rowley
Clause 63 states the territorial extent of the Bill. It applies to England and Wales. We have worked closely with the Welsh Government to develop the reforms, and we will continue to engage with them. That will ensure that the legislation operates effectively to deliver long-term improvements to home ownership across both England and Wales. I commend the clause to the Committee.
Question put and agreed to.
Clause 63 accordingly ordered to stand part of the Bill.
Clause 64
Commencement
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Clause 64 makes provision for the commencement of the Bill. The substantive provisions of the Bill will come into force on a day appointed by the Secretary of State by regulation. For a number of policy areas, regulations need to be drafted and laid before Parliament before the provisions in the Bill can commence. Hon. Members should be assured that we are not intending to have any unnecessary delay in implementation, and the Department is working hard to plan and carry out the associated programme of secondary legislation. Subsection (2) sets out that the provisions for section 59, namely the regulation of remedies for rent charge arrears, come into force two days after the Act is passed. I commend the clause to the Committee.
Matthew Pennycook
I have two brief points. On the general commencement provisions, the Minister just made it perfectly clear that there are no firm dates for commencement on all the issues that require regulations. I take on board what he said about not seeking any unnecessary delay, and that is welcome. However, I push him to go slightly further to give us a sense of the timetabling of some of the more important provisions in the Bill, because leaseholders watching our proceedings will want to know when the rights provided for by the Bill can be enjoyed.
I have a point specifically on subsection (2), which specifies that clause 59 comes into force at the end of a period of two months, as I understand it—the Minister said “two days”, and I think it is two months. Given that some of the provisions in clause 59—I am thinking particularly of new subsection 120D(4)—bring the relevant provision into force on First Reading on 27 November 2023, why is there a two-month delay after Royal Assent? Why not bring the measures into force on Royal Assent?
Lee Rowley
I am grateful to the hon. Gentleman for his questions. Obviously, as he will know, I do not need to push too heavily the point that we need to get the Bill through this place. We are trying to move it as quickly as we possibly can, but the other place may have other ideas, although I hope that it will not. I hope I can provide assurances that we will try to get these things moving as quickly as possible.
On the hon. Gentleman’s specific point about subsection (2), I thank him for correcting me; it is two months. As I understand it—I am happy to go away and review it—there is a relative convention in these instances. However, given the desire and intention of all parties, including the Secretary of State, to move as quickly as possible, we will see whether we can speed it up.
Question put and agreed to.
Clause 64 accordingly ordered to stand part of the Bill.
Clause 65
Short Title
Question proposed, That the clause stand part of the Bill.
Lee Rowley
Clause 65 sets out that the short title of the legislation is to be the Leasehold and Freehold Reform Act. I commend the clause to the Committee.
Question put and agreed to.
Clause 65 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Mr Mohindra.)
Leasehold and Freehold Reform Bill (Tenth sitting)
(9 months, 3 weeks ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 5 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 1 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 7 - Question accordingly negatived.
The Minister for Housing, Planning and Building Safety (Lee Rowley)
I beg to move, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss the following:
Government new clause 11—Appointment of substitute manager.
Government new clause 12—Conditions for applying for appointment order.
Government new clause 13—Criteria for determining whether to make appointment order.
Government new clause 14—Appointment orders: further provision.
Lee Rowley
Homeowners who pay estate management charges for the upkeep and management of their estate must be able to hold their estate management company to account. The Government are committed to giving homeowners the right to apply to the appropriate tribunal to appoint a substitute manager where the estate management company is failing them. The intention is that the substitute manager will then carry out the services set out in an order that will be issued by the tribunal.
New clause 10 introduces the first stage in the procedure for doing so. It will require one or more homeowners to issue a notice of complaint to their estate management company.
Subsection (2) sets out what information must be contained in the notices. Subsection (3) sets out the grounds for issuing a complaint, which largely mirror the grounds set out under section 24 of the Landlord and Tenant Act 1987 that apply to leaseholders. Subsections (4) and (5) make it clear that a notice may be issued jointly with more than one complainant, and that it is not necessary for the grounds for complaint to be the same for each complainant.
Subsection (7) defines the term “qualifying period”. It gives the estate management company a period of six months from the time at which a complaint is received to remedy the complaint before the homeowner can move towards the next step. That is a sensible period to ensure that estate management companies have sufficient time to address concerns fully. It gives homeowners time to gather the evidence required to demonstrate failings, should that be necessary, to any tribunal. I commend new clause 10 to the Committee.
New clause 11 will introduce arrangements to allow owners of managed dwellings to apply for the appointment of a substitute estate manager. Subsection (1) requires an application by an owner of a managed dwelling to be made to the appropriate tribunal. Once it receives an application, the appropriate tribunal may appoint a person to carry out functions in connection with estate management as the tribunal sees fit. That appointed person would then carry out functions instead of the estate manager or the agent acting on its behalf.
Subsections (2) to (4) refer to other new clauses that set out the process to be followed and the issues that must be take into account. Subsection (2) refers to new clause 12, which sets out the conditions that must be met for the person to make an application. Subsection (3) refers to new clause 13, which sets out the criteria that the appropriate tribunal must consider in deciding whether to make an order.
Subsection (4) refers to new clause 14, which makes further provision in relation to appointment orders, including what may be contained in such an order and under what terms an order may be varied or discharged. Subsection (5) sets out the two key definitions that apply to this new power: it defines an appointment order, and then defines a substitute manager as the person appointed under the appointment order. New clause 11 sets out the parameters for the new power and how it should be used; I commend it to the Committee.
New clause 12 sets out the conditions for an application for an appointment order to be made under new clause 11. Subsection (1) sets out the main condition that must be met: the homeowner must have given a notice of complaint and must have given the estate manager the required six-month period to resolve that complaint. The homeowner must also have issued a subsequent final warning notice, such that it is clear within a reasonable time period that either the estate manager is not capable of taking steps or not willing to take steps to remedy the problem.
Subsections (2) and (3) set out the arrangements for an appointment notice where it is given jointly by a number of homeowners. Critically, they allow additional homeowners to join the final warning notice even if they were not part of the initial complaint. Importantly, people who have provided the initial notice of complaint must also sign the final warning notice.
Subsection (4) sets out what a final warning notice must contain, such as the addresses and names of those issuing the notice. The notice must also set out the grounds on which those people consider that the appropriate tribunal should make that order. The final warning notice must give the estate manager a reasonable period in which to solve the problem. The Secretary of State and equivalent Welsh Ministers have the power to specify what other information might be required.
Subsection (6) allows the appropriate tribunal to dispense with the need to make a final warning notice if it is satisfied that it would not be reasonably practical to do so. New clause 12 provides clarity about what steps are required in order to make an appropriate order to the tribunal. I commend it to the Committee
New clause 13 sets out the criteria and grounds on which the appropriate tribunal may make an appointment order. Subsection (1) defines the estate management arrangements that are within scope of an appointment order by allowing the appropriate authority to set out in regulations any exemptions, should they be required.
Subsection (2)(a) states that the appropriate tribunal may make an appointment order if it is “just and convenient” in the circumstances. Subsections (2)(b) and (3) set out the grounds under which an appointment order may be made. In broad terms, these are where the estate manager has breached an obligation; where a management charge or an administration charge may be unreasonable; where a manager has failed to comply with a relevant code of practice; and where the estate manager has failed to belong to a redress scheme. However, the appropriate tribunal is also able to issue an order if it considers that there are other circumstances that make it just and convenient to do so.
Subsection (4) sets out the grounds under which an estate management charge under subsection (3)(b) is taken to be unreasonable. Subsection (5) will allow the appropriate tribunal additional freedom to make an order in circumstances in which
“a period specified in a final warning notice was not a reasonable period”,
or in which the final warning notice did not contain all the required information. I commend new clause 13 to the Committee.
New clause 14 sets out further provision relating to the making of orders to appoint substitute estate managers. Subsection (1) sets out matters for which the appropriate tribunal may wish to make a provision in an appointment order, such as provision allowing the substitute manager to become party to certain rights and liabilities, provision for remuneration to be paid to a substitute manager by the estate management company, and provision setting a time limit for how long the manager may carry out its functions.
Subsection (2) allows the appropriate tribunal to
“vary or discharge…an appointment order.”
Subsection (3) sets out the conditions under which an appointment order may be varied or discharged. Subsection (4) states that
“the appropriate tribunal must have regard to whether”
or not the estate management company is part of a “redress scheme” in deciding the terms of the appointment order, or when it considers variation or discharge of the order. I commend new clause 14 to the Committee.
Question put and agreed to.
New clause 10 accordingly read a Second time, and added to the Bill.
New Clause 11
Appointment of substitute manager
“(1) The appropriate tribunal may, on the application of an owner of a managed dwelling, by order appoint a person to carry out, in place of an estate manager, such functions in connection with the estate management relating to that dwelling as the tribunal thinks fit.
(2) Section (Conditions for applying for appointment order) sets out conditions that must be met for a person to make an application.
(3) Section (Criteria for determining whether to make appointment order) sets out criteria the appropriate tribunal must consider in deciding whether to make an appointment order.
(4) Section (Appointment orders: further provision) makes further provision in relation to appointment orders.
(5) In this section and sections (Conditions for applying for appointment order) to (Appointment orders: further provision)—
‘appointment order’ means an order under subsection (1);
‘substitute manager’ means a person appointed under an appointment order.”—(Lee Rowley.)
This new clause, to be inserted after NC10, would allow owners of managed dwellings to apply for the appointment of a substitute estate manager.
Brought up, read the First and Second time, and added to the Bill.
New Clause 12
Conditions for applying for appointment order
“(1) An owner of a managed dwelling may make an application for an appointment order in relation to an estate manager only if—
(a) the owner has given a notice of complaint to the estate manager,
(b) the qualifying period in relation to that notice has ended,
(c) the owner has, after the end of the qualifying period but before the application is made, given further notice to the estate manager (a ‘final warning notice’), and
(d) the condition in subsection (5) is met in relation to the final warning notice.
(2) If the owner gave the notice of complaint jointly with other persons, the owner may not make an application for an appointment order unless—
(a) the owner does so jointly with each of those other persons that remain owners of managed dwellings in relation to the estate manager, and
(b) the final warning notice was given jointly by the owner and each of those other persons.
(3) The owner, or the owners acting jointly in accordance with subsection (2), may make an application jointly with an owner of a managed dwelling who did not give the notice of complaint to the estate manager (a ‘joined applicant’), if the final warning notice was given jointly by the owner or owners and the joined applicant.
(4) A final warning notice must—
(a) specify—
(i) the name of the person (or persons) giving the notice,
(ii) the address of their dwelling (or the addresses of each of their dwellings), and
(iii) if different, an address (or addresses) at which a person may give notice to that person (or one or more of those persons) in connection with the application,
(b) state that the person or persons giving the notice intend to make an application for an appointment order in respect of the dwelling specified in the notice,
(c) specify the grounds on which the appropriate tribunal would be asked to make such an order and the matters that would be relied on by the person or persons for the purpose of establishing those grounds,
(d) where those matters are capable of being remedied by the estate manager, require the estate manager, within a reasonable period specified in the notice, to take specified steps for the purpose of remedying them,
(e) state that, if those matters are remedied, the person or persons will not make an application, and
(f) contain any other information specified in regulations made by the Secretary of State.
(5) The condition in this subsection is met if—
(a) the matters specified in the final warning notice were not capable of being remedied, or
(b) the period specified in the final warning notice for the matters to be remedied has expired without the estate manager having taken the required steps to remedy them.
(6) The appropriate tribunal may by order dispense with a requirement in subsection (1), (2) or (3) if the tribunal is satisfied in light of the urgency of the case that it would not be reasonably practicable for the requirement to be satisfied.
(7) But the tribunal may, when so ordering, direct that such other notices are given, or such other steps are taken, as it thinks fit.
(8) If the tribunal makes an order under subsection (6), an application for an appointment order may be made only if any notices required to be given, and any other steps required to be taken, by virtue of the order have been given or taken.
(9) The Secretary of State may by regulations make provision for determining when a notice under this section is given.
(10) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)
This new clause, to be inserted after NC11, would set out conditions for an application to be made under NC11.
Brought up, read the First and Second time, and added to the Bill.
New Clause 13
Criteria for determining whether to make appointment order
“(1) The appropriate tribunal may not make an appointment order in relation to an estate manager if the estate manager is specified, or is of a description specified, in regulations made by the Secretary of State.
(2) The appropriate tribunal may make an appointment order only if the tribunal is satisfied that—
(a) it is just and convenient to make the order in all the circumstances of the case, and
(b) either—
(i) those circumstances include those set out in subsection (3), or
(ii) there are other circumstances that make it just and convenient for the order to be made.
(3) The circumstances are—
(a) that the estate manager is—
(i) in breach of an obligation in relation to a dwelling, or
(ii) in the case of an obligation dependent on notice, would be in breach of the obligation but for the fact that it has not been reasonably practicable to give the estate manager the appropriate notice;
(b) that an estate management charge payable, or proposed or likely to be payable, is unreasonable;
(c) that an administration charge payable, or proposed or likely to be payable, is unreasonable;
(d) that the estate manager has failed to comply with a relevant provision of a code of practice approved by the Secretary of State under section 87 of the LRHUDA 1993 (codes of management practice);
(e) that the estate manager has breached regulations under section (Leasehold and estate management: redress schemes)(1) of this Act (requirement to be member of redress scheme).
(4) For the purposes of subsection (3)(b), an estate management charge is to be taken to be unreasonable if—
(a) the amount is unreasonable having regard to the items for which it is payable,
(b) the items for which it is payable are of an unnecessarily high standard, or
(c) the items for which it is payable are of an insufficient standard with the result that additional charges are or may be incurred.
(5) An appointment order may be made despite the fact that—
(a) a period specified in a final warning notice was not a reasonable period, or
(b) a final warning notice otherwise failed to comply with a requirement under section (Conditions for applying for appointment order)(4).
(6) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)
This new clause, to be inserted after NC12, would set out criteria for the making of an order under NC11.
Brought up, read the First and Second time, and added to the Bill.
New Clause 14
Appointment orders: further provision
“(1) An appointment order may—
(a) make provision with respect to such matters relating to the exercise by the substitute manager of their functions under the order, and such incidental or ancillary matters, as the tribunal thinks fit, including—
(i) for rights and liabilities arising under contracts or other arrangements to which the substitute manager is not party to become rights and liabilities of the substitute manager;
(ii) for the substitute manager to be entitled to prosecute claims in respect of causes of action (whether contractual or tortious) accruing before or after the date of their appointment;
(iii) for remuneration to be paid to the substitute manager by the estate manager;
(iv) for the substitute manager’s functions to be exercisable during a specified period;
(b) be subject to such conditions as the tribunal thinks fit;
(c) be subject to suspension on terms set by the tribunal.
(2) The appropriate tribunal may, on the application of any interested person or of its own motion, vary or discharge (whether conditionally or unconditionally) an appointment order.
(3) The tribunal may not vary or discharge an appointment order unless the tribunal is satisfied that—
(a) the variation or discharge will not result in a recurrence of the circumstances which led to the appointment order being made, and
(b) it is just and convenient in all the circumstances of the case to vary or discharge the order.
(4) In deciding—
(a) the terms of an appointment order, or
(b) whether or how to vary or discharge an appointment order,
the appropriate tribunal must have regard to whether the estate manager in relation to which the order is made has breached regulations under section (Leasehold and estate management: redress schemes)(1) (requirement to be member of redress scheme).”—(Lee Rowley.)
This new clause, to be inserted after NC13, would set out further provision about orders to appoint substitute estate managers under NC11.
Brought up, read the First and Second time, and added to the Bill.
New Clause 15
Leasehold and estate management: redress schemes
“(1) The Secretary of State may by regulations require a person that carries out estate management in respect of a dwelling in England in a relevant capacity to be a member of a redress scheme.
(2) A person carries out estate management in a ‘relevant capacity’ if they do so—
(a) as a relevant landlord of the dwelling, or
(b) as an estate manager.
(3) But a person may not be required to be a member of a redress scheme under this section if they carry out estate management only—
(a) as a tenant, or
(b) as an agent.
(4) A ‘redress scheme’ is a scheme—
(a) which provides for a complaint against a member of the scheme made by or on behalf of a current or former owner of a dwelling in relation to which estate management is carried out to be independently investigated and determined by an independent individual, and
(b) which is—
(i) approved by the lead enforcement authority for the purposes of regulations under subsection (1), or
(ii) administered by or on behalf of the lead enforcement authority and designated by the lead enforcement authority for those purposes.
(5) Regulations under subsection (1) may require a person to remain a member of a redress scheme after ceasing to be a person mentioned in that subsection, for a period specified in the regulations.
(6) Before making regulations under subsection (1), the Secretary of State must be satisfied that all persons who are to be required to be a member of a redress scheme will be eligible to join such a scheme before being so required (subject to any provision in the scheme about expulsion, as to which see section (Approval and designation of redress schemes)(3)(k)).
(7) For potential consequences of breaching regulations under subsection (1), see—
(a) section 24(2)(ad) of the LTA 1987 and section (Criteria for determining whether to make appointment order)(3)(e) of this Act (appointment of manager by tribunal);
(b) section (Financial penalties) of this Act (financial penalties by enforcement authorities).
(8) In this Part—
‘estate management’ means—
(a) the provision of services,
(b) the carrying out of maintenance, repairs or improvements,
(c) the effecting of insurance, or
(d) the making of payments,
for the benefit of one or more dwellings;
‘estate manager’ means a body of persons (whether incorporated or not)—
(a) which carries out, or is required to carry out, estate management, and
(b) which recovers the costs of carrying out estate management by means of relevant obligations;
‘the lead enforcement authority’ means either—
(a) the Secretary of State, or
(b) another person designated by the Secretary of State as the lead enforcement authority,
and see section (Lead enforcement authority: further provision) for further provision about the lead enforcement authority;
‘relevant landlord’, in relation to a dwelling, means a landlord under a long lease of the dwelling;
“relevant obligation’, in relation to a dwelling, means each of the following—
(a) a rentcharge which—
(i) is charged on or issues out of the land which comprises the dwelling or a building of which the dwelling forms part, and
(ii) is an estate rentcharge by virtue of section 2(4)(b) and (5) of the RA 1977;
(b) an obligation under a long lease of the dwelling;
(c) any other obligation that—
(i) runs with the land which comprises the dwelling or a building of which the dwelling forms part, or
(ii) otherwise (whether in law or in equity) binds the owner for the time being of the land which comprises the dwelling;
(d) any other obligation—
(i) to which the owner of the dwelling is subject, and
(ii) to which any immediate successor in title of that owner will become subject, if an arrangement to which a relevant landlord or an estate manager and that owner are parties is performed.
(9) The arrangements that are within paragraph (d) of the definition of ‘relevant obligation’ include an arrangement under which the owner is required (in particular by a limitation on transfer of title to the dwelling or on registration of a transfer of title) to ensure that any immediate successor in title to the owner enters into an obligation.
(10) The Secretary of State may by regulations make provision (including provision amending this Act) for the purpose of changing the meaning of ‘relevant capacity’, ‘relevant landlord’ or ‘relevant obligation’.
(11) A statutory instrument containing regulations under this section (whether alone or with other provision) is subject to the affirmative procedure.”—(Lee Rowley.)
This new clause, to be inserted as the first clause of a new Part after Part 4, would enable the Secretary of State to make provision for redress schemes for property management work carried out other than by agents.
Brought up, read the First and Second time, and added to the Bill.
New Clause 16
Redress schemes: voluntary jurisdiction
“(1) Nothing in this Part prevents a redress scheme from providing (subject to regulations under section (Approval and designation of redress schemes))—
(a) for membership to be open to persons who wish to join as voluntary members;
(b) for the investigation or determination of any complaints under a voluntary jurisdiction (including complaints by persons who are not current or former owners of dwellings in relation to which estate management is carried out);
(c) for voluntary mediation services;
(d) for the exclusion from investigation and determination under the scheme of any complaint in such cases or circumstances as may be specified in or determined under the scheme.
(2) In this Part—
‘complaints under a voluntary jurisdiction’ means complaints in relation to which there is no duty to be a member of a redress scheme, where the members against which the complaints are made have voluntarily accepted the jurisdiction of the scheme over those complaints;
‘voluntary mediation services’ means mediation, conciliation or similar processes provided at the request of a member in relation to complaints made—
(a) against the member, or
(b) by the member against another person;
‘voluntary members’, in relation to a scheme, means members who are not subject to a duty to be a member of a redress scheme.”—(Lee Rowley.)
This new clause, to be inserted after NC15, would provide for redress schemes to have the possibility of voluntary jurisdiction.
Brought up, read the First and Second time, and added to the Bill.
New Clause 17
Financial assistance for establishment or maintenance of redress schemes
“The Secretary of State may give financial assistance (by way of grant, loan, or guarantee, or in any other form) or make other payments to a person for the establishment or maintenance of—
(a) a redress scheme, or
(b) a scheme that would be a redress scheme if it were approved or designated under section (Leasehold and estate management: redress schemes)(4)(b).”—(Lee Rowley.)
This new clause, to be inserted after NC16, would allow the Secretary of State to give financial assistance for the establishment or maintenance of redress schemes.
Brought up, read the First and Second time, and added to the Bill.
New Clause 18
Approval and designation of redress schemes
“(1) This section applies where the Secretary of State makes regulations under section (Leasehold and estate management: redress schemes)(1).
(2) The Secretary of State must by regulations set out conditions which are to be satisfied before a scheme is approved or designated under section (Leasehold and estate management: redress schemes)(4)(b).
(3) The conditions must include conditions requiring the scheme to include provision in accordance with the regulations—
(a) for an administrator of the scheme to appoint an individual, having obtained the lead enforcement authority’s approval of the individual and the terms of the appointment, who is to be responsible for overseeing and monitoring the investigation and determination of complaints under the scheme;
(b) about the complaints that may be made under the scheme, which must include provision enabling the making of complaints about non-compliance with any codes of practice that are issued or approved by the Secretary of State;
(c) about the time to be allowed for scheme members to resolve matters before a complaint is accepted under the scheme in relation to those matters;
(d) about the circumstances in which a complaint may be rejected;
(e) about co-operation (which may include the joint exercise of functions) of an individual who is investigating or determining a complaint with persons who have functions under other schemes for providing redress and with enforcement authorities;
(f) about the provision of information to the persons mentioned in paragraph (e);
(g) if members are required to pay fees in respect of compulsory aspects of the scheme, about the level of those fees;
(h) if there are voluntary aspects of the scheme—
(i) for fees to be payable in respect of those aspects of the scheme, and
(ii) for the fees to be set at a level that, taking one year with another, is sufficient to meet the costs incurred in the administration of those aspects of the scheme;
(i) for the individual determining a complaint to be able to require members to provide redress of the following types to the complainant—
(i) providing an apology or explanation,
(ii) paying compensation, and
(iii) taking such other actions in the interests of the complainant as the individual determining the complaint may specify;
(j) about the enforcement of the scheme and decisions made under the scheme;
(k) for a person to be expelled from the scheme only—
(i) in circumstances specified in the regulations,
(ii) once steps to secure compliance that are specified in the regulations have been taken, and
(iii) once the decision to expel the person has been reviewed by an independent person in accordance with the regulations;
(l) for an expulsion to be revoked in circumstances specified in the regulations;
(m) prohibiting a person from joining the scheme when the person has been expelled from another redress scheme and the expulsion has not been revoked;
(n) for circumstances in which the administration of the scheme is to be transferred to a different administrator;
(o) about the closure of the scheme by an administrator of the scheme.
(4) Conditions set out in regulations under subsection (3)—
(a) may include conditions requiring an administrator or proposed administrator of a scheme to undertake to do things—
(i) on an ongoing basis following approval or designation;
(ii) after ceasing to be an administrator of the scheme;
(b) in the case of conditions set out in regulations by virtue of subsection (3)(d), may require a scheme to reject complaints by a current or former owner of a dwelling where that owner is of a description specified in the regulations;
(c) in the case of conditions set out in regulations by virtue of subsection (3)(n), may—
(i) require an approved scheme to provide for the administration of that scheme to be transferred to the lead enforcement authority or a person acting on behalf of the lead enforcement authority in circumstances specified in the regulations, and
(ii) where they so require, provide for a scheme whose administration is transferred to be treated as a designated scheme instead of an approved one.
(5) Subsections (3) and (4) do not limit the conditions that may be set out in regulations under subsection (2).
(6) The Secretary of State may by regulations make further provision about the approval or designation of redress schemes under section (Leasehold and estate management: redress schemes)(4)(b), including provision—
(a) about the number of redress schemes that may be approved or designated (which may be one or more);
(b) about the making of applications for approval;
(c) about the period for which an approval or designation is valid;
(d) about the withdrawal of approval or revocation of designation;
(e) authorising the approval or designation of a scheme which provides for fees payable by a compulsory member to be calculated by reference to the total of the costs incurred, or to be incurred, in the administration of the compulsory aspects of the scheme (including costs unconnected with the member in question).
(7) Regulations under this section may confer a discretion on the lead enforcement authority or require a scheme to do so.
(8) In this section—
‘compulsory aspects’, in relation to a scheme, means aspects of the scheme relating to complaints in relation to which there is a duty to be a member of a redress scheme;
‘compulsory member’, in relation to a scheme, means a member of the scheme who is subject to a duty to be a member of a redress scheme;
‘voluntary aspects’, in relation to a scheme, means aspects of the scheme that relate to—
(a) complaints under a voluntary jurisdiction,
(b) voluntary mediation services, or
(c) voluntary members.
(9) A statutory instrument containing regulations under this section (whether alone or with other provision) is subject to the affirmative procedure.”—(Lee Rowley.)
This new clause, to be inserted after NC17, would make provision for the approval and designation of redress schemes.
Brought up, read the First and Second time, and added to the Bill.
New Clause 19
Financial penalties
“(1) An enforcement authority may impose a financial penalty on a person if satisfied beyond reasonable doubt that the person has breached regulations under section (Leasehold and estate management: redress schemes)(1).
(2) The Secretary of State may by regulations make provision about the investigation by an enforcement authority of suspected breaches of regulations under section (Leasehold and estate management: redress schemes)(1) for the purpose of determining whether to impose a financial penalty.
(3) Regulations under subsection (2) may, among other things, make provision about—
(a) co-operation between enforcement authorities, and
(b) the sharing of information between enforcement authorities,
for the purposes of an investigation.
(4) The amount of a financial penalty imposed under this section is to be determined in accordance with section (Financial penalties: maximum amounts).
(5) More than one penalty may be imposed for the same conduct only if—
(a) the conduct continues after the end of 28 days beginning with the day after the day on which the final notice in respect of the previous penalty for the conduct was given to the person, unless the person appeals against that notice within that period, or
(b) if the person appeals against that notice within that period, the conduct continues after the end of 28 days beginning with the day after the day on which the appeal is finally determined, withdrawn or abandoned.
(6) Subsection (5) does not enable a penalty to be imposed after the final notice in respect of the previous penalty has been withdrawn or quashed on appeal.
(7) Schedule (Redress schemes: financial penalties) makes provision about—
(a) the procedure for imposing a financial penalty under this section,
(b) appeals against financial penalties,
(c) enforcement of financial penalties, and
(d) how enforcement authorities are to deal with the proceeds of financial penalties.
(8) For the purposes of this section and section (Financial penalties: maximum amounts)—
(a) a financial penalty is imposed on the date specified in the final notice as the date on which the notice is given;
(b) ‘final notice’ has the meaning given by paragraph 3 of Schedule (Redress schemes: financial penalties).
(9) A statutory instrument containing regulations under this section (whether alone or with other provision) is subject to the affirmative procedure.”—(Lee Rowley.)
This new clause, to be inserted after NC18, would provide for an enforcement authority to impose a financial penalty for breach of regulations under NC15.
Brought up, read the First and Second time, and added to the Bill.
New Clause 20
Financial penalties: maximum amounts
“(1) The amount of a financial penalty imposed on a person under section (Financial penalties) is to be determined by the enforcement authority imposing it, but—
(a) if Case A, B or C applies, the penalty must not be more than £30,000;
(b) otherwise, the penalty must not be more than £5,000.
(2) Case A applies if—
(a) a relevant penalty has been imposed on the person and the final notice imposing the penalty has not been withdrawn, and
(b) the conduct for which the penalty was imposed continues after the end of the period of 28 days beginning with—
(i) the day after the day on which the penalty was imposed on the person, or
(ii) if the person appeals against the final notice in respect of the penalty within that period, the day after the day on which the appeal is finally determined, withdrawn or abandoned.
(3) Case B applies if—
(a) a relevant penalty has been imposed on the person for a breach of regulations under section (Leasehold and estate management: redress schemes)(1) and the final notice imposing the penalty has not been withdrawn, and
(b) the person engages in conduct which constitutes a different breach of such regulations within the period of five years beginning with the day on which the penalty was imposed.
(4) Case C applies if—
(a) a relevant penalty has been imposed on the person for conduct in respect of which Case A, B or C applies and the final notice imposing the penalty has not been withdrawn, and
(b) the person breaches regulations under section (Leasehold and estate management: redress schemes)(1) within the period of five years beginning with the day on which the penalty was imposed.
(5) For the purposes of this section, ‘relevant penalty’ means a financial penalty imposed under section (Financial penalties) where—
(a) the period for bringing an appeal against the penalty under paragraph 5 of Schedule (Redress schemes: financial penalties) has expired without an appeal being brought,
(b) an appeal against the financial penalty under that paragraph has been withdrawn or abandoned, or
(c) the final notice imposing the penalty has been confirmed or varied on appeal.
(6) The Secretary of State may by regulations amend the amounts specified in subsection (1) to reflect changes in the value of money.
(7) A statutory instrument containing regulations under this section is subject to the negative procedure.’—(Lee Rowley.)
This new clause, to be inserted after NC19, would provide for the maximum penalties that may be imposed under NC19.
Brought up, read the First and Second time, and added to the Bill.
New Clause 21
Decision under a redress scheme may be made enforceable as if it were a court order
“(1) The Secretary of State may by regulations make provision for, or in connection with, authorising an administrator of a redress scheme to apply to a court or tribunal for an order that a determination made under the scheme and accepted by the complainant in question be enforced as if it were an order of a court.
(2) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)
This new clause, to be inserted after NC20, would enable the Secretary of State to make regulations making a decision under a redress scheme enforceable as if it were a court order.
Brought up, read the First and Second time, and added to the Bill.
New Clause 22
Lead enforcement authority: further provision
“(1) The lead enforcement authority must oversee the operation of a redress scheme under this Part.
(2) The lead enforcement authority must provide—
(a) other enforcement authorities, and
(b) the public in England,
with information and advice about the operation of redress schemes, in such form and manner as the lead enforcement authority considers appropriate.
(3) The lead enforcement authority may disclose information to another enforcement authority for the purposes of enabling that authority to determine whether there has been a breach of regulations under section (Leasehold and estate management: redress schemes)(1).
(4) The lead enforcement authority may issue guidance to other enforcement authorities about the exercise of their functions under this Part.
(5) Enforcement authorities other than the lead enforcement authority must have regard to any guidance issued under subsection (4).
(6) If the Secretary of State designates a person as the lead enforcement authority for the purposes of this Part—
(a) the Secretary of State may make arrangements in connection with the person’s role as the lead enforcement authority, which may include arrangements—
(i) for payments by the Secretary of State;
(ii) about bringing the arrangements to an end;
(b) the Secretary of State may give the lead enforcement authority directions as to the exercise of any of its functions, which—
(i) may relate to all or particular kinds of enforcement authorities, and
(ii) may make different provision for different purposes;
(c) the lead enforcement authority must keep under review and from time to time advise the Secretary of State about—
(i) the operation of redress schemes;
(ii) social and commercial developments relating to estate management (including by relevant landlords) in England, so far as it considers those developments relevant to redress schemes.
(7) The Secretary of State may by regulations make transitional or saving provision which applies when there is a change in the lead enforcement authority (which may relate to a specific change in the lead enforcement authority or to changes that might arise from time to time).
(8) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)
This new clause, to be inserted after NC21, would make further provision about lead enforcement authorities.
Brought up, read the First and Second time, and added to the Bill.
New Clause 23
Guidance for enforcement authorities and scheme administrators
“(1) The Secretary of State may from time to time issue or approve guidance for enforcement authorities in England and administrators of redress schemes about co-operation between such enforcement authorities and persons exercising functions under the schemes.
(2) An enforcement authority in England other than the Secretary of State must have regard to any guidance issued or approved under this section.
(3) The Secretary of State must exercise the powers in section (Approval and designation of redress schemes) for the purpose of ensuring that every administrator of a redress scheme has regard to any guidance issued or approved under this section.”— (Lee Rowley.)
This new clause, to be inserted after NC22, would enable the Secretary of State to issue guidance to enforcement authorities and scheme administrators.
Brought up, read the First and Second time, and added to the Bill.
New Clause 24
Interpretation of Part 4A
“In this Part—
‘complaints under a voluntary jurisdiction” has the meaning given in section (Redress schemes: voluntary jurisdiction)(2);
‘dwelling’ means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, outhouses and appurtenances belonging to it or usually enjoyed with it;
‘enforcement authority’ means—
(a) the lead enforcement authority,
(b) the Secretary of State,
(c) a local housing authority, or
(d) another person designated by the Secretary of State as an enforcement authority;
‘estate management’ has the meaning given in section (Leasehold and estate management: redress schemes)(8);
‘estate manager’ has the meaning given in section (Leasehold and estate management: redress schemes)(8);
‘the lead enforcement authority’ has the meaning given in section (Leasehold and estate management: redress schemes)(8);
‘local housing authority’ means—
(a) a district council,
(b) a London borough council,
(c) the Common Council of the City of London (in its capacity as a local authority), or
(d) the Council of the Isles of Scilly;
‘long lease’ has the meaning given in section 77(2) of the LRHUDA 1993;
‘owner’, in relation to a dwelling, means—
(a) the owner of freehold land which comprises the dwelling;
(b) a tenant under a long lease of the dwelling;
‘redress scheme’ has the meaning given in section (Leasehold and estate management: redress schemes)(4);
‘relevant capacity’ has the meaning given in section (Leasehold and estate management: redress schemes)(2);
‘relevant landlord’ has the meaning given in section (Leasehold and estate management: redress schemes)(8);
“relevant obligation’ has the meaning given in section (Leasehold and estate management: redress schemes)(8);
‘rentcharge” has the same meaning as in the RA 1977 (see section 1 of that Act);
‘voluntary mediation services’ has the meaning given in section (Redress schemes: voluntary jurisdiction)(2);
‘voluntary members’ has the meaning given in section (Redress schemes: voluntary jurisdiction)(2).”—(Lee Rowley.)
This new clause, to be inserted after NC22, would make interpretation provision for the purposes of the new Part to be inserted after Part 4.
Brought up, read the First and Second time, and added to the Bill.
New Clause 42
Leasehold sales information requests
“(1) In the LTA 1985, after section 30J (as inserted by section 35) insert—
‘Sales information requests
30K Sales information requests
(1) A tenant of a dwelling under a long lease may give a sales information request to the landlord.
(2) A “sales information request” is a document in a specified form, and given in a specified manner, setting out—
(a) that the tenant is contemplating selling a long lease of the dwelling,
(b) information that the tenant requests from the landlord for the purpose of the contemplated sale, and
(c) any other specified information.
(3) A tenant may request information in a sales information request only if the information is specified in regulations made by the appropriate authority.
(4)The appropriate authority may specify information for the purposes of subsection (3) only if the information could reasonably be expected to assist a prospective purchaser in deciding whether to purchase a long lease of a dwelling.
(5) The appropriate authority may by regulations provide that a sales information request may not be given until the end of a particular period, or until another condition is met.
(6) Regulations under this section—
(a) are to be made by statutory instrument;
(b) may make provision generally or only in relation to specific cases;
(c) may make different provision for different purposes;
(d) may include supplementary, incidental, transitional or saving provision.
(7) A statutory instrument containing regulations under this section is subject to the negative procedure.
30L Effect of sales information request
(1) A landlord who has been given a sales information request must provide the tenant with any of the information requested that is within the landlord’s possession.
(2) The landlord must request information from another person if—
(a) the information has been requested from the landlord in a sales information request,
(b) the landlord does not possess the information when the request is made, and
(c) the landlord believes that the other person possesses the information.
(3) That person must provide the landlord with any of the information requested that is within that person’s possession.
(4) A person (“A”) must request information from another person (“B”) if—
(a) the information has been requested from A in a request under subsection (2) or this subsection (an “onward request”),
(b) A does not possess the information when the request is made, and(c)A believes that B possesses the information.
(5) B must provide A with any of the information requested that is within B’s possession.
(6) A person who is required to provide information under this section must do so before the end of a specified period beginning with the day on which the request for the information is made.
(7) A person who—
(a) has been given a sales information request or an onward request, and
(b) as a result of not possessing the information requested, does not provide the information before the end of a specified period beginning with the day on which the request is made, must give the person making the request a negative response confirmation.
(8) A “negative response confirmation” is a document in a specified form, and given in a specified manner, setting out—
(a) that the person is unable to provide the information requested because it is not in the person’s possession;
(b) a description of what action the person has taken to determine whether the information is in the person’s possession;
(c) any onward requests the person has made and the persons to whom they were made;
(d) an explanation of why the person was unable to obtain the information, including details of any negative response confirmation received by the person;
(e) any other specified information.
(9) A person who is required to give a negative response confirmation must do so before the end of a specified period beginning with the day after the day on which the period referred to in subsection (7)(b) ends.
(10) The appropriate authority may by regulations—
(a) provide that an onward request may not be made until the end of a particular period, or until another condition is met;
(b) provide for how an onward request is to be made;
(c) make provision as to the period within which an onward request must be made;
(d) provide for circumstances in which a duty to comply with a sales information request or an onward request does not apply;
(e) make provision as to how information requested in a sales information request or an onward request is to be provided;
(f) make provision for circumstances in which a period specified for the purposes of subsection (6), (7) or (9) is to be extended.
(11) Regulations under this section—
(a) are to be made by statutory instrument;
(b) may make provision generally or only in relation to specific cases;
(c) may make different provision for different purposes;
(d) may include supplementary, incidental, transitional or saving provision.
(12) A statutory instrument containing regulations under this section is subject to the negative procedure.
30M Charges for provision of information
(1) Subject to any regulations under subsection (2), a person (“P”) may charge another person for—
(a) determining whether information requested in a sales information request or an onward request is in P’s possession;
(b) providing or obtaining information under section 30L.
(2) The appropriate authority may by regulations—
(a) limit the amount that may be charged under subsection (1);
(b) prohibit a charge under subsection (1) in specified circumstances or unless specified requirements are met.
(3) If a landlord charges a tenant under subsection (1), the charge—
(a) is an administration charge for the purposes of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 (see paragraph 1(1)(b) of that Schedule), and
(b) is not to be treated as a service charge for the purposes of this Act.
(4) For the purposes of the provisions of this Act relating to service charges, the costs of—
(a) determining whether information requested in a sales information request or an onward request is in a person’s possession, or
(b) providing or obtaining information under section 30L,are not to be regarded as relevant costs to be taken into account in determining the amount of any variable service charge payable by any tenant.
(5) Regulations under this section—
(a) are to be made by statutory instrument;
(b) may make provision generally or only in relation to specific cases;
(c) may make different provision for different purposes;
(d) may include supplementary, incidental, transitional or saving provision.
(6) A statutory instrument containing regulations under this section is subject to the negative procedure.
30N Enforcement of sections 30L and 30M
(1) A person who makes a sales information request or an onward request (“C”) may make an application to the appropriate tribunal on the ground that another person (“D”) failed to comply with a requirement under section 30L or 30M in relation to the request.
(2) The tribunal may make one or more of the following orders—
(a) an order that D comply with the requirement before the end of a period specified by the tribunal;
(b) an order that D pay damages to C for the failure;
(c) if D charged C in excess of a limit specified in regulations under section 30M(2)(a), an order that D repay the amount charged in excess of the limit to C;
(d) if D charged C in breach of regulations under section 30M(2)(b), an order that D repay the amount charged to C.
(3) Damages under subsection (2)(b) may not exceed £5,000.
(4) The appropriate authority may by regulations amend the amount in subsection (3) if the appropriate authority considers it expedient to do so to reflect changes in the value of money.
(5) Regulations under this section—
(a) are to be made by statutory instrument;
(b) may make provision generally or only in relation to specific cases;
(c) may make different provision for different purposes;
(d) may include supplementary, incidental, transitional or saving provision.
(6) A statutory instrument containing regulations under this section is subject to the negative procedure.
30P Interpretation of sections 30K to 30N
(1) In sections 30K to 30N—
“information” includes a document containing information, and a copy of such a document;
“landlord” includes—
(a) any person who has a right to enforce payment of a service charge;
(b) a RTM company within the meaning of Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (see section 73 of that Act);
“long lease” has the same meaning as in Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (see sections 76 and 77 of that Act);
“onward request” has the meaning given in section 30L(4)(a);
“sales information request” has the meaning given in section 30K(2);
“specified” means specified in, or determined in accordance with, regulations made by the appropriate authority.
(2)A reference in sections 30K to 30N to purchasing a long lease is a reference to becoming a tenant under the lease for consideration, whether by grant, assignment or otherwise, and references to selling a long lease are to be read accordingly.
(2) In section 172(1) of the CLRA 2002 (application to Crown of provisions of the LTA 1985), after paragraph (ac) (as inserted by section 35) insert—
“(ad) sections 30K to 30P of the 1985 Act (sales information requests),”.’”—(Lee Rowley.)
This new clause, to be inserted after NC9, would require a landlord to provide specified information to a tenant, in anticipation of the tenant selling their property, within a specified time and at a specified cost, and request that information from other parties.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss the following:
Government new clause 43—Estate management: sales information requests.
Government new clause 44—Effect of sales information request.
Government new clause 45—Charges for provision of information.
Government new clause 46—Enforcement of sections (Effect of sales information request) and (Charges for provision of information).
Lee Rowley
New clause 42 will introduce a requirement for a landlord to provide specific information requested by a leaseholder. That information is vital for a leaseholder to enable the sale of their property; it also provides the detail that a prospective purchaser needs to make an informed decision. Regulations will set out what information is to be provided, as well as a maximum timeframe and a maximum cost for providing that information. Regulations will further specify how a request must be made, how the requested information must be provided, in what circumstances a request can be refused and when the time period for its provision may be extended. The clause also sets out enforcement mechanisms, including the various orders that a tribunal may make such as requiring compliance, awarding damages and requiring the repayment of excessive fees.
Under the current system, there is no consistency for leaseholders, some of whom are left paying thousands of pounds and waiting months for this information. Some of them never receive the information at all. The clause will reduce the time that leaseholders have to wait to receive the information that they need, which should reduce delays in selling their properties. It will also make the selling process cheaper and less uncertain. I commend new clause 42 to the Committee.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
I rise to say simply that the Opposition welcome this group of Government new clauses.
Barry Gardiner (Brent North) (Lab)
I, too, welcome the new clauses, but I do so in the knowledge that they do not provide a perfect solution. My concern, and the question I put to the Minister, relates to situations such as the one that I outlined the other day. Where information is held by a series of Russian dolls, as it were, the ultimate one of which is located in the Cayman Islands—as is the case with Wembley Central Apartments in my constituency—what ultimate redress do the leaseholders have? Damages does not get to the nub of the problem.
Lee Rowley
As the hon. Member has outlined, we spoke about this issue on Thursday. I have a lot of sympathy for the point that he makes, and I think we agreed that we would explore it further; I was going to write to the hon. Gentleman and the Committee, if I recall correctly. He is right to raise and highlight that point. Where we can make further progress, we should try to do so. As I know he will appreciate, there is ultimately a challenge when entities move out of jurisdictions, but that should not mean that we should not have a look at whether we can make things better, if not perfect.
Question put and agreed to.
New clause 42 accordingly read a Second time, and added to the Bill.
New Clause 43
Estate management: sales information requests
“(1) An owner of a managed dwelling may give a sales information request to the estate manager.
(2) A ‘sales information request’ is a document in a specified form, and given in a specified manner, setting out—
(a) that the owner is contemplating selling the dwelling,
(b) information that the owner requests from the estate manager for the purpose of the contemplated sale, and
(c) any other specified information.
(3) An owner of a managed dwelling may request information in a sales information request only if the information is specified in regulations made by the appropriate authority.
(4) The appropriate authority may specify information for the purposes of subsection (3) only if the information—
(a) relates to estate management, estate managers, estate management charges or relevant obligations, and
(b) could reasonably be expected to assist a prospective purchaser in deciding whether to purchase a dwelling.
(5) The appropriate authority may by regulations provide that a sales information request may not be given until the end of a particular period, or until another condition is met.
(6) In this section and sections (Effect of sales information request) to (Enforcement of sections (Effect of sales information request) and (Charges for provision of information))—
(a) a reference to purchasing a dwelling is a reference to becoming an owner of the dwelling, and references to selling a dwelling are to be read accordingly;
(b) ‘sales information request’ has the meaning given in subsection (2);
(c) ‘specified’ means specified in, or determined in accordance with, regulations made by the appropriate authority.
(7) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)
This new clause, to be inserted after NC14, would provide for the owner of a managed dwelling to give a sales information request to the estate manager in anticipation of selling the dwelling.
Brought up, read the First and Second time, and added to the Bill.
New Clause 44
Effect of sales information request
“(1) An estate manager who has been given a sales information request by the owner of a managed dwelling must provide the owner with any of the information requested that is within the estate manager’s possession.
(2) The estate manager must request information from another person if—
(a) the information has been requested from the estate manager in a sales information request,
(b) the estate manager does not possess the information when the request is made, and
(c) the estate manager believes that the other person possesses the information.
(3) That person must provide the estate manager with any of the information requested that is within that person’s possession.
(4) A person (‘A’) must request information from another person (‘B’) if—
(a) the information has been requested from A in a request under subsection (2) or this subsection (an ‘onward request’),
(b) A does not possess the information when the request is made, and
(c) A believes that B possesses the information.
(5) B must provide A with any of the information requested that is within B’s possession.
(6) A person who is required to provide information under this section must do so before the end of a specified period beginning with the day on which the request for the information is made.
(7) A person who—
(a) has been given a sales information request or an onward request, and
(b) as a result of not possessing the information requested, does not provide the information before the end of a specified period beginning with the day on which the request is made,
must give the person making the request a negative response confirmation.
(8) A ‘negative response confirmation’ is a document in a specified form, and given in a specified manner, setting out—
(a) that the person is unable to provide the information requested because it is not in the person’s possession;
(b) a description of what action the person has taken to determine whether the information is in the person’s possession;
(c) any onward requests the person has made and the persons to whom they were made;
(d) an explanation of why the person was unable to obtain the information, including details of any negative response confirmation received by the person;
(e) any other specified information.
(9) A person who is required to give a negative response confirmation must do so before the end of a specified period beginning with the day after the day on which the period referred to in subsection (7)(b) ends.
(10) The appropriate authority may by regulations—
(a) provide that an onward request may not be made until the end of a particular period, or until another condition is met;
(b) provide for how an onward request is to be made;
(c) make provision as to the period within which an onward request must be made;
(d) provide for circumstances in which a duty to comply with a sales information request or an onward request does not apply;
(e) make provision as to how information requested in a sales information request or an onward request is to be provided;
(f) make provision for circumstances in which a period specified for the purposes of subsection (6), (7) or (9) is to be extended.
(11) In this section and sections (Charges for provision of information) and (Enforcement of sections (Effect of sales information request) and (Charges for provision of information)), ‘onward request’ has the meaning given in subsection (4)(a).
(12) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)
This new clause, to be inserted after NC43, would require an estate manager who has been given a sales information request to provide the information requested, and request that information from other parties.
Brought up, read the First and Second time, and added to the Bill.
New Clause 45
Charges for provision of information
“(1) Subject to any regulations under subsection (2), a person (‘P’) may charge another person for—
(a) determining whether information requested in a sales information request or an onward request is in P’s possession;
(b) providing or obtaining information under section (Effect of sales information request).
(2) The appropriate authority may by regulations—
(a) limit the amount that may be charged under subsection (1);
(b) prohibit a charge under subsection (1) in specified circumstances or unless specified requirements are met.
(3) If an estate manager charges the owner of a managed dwelling under subsection (1), the charge—
(a) is an administration charge for the purposes of this Part, and
(b) is not to be treated as an estate management charge for the purposes of this Part.
(4) For the purposes of this Part, the costs of—
(a) determining whether information requested in a sales information request or an onward request is in a person’s possession, or
(b) providing or obtaining information under section (Estate management: sales information requests),
are not to be regarded as relevant costs to be taken into account in determining the amount of any estate management charge.
(5) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)
This new clause, to be inserted after NC44, would regulate charges for the provision of information under NC44.
Brought up, read the First and Second time, and added to the Bill.
New Clause 46
Enforcement of sections (Effect of sales information request) and (Charges for provision of information)
“(1) A person who makes a sales information request or an onward request (‘C’) may make an application to the appropriate tribunal on the ground that another person (‘D’) failed to comply with a requirement under section (Effect of sales information request) or (Charges for provision of information) in relation to the request.
(2) The tribunal may make one or more of the following orders—
(a) an order that D comply with the requirement before the end of a period specified by the tribunal;
(b) an order that D pay damages to C for the failure;
(c) if D charged C in excess of a limit specified in regulations under section (Charges for provision of information)(2)(a), an order that D repay the amount charged in excess of the limit to C;
(d) if D charged C in breach of regulations under section (Charges for provision of information)(2)(b), an order that D repay the amount charged to C.
(3) Damages under subsection (2)(b) may not exceed £5,000.
(4) The appropriate authority may by regulations amend the amount in subsection (3) if the appropriate authority considers it expedient to do so to reflect changes in the value of money.
(5) A statutory instrument containing regulations under this section is subject to the negative procedure.”—(Lee Rowley.)
This new clause, to be inserted after NC45, would provide for the enforcement of obligations under NC44 and NC45.
Brought up, read the First and Second time, and added to the Bill.
New Clause 1
Abolition of forfeiture of a long lease
“(1) This section applies to any right of forfeiture or re-entry in relation to a dwelling held on a long lease which arises either—
(a) under the terms of that lease; or
(b) under or in consequence of section 146(1) of the Law of Property Act 1925.
(2) The rights referred to in subsection (1) are abolished.
(3) In this section—
“dwelling” means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, or outhouses and appurtenances belonging to it or usually enjoyed with it;
“lease” means a lease at law or in equity and includes a sub-lease, but does not include a mortgage term;
“long lease” has the meaning given by sections 76 and 77 of the Commonhold and Leasehold Reform Act 2002.” —(Matthew Pennycook.)
This new clause would abolish the right of forfeiture in relation to residential long leases in instances where the leaseholder is in breach of covenant.
Brought up, and read the First time.
Matthew Pennycook
I beg to move, That the clause be read a Second time.
It is a pleasure to continue our line-by-line proceedings with you in the Chair, Sir Edward. For the sake of probity, simply because I will make reference to the organisation’s work, I once again declare that my wife is the joint chief executive of the Law Commission.
The reason for tabling the new clause is simple: forfeiture is a wholly disproportionate and horrifically draconian mechanism for ensuring compliance with a lease agreement, and it needs to be abolished through the Bill. To remind the Committee, the law of forfeiture gives the landlord the right, following a breach of a clause in the lease or an unpaid debt of £350, or a lesser sum if it has been outstanding for more than three years, to terminate the lease, regain possession of the property and pocket the unmerited windfall gain that would accrue from its sale.
Not all forfeiture actions relate to trivial breaches—some are made in response to serious transgressions of a covenant in a lease, such as instances of persistent and egregious antisocial behaviour—but many are initiated for entirely trivial breaches, such as nominal ground rent or service charge arrears. The current laws of forfeiture render it entirely possible, for example, for a tenant to lose possession of a £500,000 flat or house for a debt of as little as £351, or even £15 if unpaid for more than three years, with the landlord keeping the entire difference between the value of the property and the debt owed.
Eddie Hughes (Walsall North) (Con)
The hon. Gentleman is making a compelling speech. It seems crazy that in the 21st century somebody can lose possession of their property for such a small amount of money. I sincerely hope that he continues his compelling speech in such a way that he has a very positive effect on the Minister.
Matthew Pennycook
I thank the hon. Gentleman for that helpful intervention. I hope that I do have that effect, and that he can use his good offices to persuade the Minister of the merits of adopting new clause 1.
Richard Fuller (North East Bedfordshire) (Con)
The shadow Minister is making a good point, but to play the cynic on this issue, there is a difference between things that could take place and things that are taking place. What is the evidence? We should probably get rid of this latent power in any case, but how often is the power being used in practice? Is this a real thing that is happening?
Matthew Pennycook
I thank the hon. Gentleman. If he allows me to develop my case, I will address that very point, which was well made.
Not only is the potential penalty for a breach incredibly draconian in the circumstances in which it is used, but even in instances in which a lease is not terminated, with the landlord gaining the financial benefit of any capital loans attached to it, the laws of forfeiture can lead to a significant financial loss for leaseholders. Take the following scenario. For whatever reason, a leaseholder accumulates a small arrears—perhaps a demand has not been received—and the freeholder or managing agent issues reminders, which add to the initial debt. That debt is then handed over to a debt collector, whose means of remuneration incentivise them to pursue it aggressively. The leaseholder might then attempt to pay, but they also have to find the money to cover large legal costs. If there is a mortgage, the bank is often drawn in to secure its interest, so a compulsory loan is added to the leaseholder’s account. In our view, it is the lack of any proportionate relationship between a breach of a lease and its consequences that makes forfeiture so unjust.
Since 1925, this House has regularly taken steps to make it more difficult for a freeholder to successfully forfeit a lease. For example, the Housing Act 1996 and the Commonhold and Leasehold Reform Act 2002 introduced prohibitions on the serving of a section 146 notice under the Law of Property Act 1925 in relation to service charges and breach of a covenant, respectively, in instances in which the amount payable has not been determined. Those were not the first attempts to constrain the laws of forfeiture. History shows that Parliament has returned to the matter every few decades in an attempt to mitigate forfeiture’s manifest injustices. Despite the laws of forfeiture being made stricter, a great many freeholders and managing agents still routinely use forfeiture powers as a first resort when seeking to recover alleged arrears of payments from leaseholders, and they rely—this is in some ways the more important point—on the mere threat of forfeiture, and the financial risks it presents, to deter leaseholders from disputing any unreasonable costs and defending claims.
Those who advocate retaining forfeiture often argue that it is a minor issue that does not affect many leaseholders. However, although termination of a lease under forfeiture may be relatively rare—I deliberately use the word “may”, because His Majesty’s Courts and Tribunals Service does not track the number of cases—evidence from across the country shows hundreds of cases and scores of outright forfeitures on average each year. As I said, the threat is as damaging as the use of the power, because it puts landlords in a nearly unassailable position of strength in disputes vis-à-vis leaseholders, which is why forfeiture is routinely threatened in money disputes.
Because the law of forfeiture remains so manifestly unjust, despite successive attempts to render it more palatable, there have been many calls over recent decades for more wholesale reform. For example, hon. Members may know that in 2006 the Law Commission proposed abolishing the current law of forfeiture and replacing it with a statutory scheme for the termination of tenancies. It even drafted legislation, the Termination of Tenancies Bill, to implement that proposal. Yet nothing has been done. Indeed, the relevant section of the Law Commission’s website states—this amused me—that, 18 years on,
“We are awaiting the Government’s response to our recommendations”—
eighteen years and counting.
There is, of course, a need to carefully balance the rights and responsibilities of landlords and leaseholders, and there must be effective means of ensuring compliance with a lease agreement, but those means must be appropriate and proportionate to the breach in question. We can debate precisely what alternative arrangements are needed to deal with breaches of the covenant or unpaid arrears, whether orders of some kind are necessary to sell a property when a debt is not paid, and what kind of measured method is appropriate to removing problem tenants from a building—we heard about that in our oral evidence sessions. The starting point, however, must be that we finally grasp the nettle and abolish forfeiture, and the windfall it provides, once and for all. It operates to the prejudice of leaseholders and it cannot be justified.
The Secretary of State made clear on Second Reading that he was open to this Committee looking at how we end the abuse of forfeiture. I believe there is a broad consensus across the House—indeed across this Committee —that we should consign it to history, even if there is a debate about precisely what replace it with. Following the point made by the hon. Member for Walsall North, I sincerely hope that the Minister will not disappoint us and the many thousands of leaseholders who support the abolition of forfeiture by resisting this new clause out of hand. I very much look forward to his response.
Rachel Maclean (Redditch) (Con)
It is a pleasure to serve under your chairmanship, Sir Edward. I wish to place on the record my support for the eventual removal of this most feudal and abusive practice—one of the worst examples in this whole system—and I look forward to hearing the Minister’s plans to eventually do that.
In response to my hon. Friend the Member for North East Bedfordshire, I just want to let him know that there is ample evidence that this abusive practice has had a deleterious impact on decent people who have bought their properties in good faith. Take, for example, the evidence from Free Leaseholders, which represents many people in this position. The organisation says,
“Forfeiture has no place in a modern housing market”
and that it gives
“the freeholder landlord complete whip hand over his ‘tenant’.”
It is a “draconian remedy” that really has very few comparators anywhere else. Unlike mortgage foreclosure, where there is a balancing payment at the end of it, someone loses all the equity in their own home. That means they could actually lose, for example, a flat worth half a million pounds because of non-payment of a £5,000 bill. The freeholder would seize that flat, take back the lease, and make a windfall irrespective of the size of the contested charge. It kicks in at just £350.
There are alternative ways of resolving these debts available in our system. For example, the freeholder could sue for an injunction. He does not need forfeiture and the windfall to enable him to carry out good management of the block. The Levelling Up, Housing and Communities Committee looked at this issue and also recommended its abolition, on the grounds that it puts the freeholders in an unassailable position of strength in disputes. Once again, it is about that power imbalance, which we have highlighted all the way through this Committee. We should absolutely take up the Law Commission’s proposals to remove forfeiture. It is true that it is relatively rare, with perhaps an estimated 80 to 90 cases every year, but it is the threat that hangs over people—people who are not legal experts, fighting a very uneven battle against these big boys with deep pockets and plenty of lawyers on speed dial.
As well as the evidence I have just referred to, I want to represent again the fantastic testimony from the National Leasehold Campaign, which I think has 29,000 members. It has described again and again the impact of this sword of Damocles hanging over its members who have bought these properties in good faith, doing their best to navigate this thicket of rules, with the debt completely stacked against them. I look forward to hearing about the pathway that I am sure the Minister will set out for us, where we can remove this element from our laws once and for all.
Lee Rowley
I am grateful to the hon. Member for Greenwich and Woolwich for this new clause and for the opportunity to debate it. The hon. Gentleman set me a challenge at the end of his speech. He said he hoped I would not resist the new clause out of hand—I will not resist it out of hand, but I may resist it. In all seriousness, this is an important part of the discussion and I do not disagree with what the hon. Member for Greenwich and Woolwich and my hon. Friend the Member for Redditch said—I absolutely accept it. I am happy to confirm that the Government are aware of the strength of feeling on this issue and sympathetic to some of the objectives of the amendment. It is absolutely the case that forfeiture is an extreme measure. That is why we committed on Second Reading to look at this.
On the question from my hon. Friend the Member for North East Bedfordshire, it is difficult to get numbers. As has been outlined by others, the principle is clearly a real problem. The disproportionate nature of the outcome completely outweighs the likely loss being pursued. The Leasehold Knowledge Partnership, or one of the other witnesses, suggested in oral evidence that there were 80 to 90 forfeitures a year, but the Government do not have specific data to validate that at this stage. We understand that most of the threats are defused during the process—particularly if a mortgage company is involved, it tends to, in extremis, step in and offer to put the amount of money on to the mortgage or equivalent. The evidence base is and will always be challenging, but we absolutely accept that the principle is disproportionate and unreasonable.
However, as with so many of these clauses and elements of law, there is the question of how to make something in the system better while still ensuring the ability to balance all the things underneath. That is probably one of the reasons why this place has returned to this issue so often over the decades—it is not just because the Government may not respond in time, as the hon. Member for Greenwich and Woolwich indicated. This new clause is definitely well intentioned. We are sympathetic, but we do not necessarily believe in the full abolition of forfeiture without some form of replacement for some elements of it that may still have validity—not the forfeiture itself, but a recognition that people cannot just not pay things without some form of process to address that. That is one of the reasons we cannot accept this amendment at the moment.
However, I do not condone the abuse of forfeiture. I want to be absolutely clear that we are listening very carefully to the arguments being made. We have already committed to look at this again, and we are currently looking at it. I hope we will be able to say more at future stages of the Bill. With those reassurances, I hope the hon. Member for Greenwich and Woolwich will consider withdrawing his clause.
Matthew Pennycook
That was a slightly frustrating response from the Minister. I had hoped for a little more. I am glad that he thinks the new clause is well intentioned and sympathises with some of its objectives. From the Opposition’s point of view, as with rent charges, another example of draconian and wholly disproportionate Victorian-era property law, we need to cut the knot and get rid of these provisions entirely. As I said, we can have a debate on what we replace them with. We are very clear that there must be a replacement. There must be an effective means of ensuring compliance with a lease agreement, but it must be appropriate and proportionate to the breach in question. We all agree that forfeiture is not proportionate or appropriate to the breach, so why retain it? What I did not get from the Minister, but had hoped for, was a clear indication that that is the Government’s intent, at whatever stage of the Bill.
I suspect this is one of those new clauses that the Minister has resisted—perhaps not out of hand, but resisted none the less—but that we may see back in a different form at a later stage with the Government’s seal of approval. However, I would like to make very clear our strength of feeling on the matter, and I will therefore press the clause to a vote.
Question put, That the clause be read a Second time.
Matthew Pennycook
I beg to move, That the clause be read a Second time.
As I made clear at the outset of our line-by-line consideration of the Bill, while we have no intention of trying to convince this Government to radically overhaul this limited piece of legislation to enact the Law Commission’s recommendations on enfranchisement, right to manage and commonhold in full, we do want to make the case for a limited number of new measures that would give future leaseholders greater control and strengthen the foundations on which bolder reform will be enacted. New clause 2 seeks to incorporate one of those measures into the Bill—namely, that all leases on new flats should include a requirement to establish and operate a residents’ management company responsible for all service charge matters, with each leaseholder given a share.
The new clause seeks to remedy two significant flaws in the current leasehold system. The first is that unless leaseholders in blocks of flats either take it upon themselves to acquire the right to manage, collectively enfranchise and then establish an RMC or buy a property on a development where an RMC has been set up, they find that despite being the people who pay all the costs associated with maintaining and managing their building, they have no control whatever over how their money is spent. The second is that the rights that this House has chosen to give leaseholders to empower them to exercise a degree of control over the management of their buildings—for example, the right to make an application to the first-tier tribunal, to appoint a manager under section 24 of the Landlord and Tenant Act 1987 or to acquire the right to manage under the Commonhold and Leasehold Reform Act 2002—can be exercised only following what is often an arduous and costly legal process.
New clause 2 would go some way to remedying both of those problems. It would mean that, where a new residential block of flats was constructed and its units sold, the development would have to be a tripartite lease between the freeholder, leaseholder and a new residents’ management company. Each leaseholder in the block would own a share of the RMC and it would be under their exclusive control, giving them full responsibility for services, repairs, maintenance, improvements, insurance and the cost of managing their building, and thereby enabling them to control how their money was spent. Their share of the company and ability to influence the management of their building would be theirs by right and at no additional cost.
The importance of this proposed measure lies not only in the greater control it would give to leaseholders over the maintenance and management of their buildings, but in it being one of several ways by which we can lay the groundwork for a future in which leasehold has been rendered obsolete and commonhold is the norm. New clause 2, even if it is in operation for only a few years prior to commonhold being made the default tenure for new blocks of flats, as is our intention, would facilitate the reinvigoration of that tenure by creating a cohort of leaseholders who, of necessity, have experience in running their building as they would under a commonhold arrangement, even if that experience extends only to appointing and overseeing a managing agent—hopefully one properly regulated as a result of the Government’s accepting our new clause 25.
In facilitating leaseholder control of the operation of a site and giving them responsibility for everything covered by a service charge, new clause 2 would also further undermine freehold by depriving unscrupulous landlords of the ability to extract income from leaseholders using opaque and potentially unlawful practices such as appointing managing agents that are just related companies and using captive insurance brokers.
Lastly, if enacted in conjunction with leaseholders being given a mandatory share of freehold, as provided for by new clause 29, mandatory RMCs in new blocks of flats would ensure that we have a standardised management model and an agreed set of rules for those new blocks of flats where the freehold is collectively owned, making the process of converting buildings to commonhold at scale far easier.
Let me be clear with the Committee: we do not pretend that this is a perfect solution. It would obviously not help those leaseholders who have already purchased their flats and who do not currently have an RMC. We will need other solutions, building on the measures already in the Bill, to address the challenges that they will continue to face. However, if the Committee believes —as I think it does—that commonhold is the ideal form of tenure, and that reinvigorating it is the solution for blocks of flats, we should take practical steps to pave the way for that to happen. New clause 2 is one of the ways we can do so, and I urge the Minister to consider it.
Lee Rowley
I thank the hon. Gentleman for his new clause which, as he has indicated, seeks to require the establishment of leaseholder-owned management companies for all new leasehold flats. I understand that his intention is to ensure that, by default, all leaseholders of new flats would be responsible for the management of their buildings. I support the well-intentioned desire to give more homeowners control over the management of their buildings. The Bill as a whole is intended to do that, and I hope everybody accepts that it is moving in the right direction.
As the hon. Gentleman knows, existing leaseholders can already use the right to manage to take over management responsibility for their building. It is an established no-fault right that allows leaseholders to take over management responsibility when a majority of them wish to do so. The Bill accepts and implements key elements of the Law Commission recommendations that broaden access to the right to manage and reduce leaseholders’ costs when they make a claim. The Bill gives leaseholders the right to take control over their building, but it does not compel those who do not wish to. There is an important point there: I understand the intentions behind the new clause, but there is a question about compulsion and there may be a question about operation if some leaseholders do not wish to step up. For that reason, the requirement would not easily apply in some scenarios and a blanket requirement to establish such companies is probably not appropriate.
Although I accept, understand and sympathise with the intention of the new clause, I am afraid that we will resist it because there are times when it would not be appropriate for it to apply, and we should not change the law on that basis.
Matthew Pennycook
I am disappointed by that response from the Minister, as he would expect. We very much agree that the Bill is moving in the right direction, but we do not think it goes far enough for two reasons, which I will reiterate to help the Committee to understand why we feel strongly about this issue. Yes, the right to manage is an established right. The Bill makes provisions to enhance and expand access to RTM, but the RTM application process comes after an arduous and costly legal process. We are saying that, as a matter of right, residents in new build blocks of flats would have an RMC put in place and a share of it, without that cost. That is one point.
There is a more fundamental difference of principle, which is that if we are serious about reinvigorating commonhold, we need a number of steps. We need the legal changes that are recommended by the Law Commission, and we need to do those as one process, not in a partial way. However, there are other non-legislative policy changes that we need to make if we are to pave the way for commonhold. This new clause is one of them, and we feel quite strongly that it should be included in the Bill.
The Minister argued that there may be limited cases in which a mandatory RMC is not appropriate. If the Government want to bring forward their own amendment to provide for general RMCs across the board with limited exceptions, they are more than welcome to do so. However, we feel strongly, on a point of principle, that we should take this step alongside providing a share of the freehold, which I will argue for when I speak to new clause 29. Given our strength of feeling on this issue, as with the previous new clause, I will press this one to a vote.
Question put, That the clause be read a second time.
Matthew Pennycook
I beg to move, That the clause be read a Second time.
I will be relatively brief in speaking to the new clause, because I trust that it is self-explanatory, and we believe that the case for it is robust and well understood. Part 4 of the Bill, which we have already considered, will give residential freeholders on private and mixed-tenure estates rights to challenge the reasonableness of estate management charges and to hold estate management companies to account that are equivalent to those of leaseholders, but it does not give those same residential freeholders the right to take over the management functions on their estate.
We appreciate the concern among some that the right to manage would be too complex and onerous in a freehold estate setting, but it is only a right; it is not a requirement that it be exercised. We believe that there is evidence of an appetite among residential freeholders not only to be able to change a poorly performing or exploitative estate manager, for which part 4 provides, but to have more direct control of the management of their estates. We also believe that it is right in principle that there is parity between residential leaseholders and freeholders when it comes to the right to manage. New clause 5 simply seeks to provide them with that right.
In their June 2019 response to the 2018 consultation on reforms to the leasehold system in England, the Government committed to considering the implications of introducing a right to manage for residential freeholders, as part of their wider commitment to ensuring that leaseholders and residential freeholders enjoy equivalent rights. The Secretary of State made it clear on Second Reading that this Committee should look at the issue, as well as the issue of the abuse of forfeiture. On that occasion, the hon. Member for Redditch went even further. She stated:
“I know that the Government intend to introduce a right to manage for freeholders”.—[Official Report, 11 December 2023; Vol. 742, c. 677.]
We hope that she is right and that that remains the Government’s intent, but there are no Government amendments that would incorporate the power to establish a right to manage regime for freeholders on privately managed estates. New clause 5 would do so, and I hope the Minister will accept it.
Lee Rowley
I am grateful to the hon. Gentleman for tabling the new clause.
Let me separate my remarks into two parts. First, am I relatively sympathetic to the hon. Gentleman’s point? The answer is yes: there is a strong case for the measure. It has not been brought forward to date, and we will have to see whether it is possible to do so in the future. I cannot guarantee that, but we are looking at it and listening carefully. I understand the hon. Gentleman’s point, and he made a strong case for it. We will not be able to do everything that we have said throughout this process, in the end, but I assure him that we are interested in this potential area.
However, we will resist the new clause, not because it is the convention to do so but because we genuinely think that it is not the right measure, even if we did agree with the principle. To go back to the Henry VIII powers discussion, this is probably an area in respect of which, if we were to do something—again, there are no guarantees—we would do it on the face of the Bill.
Richard Fuller
I am listening carefully to the Minister, as I did to the shadow Minister. The current Minister says he is sympathetic to the intentions, but I take his point that it is the wrong new clause, so I will oppose it if it is pressed to a vote. However, the shadow Minister said that the Minister’s predecessor, my hon. Friend the Member for Redditch, said on the Floor of the House that she was sympathetic to the measure. That is two up. Will the Minister outline what the impediments might be? Will he give some reassurance that by the time we get to Report the Government may have turned sympathy into action? By the way, I think it is empathy, not sympathy.
Lee Rowley
Indeed—so let me see how to get out of this one. Out of principle, from a Conservative perspective, we would want people to have choice about how they approach such things. It is also the case that there is an additional operator, which is the person who owns the capital or the asset. We need to consider that carefully. Having started conversations with officials in the Department, I think there is a challenge around complexity. There is always a challenge with complexity; that is not an argument in itself but a recognition of the reality. I recognise that there are people in this room with much more experience than me on this issue, and hope colleagues will take what I say in the spirit in which it is meant. There will be a point at the end of this process when the sheer number of additional things that have been requested mean that there will need to be prioritisation.
This is a good Bill, and we should not take away from that fact—I think everybody present acknowledges that—but as the Secretary of State said on Second Reading, where we can improve it, we will seek to do so. I confirm that we are looking at this issue in more detail and hope we will be able to say more in the Bill’s following stages, if that is possible—I emphasise the “if”, with no guarantees. I urge the hon. Member for Greenwich and Woolwich, if he is willing, to withdraw his new clause, solely on the basis that if something happens in the future, the provisions should be in primary legislation, not introduced under Henry VIII powers.
Matthew Pennycook
I think I quote the Minister accurately when I say that he said, “Let me see how to get out of this one.” He is developing a reputation not just for reasonableness but for undue honesty. This is one of those features of the parliamentary process that I think anyone watching our proceedings will struggle to understand: there is clearly agreement here, and there is clearly a high chance that the Government are going to introduce a right to manage on privately managed estates, yet the Minister cannot accept the new clause.
I take the point about the particular drafting of the new clause. It was done to put the onus on the Government, who have the resources to bring forward the necessary amendments, given that it is a complex area. I did not hear a clear commitment from the Minister to bring forward those provisions. If he had given one, I would have withdrawn the new clause, but he has not. All he has said is, “We’re looking and listening but won’t be able to do everything”—despite the fact that the Government are dumping hundreds of amendments into the Bill at the last minute and no doubt will dump hundreds more. If we want to put these important measures in the Bill, we can, and we think we should. We feel strongly about this issue and I am going to press the new clause to the vote.
The Chair
We look forward to a Labour Government always accepting Opposition amendments. [Laughter.]
Question put, That the clause be read a second time.
Matthew Pennycook
I beg to move, That the clause be read a Second time.
I hope that on this occasion the Minister will give me enough reason to withdraw the new clause. I always prefer to withdraw a new clause with a commitment that the Government will introduce what we seek to incorporate into the Bill. New clause 25 raises the important issue of the regulation of property agents, particularly managing agents.
For all that the various measures in the Bill seek to give leaseholders greater control over the buildings in which they live, and to give residential freeholders greater control over their estates, managing agents will remain responsible for day-to-day management in almost all circumstances. In the case of newly empowered leaseholders involved in either an RMC or an RTM company, there will be managing agents they have to take advice from and instruct. The ultimate success of many of the provisions in the Bill, and the extent to which leaseholders experience a tangible improvement in the quality of the services they receive, is dependent on the performance of those managing agents.
Lee Rowley
I will not detain the Committee particularly long on this provision. I regret that we will not be able to accept new clause 25, for two reasons. First, I accept that people come down in different places on the use of broad Henry VIII-type powers, but we are not sure that those would be proportionate here. This measure concerns a considerable framework that would require a significant level of scrutiny to make it work. We are not convinced that it would be agreeable or acceptable to the Delegated Powers and Regulatory Reform Committee, either.
Secondly, the new clause relates to an area that has been under debate for a number of years, as the hon. Member for Greenwich and Woolwich has outlined, and we think that it is without the scope of the Bill. It is a significant area on which further consideration is needed, and we do not think that there is space for that among all the other discussions. That will ultimately be a matter for the House to determine, but the Government do not think that this is the place to do it, given its significance and given the significance of the other things that we are trying to bring forward in the Bill.
Matthew Pennycook
I expected a little more from the Minister, because the Government have accepted in principle that property agents need to be regulated. We think it important that this matter be discussed in connection with this Bill, and that some form of regulation be introduced. As I say, the effective functioning of many of the provisions in this Bill will rely on the standard of managing agents being driven up, and on substandard agents being driven out of the market.
At the moment, all the Minister is saying is that the lack of an overarching regulatory framework in this area is fine. The Government have had four and a half years and are comfortable with taking many more years to come to consider this matter. From our point of view, that is not good enough. The Government have had the working group’s report for some time. They should have made better progress in implementing at least some of its recommendations, if not the vast majority of them. I will press new clause 25 to a vote.
Lee Rowley
I should put it on record—just in case, although it was many years ago—that I used to be an estate agent. I should probably make that clear.
The Chair
Well, that’s an admission.
Question put, That the clause be read a Second time.
Matthew Pennycook
I beg to move, That the clause be read a Second time.
I do not intend to press new clause 26 to a vote, because it is very much a probing amendment. My remarks on it will be brief because it is extremely simple and straightforward.
Leasehold enfranchisement and the right to manage are extremely complex areas of law. There are at least eight Acts relevant to the rights of residential leaseholders, namely the Leasehold Reform Act 1967, the Landlord and Tenant Acts 1985 and 1987, the Housing Act 1988, the Local Government and Housing Act 1989, the Leasehold Reform, Housing and Urban Development Act 1993, the Commonhold and Leasehold Reform Act 2002 and the Building Safety Act 2022. There are also two Acts relevant to residential freeholders on private and mixed-tenure estates, namely the Rentcharges Act 1977 and the Law of Property Act 1925, both of which we have debated extensively.
This limited Bill has made significant changes to almost all of those Acts. If and when it receives Royal Assent, it will add a further layer of complexity and interpretation to a legislative landscape that is perplexing even to those with legal training. The law as it relates to residential and freehold leaseholders is crying out for consolidation. The statute law must be made clearer, shorter and more accessible so that those who work with the law, are concerned with making it or need to access or use it can do so more easily.
This is not a consolidation Bill, but the Opposition believe that it would be useful to give the Secretary of State the power to amend a number of the Acts to which I referred, so as to facilitate their consolidation. I trust that the Minister will see the benefit of incorporating such a power into the Bill, and I hope that he will accept it.
Lee Rowley
I am grateful to the hon. Member for Greenwich and Woolwich for moving new clause 26. He is right that this is an extremely complicated area of law and that there is a significant amount of interaction and overlap between the relevant legislation, which has built up over many decades. He is also right that there is a legitimate question to be asked about whether consolidation or spring cleaning of the relevant Acts is reasonable and proportionate. I am grateful to him and his party for seeking to provide the Government with additional powers to do so. The challenge is in whether that would be proportionate and whether the broad powers are necessary, even given the points that he made.
While I understand the points that the hon. Gentleman highlighted, the Government are taking a self-denying ordinance. We believe that such broad powers should be used only when absolutely necessary and that the test is not met in the case, so we will resist the new clause if the hon. Gentleman chooses to press it, although I hope that, as he indicated, he will not do so.
Matthew Pennycook
I commend the Minister for continuing to deny himself additional powers to do very sensible things. Notwithstanding that self-denying ordinance, I hope that he will at least take on board the point and give some further consideration to how we might tidy up the statute law in this area. It has been complex for all members of the Committee to understand. As I said, it is complex even for those with legal training, let alone those who need to access or use the law, whether or not it is through one of the means of redress we have been debating.
I hope that the Government will give some further thought to what might be done on the issue, but I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 27
Qualifying leases for the purposes of the remediation of building defects
“Section 119 of the Building Safety Act 2022 is amended by the insertion after subsection (4) of the following —
‘(5) The Secretary of State may, by regulations, amend subsection (2) so as to bring additional descriptions of lease within the definition of “qualifying lease”.’” —(Matthew Pennycook.)
This new clause would give the Secretary of State the power to bring “non qualifying” leaseholders within the scope of the protections of the Building Safety Act 2022.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss new clause 28—Meaning of “relevant building” for the purposes of the remediation of building defects—
“Section 117 of the Building Safety Act 2022 is amended by the insertion after subsection (6) of the following—
‘(7) The Secretary of State may, by regulations, amend subsection (2) so as to bring additional descriptions of building within the definition of “relevant building”.’”
This new clause would give the Secretary of State the power to bring buildings which are under 11m in height or have fewer than four storeys within the scope of the protections of the Building Safety Act 2022.
Matthew Pennycook
New clauses 27 and 28 concern building safety. The building safety crisis exists within the context of leasehold property and has been rendered more acute by the iniquities on which the leasehold system rests, yet the solutions to the specific problems faced by leaseholders in unsafe buildings are different from the general failings of the leasehold tenure that the Bill has sought to address in a limited number of areas. However, while the provisions in parts 1, 2 and 3 of the Bill are not answers to the problems of dangerous cladding and non-cladding defects, the relationship between the building safety crisis and residential leasehold properties makes the Bill the ideal vehicle for implementing a number of those solutions.
As the Committee will know, the building safety crisis is far from over. It has been almost seven years since the horrific fire at Grenfell Tower that claimed the lives of 72 innocent men, women and children, yet the Minister will know that there remain many thousands of unsafe buildings across the country that still require remediation.
Barry Gardiner
The Minister may also know that last night in my constituency the London fire brigade had to attend with 125 firefighters and 25 fire engines—three with the tall turntables—to put out a fire at King Edward Court. More than 100 people were evacuated from the building—safely, I am pleased to add—but the cladding on that building was similar to that at Grenfell. Here we are, seven years on from Grenfell, and three and a half years since the survey of that building took place in which it was reported that the cladding was of that combustible type, and still the Building Safety Act 2022 has not been able to ensure that, between the manager and the developer, those residents remain safe.
Matthew Pennycook
I am very glad that the residents were evacuated safely, but my hon. Friend highlights a problem that will apply to many other buildings across the country. The pace of remediation is far too slow. We often talk about remediation works as if they were just a practical issue—“When will it start and when will I be updated?”—but for so many residents there remains a very real risk to their health, their safety and in many cases their life. That is why we need to grip the crisis and ensure that it is addressed. No one disputes the fact that some progress has been made over recent years in addressing the building safety crisis, or the fact that the Minister has personally devoted considerable time and attention to the issue, but it really is a damning indictment of the Government’s record that nearly seven years on, the crisis remains unresolved for the vast majority of blameless leaseholders whose lives remain blighted by it.
Lee Rowley
I am grateful to the hon. Members for Greenwich and Woolwich and for Brent North for the new clause and the contributions to the debate. I put on record how sorry I was to hear about Petworth Court, on which I was briefed overnight. It must have been a real challenge, and very scary for the residents of the property. I hope that we can move that on as quickly as we can. I am grateful for the efforts of London Fire Brigade and others, which ensured that no one came to any harm. It is a salutary reminder of the importance of the work that has been outlined by the hon. Members, which we all support.
The hon. Member for Greenwich and Woolwich asked me a number of detailed questions. We have had many exchanges on these issues in the past, so he will appreciate that this is a sensitive and detailed area, and one that we need to get right. The Building Safety Act 2022 made huge steps forward, and there have been many steps forward in the practical reality of building remediation. I want to ensure that we deal with those questions in turn and in the depth that they deserve. We will have different views on some of those questions. Take, for example, the perpetuity issue. Without going into detail, my answer is that all the buildings have pathways to remediation, so long as they choose one or, in extremis, an actor in the system forces them to take one, and that once the remediation has happened the perpetuity point should become moot and fall away. However, it is better that I write to the hon. Gentleman and the Committee on all those points in due course.
Putting those important matters aside, we come to the question of whether the Secretary of State should have specific powers to amend the definition of “qualifying”. This gets to the point of where the Secretary of State’s powers should lie, which is obviously a contested matter. It is one on which the Government have a clear view, which we have articulated, notwithstanding the challenges that that brings to some people who are impacted by it. That is better dealt with in primary legislation, rather than through the Secretary of State making changes or having the ability to make regular changes. On that basis, we will resist the new clause.
Let me turn to new clause 28 on buildings under 11 metres, in the name of the hon. Members for Greenwich and Woolwich and for Weaver Vale. I have taken a particular interest in buildings that are under 11 metres, and I and the hon. Gentlemen have had interactions on the issue in the past. There are specific issues about a small set of buildings that are under 11 metres. The previous Minister, my right hon. Friend the Member for Pudsey (Stuart Andrew), and I have made repeated commitments from the Dispatch Box, from as far back as 2022, to look into each and every one of those buildings, and we have done so. A number of them have been raised with us, and we are working through them and getting to the end of the processes.
I encourage any hon. Members with examples—and I see occasional repetitions in parliamentary questions—to raise them with the Department, as I know members of the Committee have, and we will see what we can do to move those cases on or get clarity that no works are required. With almost all under-11 metre buildings, when we get to the end of the discussion there are no works required under the PAS 9980 assessment. That is positive. There is a clear reality that buildings under 11 metres are less likely to be impacted by this issue, and we will resist the new clause on that basis.
As a result of the fire, as I said to the hon. Member for Brent North, it is important that we make progress. Significant progress has been made, and I am grateful to the hon. Member for Greenwich and Woolwich for his recognition of that. Every month, we see more buildings complete and more buildings starting the process. Where freeholders are willing to make their buildings safe, we have mechanisms and processes in place, both centrally and locally, to make sure that is happening; and I continue to see lots of progress. It will take time, but we are cognisant of the importance of moving fast, and we have certainly sped up over recent months.
Matthew Pennycook
I thank the Minister for his response. I will pass over his criticisms of the technical flaws of the new clauses. Their intent is very clear; we can debate whether primary or secondary legislation is the best means of achieving it. I think there is a point of disagreement on qualifying and non-qualifying leaseholders. On a point of principle, we think that the distinction is arbitrary and we should get rid of it. From the evidence I have seen across the country, we should also undoubtedly get rid of it on a practical basis. I do not have responsibility for building safety directly any more—my hon. Friend the Member for Weaver Vale does—but I continue to hear of cases where buildings with a significant proportion of non-qualifying leaseholders see remediation works stalled or held up entirely.
I have always conceded that buildings under 11 metres are small in number and that there is not a systemic issue, but because of the drafting of the Building Safety Act, there remains a problem about liability. In those cases where the Government certify that the buildings are unsafe and require remediation—as the Minister knows, I have a case in my constituency—the stage that we have got to, after many years, is that the Government ask the original developer to put them right. We do not know what lies behind that request or whether there is any enforcement of it, so we are at the same point that we were at many years ago.
We come back to the question, “What is the need for the distinction?” I would argue that if under-11 metre buildings are that small in number, that is all the more reason for opening them up to access for Government grants should they require that—where the developer will not remediate them voluntarily. But that is beside the point.
I thank the Minister for his willingness to provide me detailed answers to all five of the non-specific questions—that is very welcome—but on the point of principle raised by new clauses 27 and 28, there is a clear difference of opinion. I think it is worth us putting on record, again, our strong feelings about that, so I will push both new clauses to a vote.
Question put, That the clause be read a Second time.
Matthew Pennycook
I beg to move, That the clause be read a Second time.
When making the case for new clause 2, which sought to ensure that all leases on new flats should include a requirement to establish and operate an RMC with each leaseholder given a share, I stressed that it was one of several ways by which we could lay the groundwork for a future where commonhold is the norm. New clause 29 seeks to press the Government to bring forward legislative options to enact another—namely, mandating that leaseholders in all new blocks of flats should automatically be granted a share of the freehold.
I want to be clear about what such a proposition entails. It is not an alternative to leasehold. If such a measure were brought into force, any leaseholder resident in a new block of flats would own both a lease and a share of the freehold. It would, in effect, ensure that all new blocks of flats were collectively enfranchised by default, without the need for leaseholders in them to go through the process of acquiring their freehold. The advantages of having a default share in the freehold is that it would give the leaseholder a direct say in what happens in their building, as is the case with those that have been collectively enfranchised. It would also provide for additional valuable rights, such as the right to a long lease extension on the basis of a peppercorn rent—or, in other words, the rights that will be accorded to existing leaseholders under clauses 7 and 8 but without the cost of paying a premium to the freeholder that is still required to exercise that modified right.
As we know, having flat owners with a share of freehold can cause tensions—for example, in agreeing how to proceed on crucial decisions such as whether to cover the costs of major works through service charges. That is why it is essential that proper management arrangements are in place as a matter of course, to reduce the likelihood of damaging disputes between neighbours, and why we proposed mandatory RMCs on new blocks of flats as a corollary to the new clause. Much like new clause 2, new clause 29 would also help give leaseholders greater control over their buildings and pave the way for commonhold as the default tenure.
Labour is unequivocal about the fact that commonhold is a preferable tenure to leasehold, in that it gives the benefits of freehold ownership to owners of flats without the burdensome shortcomings of leasehold ownership. As we have heard, the Law Commission made 121 recommendations on commonhold, designed to provide a legal scheme that would enable commonhold to work more flexibly and in all contexts. We share the concern expressed by Professor Nick Hopkins in our evidence sessions:
“With commonhold having failed once, there is a risk of partial implementation”—[Official Report, Leasehold and Freehold Reform Public Bill Committee, 16 January 2024, c. 39, Q84.]
of those recommendations and “a second false start” that could be “fatal” to the tenure. That is why we have not sought to persuade the Government to incorporate any subset of Law Commission commonhold recommendations into the Bill. We need to reform the legal regime for commonhold in one go, and Labour is committed to doing so if the British people give us the opportunity to serve after the next general election. Given your indication earlier, you are confident of that outcome too, Sir Edward.
We have also expressed a clear preference for commonhold to be the default tenure. That would be a policy decision distinct from the implementation of the Law Commission’s recommendations and would necessarily have to follow the legal scheme those recommendations would introduce. However, there will inevitably be a transitional period after the reformed legal regime for commonhold has been introduced, during which Government would need to consult thoroughly on the practicalities of making commonhold the default tenure for flats. The introduction of a mandatory share of freehold in all new blocks of flats, as proposed by the new clause, alongside the requirement to establish and operate an RMC with each leaseholder given a share, would be a sensible staging post on the path towards a commonhold future by making conversion to commonhold at a later date a far simpler process. We urge the Government to accept the new clause.
Lee Rowley
I am grateful to the hon. Gentleman for his new clause. As he has outlined, in share-of-freehold arrangements leaseholders will own the freehold in larger blocks; they are usually the shareholders of a resident management company from which directors are elected to manage the property. As such, there is no third-party landlord, but instead the leaseholders are themselves joint landlords. We appreciate that there are benefits to share-of-freehold arrangements, and obviously there is the opportunity for people, should they wish, to look at that when making decisions about the properties they live in.
Without seeking to detain the Committee, the reality is that although the new clause is well intentioned and understandable, it would be a significant building out of the Bill; it would be a significant additional framework. Again, it goes back to the point about the size of the Bill and exactly what it is able to do. I realise that we return to that often, and some colleagues in this room will wish us to go as far as we possibly can. That is understandable, but given the scale of the new clause—I realise that the hon. Gentleman probably will push it to a vote as a result of my comments—a pretty large and complicated legal framework would need to be put in place. I am afraid that at the current time it is challenging to have the space to do that, as much as I share the hon. Gentleman’s overall objective of trying to give people greater choice, and as a consequence we will resist the new clause.
Matthew Pennycook
I welcome the Minister’s response to the extent that he recognised the benefits of share of freehold. I am not surprised that he resists the new clause; there is no doubt that it would be a significant build-out of the Bill, as he put it. We hope that we will see other significant build-outs of the Bill and finally see a ban on new leasehold houses, as the Government have committed to, at some point. Maybe we will even get a couple of hours to debate that—who knows?
We think that this is an important provision that should be incorporated in the Bill for the reasons I have give, but mainly because—perhaps this is a point of disagreement between us and the Government—we think that we must be serious about paving the way for commonhold with the Bill and cannot leave everything to a future Government to enact. As I said, we should take some practical and specific steps to lay the groundwork for that future, which I think we all want to see. As we felt with mandatory RMCs, we feel that these two specific measures would enable us to go some way on that journey. For that reason, I will push the new clause to a vote—it will probably be the final one.
Rachel Maclean
I want to make a brief remark in sympathy with the shadow Minister’s policy objectives. I will not be supporting his new clause, but I have had extensive discussions with the Minister, who knows that I feel strongly that we should have a pathway to commonhold in the future.
Commonhold is a system that works well. Commonhold, or a version of it, works extremely well in almost every other major developed country in the world. We are quite unique in the UK—for some bizarre reason—in having this leasehold system, which is to the great regret of me and the leaseholders who live in such houses and flats. Unfortunately, something like 1.5 million people live in leasehold houses and something like 5 million people overall live in leasehold dwellings. It does not need to be that way.
In 2002, the former Labour Government did try to legislate in this regard, but a number of those measures were not enacted—we are going back into ancient history. Nobody really seems to know why it did not happen, but we now need to seize the opportunity. This Bill has been a long time in gestation; it has benefited from the contributions of many Ministers to get it to this point. I know that the Minister is listening to me, and I think it is important that we do not miss the opportunity, even at this late stage, to introduce some of the commonhold framework measures that the Department has been looking at in great detail. I hope that the Minister has listened, and he and his officials will take that point away.
Barry Gardiner
The hon. Lady is absolutely right to go back to the 2002 Act. In fact, I think in a speech on its Second Reading, I said that we would have to return to that Act in six or seven years’ time to amend the deficiencies in it. I am sad to say that here we are, 22 years later, still not having amended those deficiencies, and the Minister’s response, I am afraid, has indicated that we will not amend them again under this Bill. This is urgent, and leaseholders have been waiting for far too long for the remedy that my hon. Friend the Member for Greenwich and Woolwich has proposed. That is why I feel that it is vital that I support his new clause.
Question put, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss the following:
New clause 31—Review of the percentage of qualifying tenants required to participate in a claim to acquire the Right to Manage—
“The Secretary of State must before the end of the period of two years beginning with the day on which this Act is passed—
(a) review the effect of the participation limit contained in section 79(5) of the Commonhold and Leasehold Reform Act 2002, with particular consideration given to whether it represents an unjustified barrier to leaseholders exercising their rights under Chapter 1 of Part 2 of that Act, and
(b) report to Parliament, in whatever manner the Secretary of State thinks fit, with proposals for reform.”
This new clause would require the Secretary of State to consider, within two years of the Act coming into force, whether the current requirement that 50% of leaseholders must support an application for the Right to Manage should be lowered.
New clause 33—Proportion of qualifying tenants required for a notice of claim to acquire right to manage—
“Section 79 of the CLRA 2002 is amended, in subsection (5), by leaving out ‘one-half’ and inserting ‘one-third’.”
This new clause would reduce the proportion of qualifying tenants who must be members of a proposed right to manage company for an RTM claim to be made.
Matthew Pennycook
These are the last new clauses that I will speak to on behalf of the Opposition. In our fifth sitting, we considered eligibility for leasehold enfranchisement and extension, including the welcome changes that the Bill makes to the non-residential limit on collective enfranchisement claims. However, increasing access to collective enfranchisement by rendering more leaseholders eligible does not necessarily mean that take-up will significantly increase. That is because there are other barriers to exercising the statutory right to freehold acquisition. Some relate to the complexity of the process, but perhaps the most notable is the requirement under section 13 of the 1993 Act that at least half of qualifying tenants in a building must participate in the claim.
While there is no escaping the need to organise collectively to initiate a claim, in some buildings, particularly large blocks of flats, securing the participation of the minimum numbers of tenants required to take part in the service of the initial notice can be next to impossible, given the number of units that are occupied by tenants renting privately from the leaseholder. We therefore believe that there is a strong case for considering whether the minimum participation rate for collective enfranchisement should be reduced.
Precisely what the revised minimum participation rate might be is a matter for debate. We have not sought to be prescriptive in order to allow the Government the freedom to consider what threshold best strikes the right balance between encouraging enfranchisement and ensuring that there is sufficient participation to sustain the proper ongoing management of the building.
New clause 30 would simply require the Secretary of State to consider, within two years of the Act coming into force, whether the current 50% participation threshold should be lowered. New clause 31 would have the same effect in relation to the right to manage, where, in many ways, the argument for lowering the participation threshold is even stronger, owing to the fact that there is really no need for half of all qualifying tenants to remain involved in an RTM company once it has been established.
Again, determining the revised minimum participation rate is a matter for debate, and we have left that question for another day. If I am right in remembering, my hon. Friend the Member for Brent North is proposing, by way of his new clause 33, that that threshold should be a third of qualifying tenants, which strikes us as a reasonable proportion. However, what new clause 31 seeks to secure is the Government’s agreement in principle that the 50% threshold for an RTM acquisition should be reconsidered. These, quite consciously, are probing amendments, but I very much look forward to the Government’s thoughts on the principle of whether that 50% threshold is right, and whether there should be scope in the future to look at it again.
Barry Gardiner
I am grateful to my hon. Friend for the way in which he has introduced his new clause 30. We heard from witnesses the difficulty faced by leaseholders on larger developments in attaining that 50% participation threshold for the right to manage. It can be a more permissive regime than collective enfranchisement, wherein someone else’s property interests are being compulsorily purchased. Right to manage is just regulating the management of the building and ensuring democratic resident control of the managing agent and service charges.
We heard from Philip Rainey KC in the oral evidence, who said, almost 10 years ago, that the right to manage should be a no-fault right and it should not be caveated with the need to solicit half of the entire building. He suggested the 50% threshold should be reduced to 35%. We have heard leaseholders say that this is not enough, because the threshold is even harder to meet nowadays with high levels of buy to let and overseas leaseholder populations, as suggested by Harry Scoffin of Free Leaseholders, when he gave oral evidence to the Committee. This proposal could help leaseholders to bring their service charges under resident control and scrutiny.
That is the position for flat owners almost everywhere else in the world, including north of the border in Scotland. I believe that the Government should support the amendment from my hon. Friend the Member for Greenwich and Woolwich. If I were to hear any indication that the Government might be so inclined or that they would introduce a measure that would achieve the same effect, I would happily withdraw new clause 33.
Lee Rowley
After a number of days of often great agreement across the Committee, it is my job, unfortunately, to point out where we cannot agree, so I apologise for doing that again. The hon. Member for Greenwich and Woolwich has indicated that he is probing the Government with new clauses 30 and 31—at least, I hope he is. We understand the point that he is making, but we are seeking to apply the Law Commission’s recommendation that the participation level should remain at 50%. On that basis, we are not proposing to change that at this time. I do not think it is necessary to create the report, because we have taken a view within this legislation that—
Matthew Pennycook
This may not be the case in the Minister’s constituency, but I have very large blocks of flats in my constituency that, as my hon. Friend the Member for Brent North has just made clear, consist of hundreds of buy-to-let flats and flats owned by overseas investors. Are the Government really content to say that in those cases—in large urban centres, these blocks are springing up all over the place—the barrier to collective enfranchisement and RTM acquisition is higher? Effectively, many of these leaseholders will be locked out of the rights in this Bill purely by the design and ownership arrangements in their building. Surely the Minister must recognise that there is a subset of buildings that will not enjoy the rights that the Bill provides for, and that the Government should look again at what can be done in those circumstances.
Lee Rowley
There is no doubt that there are challenges. There are always challenges with individual buildings, but there is a specific challenge here, which the hon. Gentleman has outlined. My hon. Friend the Member for Cities of London and Westminster (Nickie Aiken), who is not serving on this Committee, has outlined that to me, and I have had the privilege of talking to a number of her constituents who are impacted by the understandable challenges that the hon. Gentleman raised.
The question is not about the Government being unwilling to look at this in the future or unwilling to discuss this further in relation to the Bill. I know this is a probing amendment, but the narrow sense of the question is: should we be legislating to create reports? I am always reluctant to legislate in that way. I understand why the Opposition would do it and why the other place do it, all too often, in my view, but I am not sure I am keen on this happening, so the Government are keen to resist it on that basis. But on the broad point about whether we would return to this if it was not working, either in this discussion or more broadly, the answer is: of course—that would be a reasonable thing for the Government to do in the future.
I appreciate the points made by the hon. Member for Brent North about new clause 33, and I know that the measure is potentially in operation elsewhere. I hope that he will agree that, when a minority can make decisions, a whole heap of additional considerations and questions are opened up. At this stage, we remain of the view that the proportion should be 50%, and for those reasons we will oppose the new clause, should it be pressed to a vote.
Matthew Pennycook
I will end on an optimistic note, because I got enough from the Minister to suggest that he is conscious of the issue and is open to looking at it again, either in the context of the Bill or at a later date. Setting aside the precise drafting of the new clauses, which have allowed us to debate the issues, the Minister recognised that we may need to look at the substantive point again. We may well come back to this at a later stage of the Bill.
Barry Gardiner
Thank you, Sir Edward. It has long been recognised that my hon. Friend the Member for Greenwich and Woolwich is a much more reasonable gentleman than I am. I would be inclined to press the new clause to a vote, but I do not want to try the patience of the Committee. My hon. Friend and I will discuss these matters further and, if the Government do not act, we will see what we might do on Report. I will therefore not press the new clause.
Matthew Pennycook
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 32
Premises to which leasehold right to manage applies
“Section 72 of the CLRA 2002 is amended in subsection (1)(a), by the addition at the end of the words ‘or of any other building or part of a building which is reasonably capable of being managed independently.’”—(Barry Gardiner.)
This new clause which is an amendment to the Commonhold and Leasehold Reform Act 2002 adopts the Law Commission’s Recommendation 5 in its Right to Manage report which would allow leaseholders in mixed-use buildings with shared services or underground car park to exercise the Right to Manage.
Brought up, and read the First time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
I am very happy to move the new clause, which would amend the Commonhold and Leasehold Reform Act 2002 to adopt recommendation 5 of the Law Commission’s right to manage report. That would allow leaseholders in mixed-use buildings with shared services or an underground car park to exercise the right to manage.
We had some debate on this issue last week. I recall, from the time of the 2002 Act, that flatted developments—especially mixed-use blocks—had not taken off yet in England in the same way as they have over the past 22 years. Given the proliferation of mixed-use buildings, the paradigms of the 2002 Act are therefore now outdated and unfair. Developers have sought to use the Act to secure the exclusion of leaseholders on the basis of shared services. If the Government do not move on the issue of shared services, many of the leaseholders in mixed-used buildings who would otherwise have benefited from the uplift in the non-residential limit from 25% to 50%—which, as I said last week, I welcome—will still not qualify for the right to manage or for enfranchisement.
We heard from the founders of the National Leasehold Campaign and from Free Leaseholders on this point. It was clear from the evidence that the presence of a plant room or underground car park alone can disqualify leaseholders from appointing their own managing agent and controlling the service charges, which they already have to pay but do not have any influence over.
The Law Commission did a great deal of work on the right to manage. It stated:
“We recommend that premises should be eligible for the RTM if they are a building or part which is reasonably capable of being managed independently. This means that if leaseholders cannot demonstrate that their premises are either a self-contained building or self-contained part of a building, the RTM will still be available if the premises are nevertheless a building or part which is reasonably capable of being managed independently. This might be straightforwardly demonstrated where parts of a building are already subject to separate management arrangements.”
That is the Law Commission’s case, and it looked into this with great care. It said:
“We think this will lead to fewer Tribunal cases and where there are still disputes the focus will instead switch to whether the premises can properly be managed autonomously, rather than their physical attributes.”
So I plead the backing of the Law Commission; I plead the common sense of some of the foremost jurors of our age. I am sure that the Minister will take on board their wisdom, if not mine.
Lee Rowley
I am grateful to the hon. Member for Brent North for moving the new clause. The Government support the aim of the amendment to improve leaseholders’ rights. As he indicates, we are taking forward key recommendations of the Law Commission to do that. The Bill takes forward the most significant measures to increase access to the right to manage and makes it simpler and cheaper for leaseholders to make a claim.
To implement the wider recommendations, the Government need to proceed carefully and undertake further work to ensure that the regime will operate satisfactorily. The Government will keep the remaining recommendations from the Law Commission’s right to manage report under consideration following the implementation of the Bill’s provisions. I thank the hon. Member for bringing forward the amendment, but I hope that because the most significant measures have already been introduced, he may be convinced enough not to push the new clause to a vote.
Barry Gardiner
With that very reasonable response, I am happy to beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 34
Commencement of section 156 of the CLRA 2002
“(1) Section 181 of the CLRA 2002 is amended as follows.
(2) In subsection (1), after ‘104’ insert ‘, section 156’.
(3) After subsection (1) insert—
‘(1A) Section 156 comes into force at the end of the period of two months beginning with the day on which the Leasehold and Freehold Reform Act 2024 is passed.’”—(Barry Gardiner.)
This new clause would bring into force a requirement of the Leasehold and Freehold Reform Act 2024 that service charge contributions be held in designated accounts.
Brought up, and read the First time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
New clause 34 would bring into force the requirement that service charge contributions be held in designated accounts. The new clause seems like a quick win for the Government: it would boost the security of leaseholder funds and would implement a policy that was in the Commonhold and Leasehold Reform Act 2002 which, unusually—22 years later—has still not been brought into force.
We have heard from witnesses such as Martin Boyd at the Leasehold Knowledge Partnership and Andrew Bulmer at the Property Institute, who have signalled support for such a policy. I understand that the British Property Federation has been actively lobbying for section 156 of the CLRA 2002 to be enacted since at least October 2012, so I hope that the Minister will see the new clause as eminently reasonable and will be prepared to comply.
Lee Rowley
Landlords and managing agents hold significant sums of leaseholder money, and it is right that they should be held to account for ensuring that such money must be managed effectively, as the hon. Member for Brent North indicates. Those who hold service charge moneys must hold them in trust, and the moneys must be deposited at a bank, building society or financial institution that is regulated by the Financial Conduct Authority. This ensures that those moneys can be used only for their intended purpose and that they are treated separately from the landlord’s other assets. This approach seeks to provide protection.
As the hon. Gentleman indicated, the effect of his new clause would be to commence section 156 of the CLRA 2002. The Government are not convinced that it is necessary. Procedurally, primary legislation is not required. I know that the hon. Gentleman will say, “Well, you’ve had the primary legislation for a significant time, so I’m giving you help to get it through,” but it can be done through secondary legislation, and I am afraid that we would seek to move it back into that domain. There is a perfectly reasonable discussion to be had about whether this provision is enacted, but I do not think that we need this primary challenge in order to continue that debate.
Barry Gardiner
Once bitten, twice shy. We were promised this measure in 2002. I am not convinced that I should accept the same blandishments once again, so I am afraid that I really do want to push this one to a vote.
Question put, That the clause be read a Second time.
The Chair
It was close, Barry.
New Clause 35
Duty to notify purchasers of liability for estate management charges
“(1) The Secretary of State must by regulations make provision to ensure that any purchaser of a property which is subject to estate management charges—
(a) is notified about their liability for estate management charges at the point at which an offer is accepted by the seller on the property; and
(b) is provided with the most recent set of accounts of the property management company.
(2) Regulations under this section—
(a) must be laid within 24 months of the date of Royal Assent to this Act,
(b) shall be made by statutory instrument, and
(c) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.”—(Richard Fuller.)
This new clause would require the Secretary of State to make regulations to ensure that purchasers of properties subject to estate management charges are notified of those charges.
Brought up, and read the First time.
Richard Fuller
I beg to move, That the clause be read a Second time.
New clause 35 seeks further to improve the rights of those who will be liable for estate management charges. We know from written and oral evidence that people do not know what they are getting into right at the start of the purchase of a property. My clause asks the Government to make it clear by regulations that purchasers of properties who will get management charges are notified about them. It would ensure that people have access to the latest set of accounts, enabling them not only to understand what charges may be due, but to see what liabilities there were in the past.
Lee Rowley
I am grateful to my hon. Friend the Member for North East Bedfordshire for moving new clause 35. I share his concern that purchasers should know about estate management charges; we talked a little about that issue in our sitting this morning.
There is nothing worse than facing a bill that we know nothing about at a time when we can do nothing about it. That is why the Government have been working with the national trading standards estate and letting agency team to develop guidance for property agents on what constitutes material information. The information must be included in property listings to meet the obligations under the Consumer Protection from Unfair Trading Regulations 2008. Estate management charges are considered material if they will have an impact on a decision to purchase. That should mean that purchasers get information on the expected level of estate management charges when they see the property particulars before they even view the property, let alone make an offer.
In addition to the measures that we discussed this morning, we are seeking to include in the Bill a requirement that freehold estate management information be provided to potential sellers, meaning that conveyancers acting on behalf of those sellers can quickly get the detailed information that they need to provide to potential purchasers. That could include accounts, if the estate manager is a resident-owned company, as well as any previous or future charges. With that reassurance in mind, I hope that my hon. Friend will consider withdrawing his new clause.
Richard Fuller
I think that that reassurance has been provided. The particular issue is that when people buy these homes, the solicitors are usually appointed by the people selling them. It is important that the Minister thinks carefully about that, and it sounds very much as if he is doing so. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 36
Asbestos remediation
“(1) The Leasehold Reform, Housing and Urban Development Act 1993 is amended as follows.
(2) After section 37B, insert—
‘37C Asbestos remediation
(1) This section applies where a claim to exercise the right to collective enfranchisement in respect of any premises is made by tenants of flats contained in the premises and the claim is effective.
(2) The landlord must cause a survey of the premises to be undertaken by an accredited professional to ascertain whether asbestos is, or is liable to be, present in those parts of the premises which the landlord is responsible for maintaining.
(3) Where the survey required by subsection (2) reveals the presence of asbestos, the landlord must, at the landlord’s cost, arrange for its safe removal.
(4) If the removal of asbestos required by subsection (3) is not carried out before the responsibility for maintaining the affected parts transfers to another person under the claim to exercise the right of collective enfranchisement, the landlord is liable for the costs of its removal.’”—(Barry Gardiner.)
Brought up, and read the First time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
The Minister will be relieved to know that this is genuinely a probing new clause, which I am pleased to move on behalf of my right hon. Friend the Member for East Ham (Sir Stephen Timms). He is not a member of the Committee, but he certainly wishes to raise the issue on Report.
New clause 36 would address the problems relating to enfranchisement when asbestos has been found, or is liable to be found, in the structure of a building. It requires that a survey be done prior to any enfranchisement process, and sets out that the landlord would be responsible for the remediation if asbestos should need to be cleared from the building. I am laying out the new clause before the Committee so that the Minister can set out his thinking about such problems in buildings, in the full knowledge that my right hon. Friend the Member for East Ham will speak to it on Report.
Lee Rowley
I thank the hon. Member for Brent North for moving the new clause. I heard the right hon. Member for East Ham make his case clearly on Second Reading, and I asked officials at the Department to go and look at it. I will read this into the record for their benefit and that of the right hon. Gentleman.
The Government recognise the devastating impact that asbestos-related disease has on those who are exposed and on their families, and we are committed to ensuring that the risk of asbestos exposure is properly managed. New clause 36 would either duplicate existing UK law or change the well-established evidence-based policy in this area.
Specifically, proposed new subsection (3) would mostly duplicate the existing duty in regulation 4 of the Control of Asbestos Regulations 2012 for landlords to survey the common areas of their property, where they are responsible for maintenance. It is true that there is no current requirement for the survey to be done by an accredited professional. That is partly because currently only organisations, not individuals, can be accredited to carry out surveys. The Health and Safety Executive is carrying out research to see whether changes to the accreditation of surveyors would be beneficial. That is in response to a recommendation from the recent inquiry into asbestos by the Work and Pensions Committee, chaired by the right hon. Member for East Ham.
Proposed new subsection (3) would be a significant departure from current health and safety policy regarding asbestos. It could increase the risk of exposure to asbestos: it could create a situation in which asbestos was removed, irrespective of whether it was in good condition. Evidence shows that any removal of asbestos is difficult and inevitably involves disturbing asbestos fibres and making them airborne. In some cases, asbestos can be removed only if there is significant and highly invasive work to the fabric of the building. For that reason, the HSE’s long-held view is that asbestos that is unlikely to be disturbed or is in good condition gives rise to less risk if it is left in situ and monitored until a suitable opportunity to remove it arises, such as refurbishment or demolition. That part of the new clause goes against HSE policy. Such a policy shift in this case would have significant implications for the legal framework for the management of asbestos across the built environment. Understandably for such a hazardous substance as asbestos, any proposed changes to how it is managed in the UK must be considered carefully.
While I appreciate the points that the hon. Member for Brent North has made on behalf of the right hon. Member for East Ham, I hope that that explains why the Government are not supporting new clause 36. I look forward to comments from them, should we have missed anything. I hope that the hon. Member for Brent North will consider withdrawing the new clause.
Barry Gardiner
I am grateful to the Minister for reading that into the record. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 37
Eligibility for enfranchisement
“(1) The LHRUDA 1993 is amended as follows.
(2) In section 3—
(a) in subsection (2)(a), after third ‘building’, insert ‘, or could be separated out by way of the granting of a mandatory leaseback on the non-residential premises to the outgoing freeholder’;
(b) after sub-paragraph (2)(b)(ii), insert ‘or
(iii) are reasonably capable of being managed independently or are already subject to separate management arrangements;’
(3) In section 4(1)(a)(ii), after ‘premises;’, insert ‘nor
(iii) reasonably capable of being separated out by way of the granting of a mandatory leaseback and reasonably capable of being managed independently from the residential premises;’”—(Barry Gardiner.)
This new clause would ensure that leaseholders in mixed-use blocks with shared services with commercial occupiers would qualify to buy their freehold.
Brought up, and read the First time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
New clause 37 would ensure that leaseholders in mixed-use blocks with shared services with commercial occupiers would qualify to buy their freehold. We have covered this ground to a certain extent, and I do not wish to detain the Committee unduly.
I commend the Government for bringing forward the reforms that promised to liberate leaseholders in mixed-use buildings and developments, including the lifting of the 25% non-residential premises limit to 50%. However, with the advent of compulsory leasebacks on commercial space to the departing freeholder, there is now a workable mechanism to split out the commercial units and their management from the ownership and management of residential leasehold homes and the common parts for the other side of the building.
It is imperative to remove any other outdated impediments to freehold purchase faced by leaseholders of flats in mixed-use buildings, if the reforms to enfranchisement are to be successful on the ground. Without moving on shared services and the structural dependency rules that bedevilled the 1993 Act, many leaseholders in mixed-use blocks, who would otherwise stand to benefit from the proposed changes that the Government have put forward, could be instantly disqualified from exercising their enfranchisement rights to gain control of their building and their service charges because of a shared plant room or a car park that connects them to the commercial occupiers and that they had no hand in constructing. That seems unfair, especially given that developers are increasingly building flatted developments in which the flats have shared services with commercial units for matters of efficiency and cost.
Mixed-use schemes are proliferating in our constituencies. The issue of shared services, structural dependency and structural detachment will continue to be a major one for leaseholders seeking self-rule, so long as the Government do not cut the red tape in the 1993 Act and, relatedly, in the 2002 Act in relation to the right to manage. I look forward to the Minister’s considered response.
Lee Rowley
I am grateful to the hon. Member for Brent North for moving new clause 37. As he says, we have talked about the issue before, including on new clause 33, so I will not detain the Committee for more than a few moments. However, the brevity of my remarks does not in any way seek to diminish the importance of this discussion.
We agree with the overall ambition behind new clause 37; as the hon. Gentleman has graciously accepted, we are seeking to increase the non-residential limit. This is a discussion about whether the improvements that are already in the Bill should go any further. I hope that I have already articulated, in our debates on previous amendments and previous clauses, the reasons why we are not seeking to agree to that at this time. I hope that on this occasion the hon. Gentleman will agree to withdraw his amendment.
Barry Gardiner
We have indeed been over this ground. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 38
Right to manage: procedure following an application to the appropriate tribunal
“(1) The CLRA 2002 is amended as follows.
(2) After section 84, insert—
‘84A Procedure following an application to the appropriate tribunal
(1) Where an application is made to the appropriate tribunal under section 84(3) for a determination that an RTM company was on the relevant date entitled to acquire the right to manage the premises, the Tribunal may, if satisfied that it is reasonable to do so, dispense with—
(a) service of any notice inviting participation;
(b) service of any notice of claim;
(c) any of the requirements in the provisions set out in subsection (2); or
(d) any requirement of any regulations made under this part of this Act.
(2) Subsection (1)(c) applies to the following provisions of this Act—
(a) section 73;
(b) section 74;
(c) section 78;
(d) section 79;
(e) section 80;
(f) section 81.’”—(Barry Gardiner.)
This new clause would provide the appropriate tribunal with the discretion to dispense with certain procedural requirements where it is satisfied that it is reasonable to do so. It is designed to deal with cases where a landlord attempts to frustrate an RTM claim by procedural means.
Brought up, and read the First time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
New clause 38 would provide the appropriate tribunal with the discretion to dispense with certain procedural requirements where it is satisfied that it is reasonable to do so. It is designed to deal with cases in which a landlord attempts to frustrate a right to manage claim by procedural means.
Let me enlighten the Committee. This morning I received the following email: “Your amendment NC38 to the Bill—right to manage—is the single best thing to happen to the right to manage since it was introduced in 2002. It will put an end to the litigation over detailed procedural objections which has frustrated this important statutory right.” The gentleman went on to say that he believes this “despite me (1) earning a good living from right to management disputes and (2) being chair of the local Tory association.”
The Law Commission report from four years ago highlighted “the tactical, game-playing approach” of some freeholders and how the current law is acting to incentivise unnecessary litigation between the parties. Mark Loveday’s proposal, which I have adopted, seems eminently sensible to provide the tribunal with the discretion to waive a right to manage application of leaseholders where the breaches are deemed to be non-material. That is a necessary guard against vexatious litigation by freeholders to thwart legitimate right to manage bids. Sadly, as a barrister, Mr Loveday has seen all too many cases in which landlords have used irrelevant technicalities in the existing legislation to try to scupper leaseholders trying to exercise their right to manage. I want to put on the record my thanks for Mr Loveday’s defence of leaseholders’ rights in the Settlers Court case and the Canary Gateway case.
I hope the Committee will understand that Mr Loveday gave evidence in writing to this Committee. The new clause draws on his proposals, which are contained within his written submission. Mr Loveday is not just a barrister, but the editor of the standard work, the fifth edition of “Service Charges and Management”. He is not just somebody who has a passing knowledge; he is recognised as an authority in these matters.
For the sake of full disclosure, I should add that the gentleman who wrote to me so effusively about my new clause was in fact Mr Loveday, so it was really about his own amendment.
Lee Rowley
I am grateful to the hon. Member for Brent North for tabling new clause 38. I understand that he seeks to reduce landlords’ ability to frustrate right to manage claims. We all share his view, and we also do not want leaseholders to fail on minor technicalities, but at the risk of disappointing his Conservative friend, we believe that there are good reasons for the procedural requirements in a right to manage claim. For example, standard requirements provide legal certainty for all parties. I recognise that there is a valid discussion to be had around the issue, but that is the position that the Government come down on. We are concerned about giving a broad, sweeping power in respect of disapplication.
There are also potential unintended consequences. All qualifying leaseholders are entitled to become members of the right to manage company, and no one person can be excluded for any reason. The legislation opens membership to all qualifying leaseholders. The procedural requirement to serve the notice inviting participation informs leaseholders of their rights to join the claim and become directors of the right to manage company. Providing discretion to the tribunal to disapply this could result in some leaseholders failing to receive adequate information about the claim and being denied such an opportunity. I am not saying that that is likely to happen; I am simply taking it to its logical extent. There are other potential areas where it would go. I am not saying that it is likely, but it is possible.
It is accepted that some landlords have sought to defend right to manage claims on the basis of minor, technical flaws in compliance with the procedural requirements. The tribunal, however, generally takes a common-sense, pragmatic approach to errors that are not critical or of primary importance. That should limit the scenarios in which there is a problem. Landlords will also have an added disincentive to raise vexatious disputes, as they will now pay their own litigation costs.
On the basis of both those points, I hope that the hon. Member for Brent North might be willing to withdraw his new clause and convince his new Conservative friend that it is not necessary at this time.
Barry Gardiner
I will press the new clause to a vote and leave it to the Minister to persuade his Conservative friends.
Question put, That the clause be read a Second time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
This new clause would set matters for the tribunal to consider when deciding whether to dispense with all or any of the requirements for landlords to consult tenants in relation to any major works. That is something that I am particularly concerned about, because in 2002 I sought to bolster transparency over the nature and costs of major works that leaseholders were paying for, and the troubles that they were experiencing in their blocks. I am also concerned because the freeholder that successfully neutered key provisions on major works is the same Daejan—then Daejan Holdings, part of the Freshwater Group—which over the years has caused absolute misery for many leaseholders in my constituency and in many other right hon. and hon. Members’ constituencies. It was one of the landlords whose behaviour saw me begin my campaign against the iniquities of leasehold back in the 1990s.
Since the Daejan v. Benson Supreme Court case of 2013, the factual burden on freeholders has been transferred to leaseholders. It was ruled that the conduct of the landlord is irrelevant, no matter how flagrantly it might have behaved in failing to adhere to the consultation requirements, unless it can be shown that the conduct caused actual prejudice. As a result of that decision, in many first-tier tribunal cases, it is now freeholders who are seeking dispensation from consultation requirements on major works. Hapless leaseholders are left trying to prove prejudice in the face of clear breaches of the legal requirements, and landlords, who of course are much better resourced, are able to game the system accordingly.
In Daejan, Lord Wilson issued a strong dissenting judgment, as did Lord Hope. Both thought, correctly, that what is reasonable should be left to the tribunal. They mentioned transparency and accountability, both ignored by the Supreme Court. In fact, Lord Wilson described the conclusion of the majority as subverting the intention of Parliament. I urge the Government to revisit their position on major works in the Bill and ensure that leaseholders have, at the very least, the same transparency and accountability that they were assured under the 2002 Act, before the Supreme Court interfered in 2013 with Daejan, fettered the tribunal’s discretion in this vital area and accordingly undermined leaseholders’ rights.
Lee Rowley
I am being tempted again to comment on the Supreme Court and the veracity of its decisions, but I will stick to the new clause. As the hon. Gentleman indicated, it seeks to amend the Landlord and Tenant Act 1985. We agree that there should be protections for leaseholders when their landlord is seeking to dispense with the requirements to consult on major works. Where a landlord has failed to comply with the statutory requirements, they must apply to the appropriate tribunal to dispense with the requirements to consult. Should they fail to consult and fail in any application for dispensation, the costs that they may pass on to the tenant are limited to a £250 threshold.
We believe that the appropriate tribunal is best placed to consider the circumstances of each application for dispensation. We would not wish to fetter the tribunal’s ability to consider a wide range of matters when deciding whether it is reasonable to dispense with the consultation requirements.
Barry Gardiner
What has happened here is that the whole weight of proof has been shifted by the Court’s decision. It has been shifted precisely against what was the legislative intent, which is why I think it is appropriate that the Minister seeks to reinstate what Parliament originally said it had decided and wanted to be the case, and ensure that the tribunal has the ability to exercise its judgment in that way.
Lee Rowley
Let me ask the hon. Gentleman whether he is willing to allow me to go away and look at this issue without any promises or guarantees. I am not across the level of detail that he obviously is, and I need to be in order to discharge the very legitimate questions that he has asked. If he is prepared to withdraw the new clause, I am happy to write to him, and if there is something that we need to take forward, I would be happy to look at it in future phases of the Bill.
Barry Gardiner
On that basis, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 40
Meaning of “accountable person” for the purposes of the Building Safety Act 2022
“(1) Section 72 of the Building Safety Act 2022 is amended in accordance with subsections (2) and (3).
(2) After subsection (2)(b), insert—
‘(c) all repairing obligations relating to the relevant common parts which would otherwise be obligations of the estate owner are functions of a manager appointed under section 24 of the Landlord and Tenant Act 1987 in relation to the building or any part of the building.’
(3) In subsection (6), in the definition of ‘relevant repairing obligation’, after ‘enactment’, insert
‘or by virtue of an order appointing a manager made under section 24 of the Landlord and Tenant Act 1987’.
(4) Section 24 of the Landlord and Tenant Act 1987 is amended in accordance with subsection (5).
(5) Omit subsection (2E).”—(Barry Gardiner.)
This new clause would provide for a manager appointed under section 24 of the Landlord and Tenant Act 1987 to be the “accountable person” for a higher-risk building.
Brought up, and read the First time.
Barry Gardiner
I beg to move, That the clause be read a second time.
New clause 40 would provide for a manager appointed under section 24 of the Landlord and Tenant Act 1987 to be the accountable person for a higher-risk building. A number of stakeholders raised in the evidence sessions that there is a major problem with the way in which the Building Safety Act 2022 is interacting with the 1987 Act, with the practical effect of depriving leaseholders of redress and the ability to replace a failed or failing freeholder from controlling their homes and service charges.
The accountable person regime of the 2022 Act has critically undermined the section 24 court-appointed manager scheme, which has been a lifeline for leaseholders who cannot afford to buy the freehold or mobilise 50% of their neighbours to participate in an enfranchisement claim but who face a predatory—or very often absentee—freeholder, have high and opaque service charges or suffer block deterioration and badly require independent and professional management. That was the whole point of having the accountable person in the court-appointed manager scheme.
The section 24 regime also gives leaseholders who do not qualify for the right to management the ability to replace freeholder management of their building and moneys by applying to tribunal to consider whether it is just and convenient to install an officer of the court—a section 24 manager—to steward the development with tribunal backing and a special management order that provides them with a bespoke scheme of management and effectively replaces the leases. The section 24 manager essentially steps into the shoes of the landlord. But the Building Safety Act has expressly disallowed a section 24 manager from double-hatting as the accountable person and the principal accountable person through its definition of accountable persons and its amendments to the Landlord and Tenant Act 1987.
That must be an oversight by Government or an unintended consequence of the Building Safety Act, because fettering a section 24 manager in this way will encourage tribunals not to grant new section 24 orders on the basis that while such an order may be just because of freeholder failure, it would not be convenient, since there would now be two squabbling managers for functions under the BSA versus a court appointee installed under the 1987 Act. Even with the reforms to enfranchisement and right to manage in this Bill, many leaseholders will still be unable to meet the qualifying criteria to remove freeholder management. We need to keep that pathway for a court-appointed manager open and accessible to leaseholders seeking relief. With the BSA, Parliament quite rightly sought to give leaseholders new statutory protections. Surely the intention of the BSA was not to take away leaseholders’ existing rights.
At Christmas, a tribunal heard about this issue as part of the long-running litigation at Canary Riverside, an estate in east London where leaseholders have enjoyed court protection via the section 24 scheme since 2016. Regrettably, it determined that section 72 of the Building Safety Act and the amendments made to section 24 by section 110 of the 2022 Act prohibit a section 24 manager from being an appointed person, and a tribunal cannot order a section 24 manager to carry out building safety responsibilities that Parliament has decided should fall outside the section 24 regime and which should be the responsibility of an AP.
The tribunal said,
“We accept that this conclusion is likely to have significant practical consequences”
for the manager. It also said,
“We accept too that there is a risk of disagreement between him and the PAP as to how the cladding-removal works should be progressed.”
The 22 December 2023 tribunal decision in the Canary Riverside case has effectively given the freeholder licence to take back control of leaseholders’ homes and moneys, despite being stripped of management rights by the court in 2016 because of its poor financial transparency and non-existent accountability to leaseholders. It now runs the risk of allowing the freeholder to take up to £20 million in public money from the building safety fund. The same freeholder’s related company, Westminster Management Services, wrongly demanded £1.6 million in insurance commission and fee—a kick-back from the leaseholders, as determined by a tribunal in December 2022.
Lee Rowley
I am grateful to the hon. Gentleman for outlining that in such detail. I will be brief and to the point. We are reviewing this, and I think that an important point has been raised. In the meantime, we have asked the Building Safety Regulator to review all higher-risk buildings that currently have a section 24 manager in place, with a view to considering whether an application for a special measures order should be made for any of the buildings impacted. On that basis, I hope that the hon. Member may withdraw the new clause until we have concluded the review.
Barry Gardiner
I want to press the new clause to a vote.
Question put, That the clause be read a Second time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
This new clause would implement recommendation 41 of the Law Commission’s report on enfranchisement, that the prohibition on leaseholders of three or more flats in a building being qualifying tenants for the purposes of a collective enfranchisement claim should be abolished. The Law Commission could not be clearer on this issue. It said:
“We remain firmly of the view that this rule–that a leaseholder of three or more flats in a building is not a qualifying tenant in respect of any–is ineffective in excluding investors from collective enfranchisement rights. It is easily avoided by sophisticated investors, and thus only penalises less well-informed leaseholders of multiple units. We do not think that there is any good justification for retaining the exclusion in its current form… Crucially, we think that removing the restriction will provide the opportunity to enfranchise to a number of leaseholders who should benefit from enfranchisement rights, but who currently do not do so. Take the building which we gave as an example in the Consultation Paper: one containing seven flats let on long leases, of which three are owned by the same person. This building is ineligible for collective enfranchisement, as there are only four qualifying tenants (and therefore the two-thirds requirement is not fulfilled). However, it may well be in the interests of the four qualifying tenants to carry out a collective freehold acquisition: indeed, the investor who owns the three other leasehold flats may also wish to participate. It may be asked why, from the point of view of the five owners in the building, it is desirable that they be prevented from acquiring the freehold jointly. In this case, the four owners of their individual flats would still have the largest say in the control of the building following the claim (assuming every owner participated).”
Removing the bar on leaseholders with three or more properties from qualifying for a collective enfranchisement is a Law Commission recommendation. It could be done easily and have the practical effect of ensuring that more leaseholders can acquire the freehold and gain control of their homes and service charges, meeting a key Government goal for this Bill.
I am aware that some freeholders buy up leases in a block using separate special purpose vehicle companies in order to make it harder for leaseholders to hit the 50% participation threshold and thwart enfranchisement bids. Meanwhile, innocent leaseholders who have three flats in their name as part of their retirement plan are instantly disqualified from participating in the freehold purchase. That is unfair, but it could be easily remedied by this amendment or another amendment were it to come from the Government.
Lee Rowley
The Government recognise that the Law Commission did not think that there was a justification for keeping the exclusion in its current form and recommended its removal, as the hon. Gentleman has indicated. However, there might be unexpected consequences if the exclusion is removed, and the Government need to proceed carefully. For example, removal of the restriction may spur investors and speculators to buy up blocks, which may not be in the interests of the remaining leaseholders and take properties out of the market that could otherwise be acquired by owner- occupiers. Investors would be able to buy multiple flats in a building in order to take control of the building following a collective acquisition claim.
Furthermore, the exclusion as it applies currently has the effect of limiting the circumstances that could result in one leasehold owner monopolising the freehold once it has been acquired. Leaseholders of a single flat may find that they escape the control of one freeholder to find that they are now subject to the control of a single owner of multiple flats, creating the same issues.
I recognise that the restriction has the effect of denying some leaseholders the right to collective enfranchisement, and there is no equivalent requirement when claiming the right to manage. However, the nature of the interest being acquired is different and the difference in approach is appropriate. I hope I can assure the hon. Member that the Government understand his concern. I hope he agrees, although I hear he might not, that the current restriction provides a level of protection for leaseholders. I ask him to consider withdrawing his new clause.
Barry Gardiner
I am grateful to the Minister for recognising the problem here. I urge him to consider coming back on Report with his own amendment to try to circumvent the other issues that he has rightly raised, which might counterbalance on the other side. On that basis, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 48
Right to participate in enfranchisement
“(1) The Secretary of State may by regulations make provision to enable qualifying leaseholders to buy a share of the freehold at a development where a collective enfranchisement has already taken place.
(2) Provision made under subsection (1) is to be known as a ‘right to participate’.”—(Barry Gardiner.)
This new clause would enable the Secretary of State to make regulations allowing those residential leaseholders whose unit qualified for a collective enfranchisement, but whose leaseholders were unable or unwilling to do so at the time, to exercise the right to participate in the enfranchisement upon payment of a proportionate sum.
Brought up, and read the First time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
This new clause would enable the Secretary of State to make regulations allowing those residential leaseholders whose unit qualified for a collective enfranchisement, but whose leaseholders were unable or perhaps unwilling to do so at the time, to exercise the right to participate in the enfranchisement subsequently upon payment of a proportionate sum.
Through its work the Law Commission emphasised the inequity of leaseholders who did not have the money to participate in the freehold purchase or were not even holding a lease on the qualifying flat at the time of the enfranchisement, having no right under the current law to buy a share in the freehold to make their home more saleable and to be part of the decision-making process of those enfranchisement leaseholders with management control.
The Law Commission stated that
“in the Consultation Paper, we proposed that a leaseholder who did not participate in a collective freehold acquisition should, at a later date, be able to purchase a share of the freehold interest held by those who did participate. We maintain our view that the policy has merit. Indeed, a clear majority of consultees were supportive of our provisional proposal.”
Barry Gardiner
We were discussing the right to participate, and I was quoting the Law Commission, which stated that
“in the Consultation Paper, we proposed that a leaseholder who did not participate in a collective freehold acquisition should, at a later date, be able to purchase a share of the freehold interest held by those who did participate. We maintain our view that the policy has merit. Indeed, a clear majority of consultees were supportive of our provisional proposal.”
Additionally, the Law Commission believes that
“the existence of the right to participate”—
attaching to an individual leasehold unit—
“might even encourage leaseholders making a collective freehold acquisition claim to invite others to join in the first place, and might also be a partial solution to the ping-pong problem”,
as the Law Commission describes it; I will not go into detail about that. The Law Commission states that, unlike with the right to manage and the notice inviting participation, leaseholders
“proposing to make a collective enfranchisement claim are not obliged to invite all other leaseholders in the building to participate in the proposed claim, nor even to inform them of their intentions. This means that leaseholders can be excluded from the opportunity to exercise their enfranchisement rights, either inadvertently or deliberately.”
The Law Commission received various suggestions as to how leaseholders could be made aware that a collective freehold acquisition has taken place and therefore that the right to participate is available to them. The new clause seeks to give the Government the flexibility to bring forward—through either regulations or, preferably, their own amendments—some provision to remedy the situation. I look to the Minister for his advice.
Lee Rowley
The principle of a right to participate is sound, and I think we all agree on that across both sides of the Committee. However, as with many of the new clauses, there are practical issues with such a right, and we struggle to see a way that it is addressed through the Bill.
I will not detain the Committee for too long, but currently leaseholders who did not participate in a previous collective acquisition claim have no means to require the previous participants to allow them to join, as the hon. Gentleman outlined. There is an existing route around that for the non-participant leaseholders if they can agree with the participating enfranchised leaseholders to allow them to obtain a share in the ownership of the building through negotiation; however, enabling that through a statutory right is complicated. The Law Commission gave considerable thought to the issues and how they may be resolved, and, although it too agreed with the principle of such a right, it was not able to make a recommendation for the creation of the right to participate without separate and detailed work on the measure. Its report analysing the difficulties that arise is publicly available.
As set out by the Law Commission, a number of highly complex questions need to be resolved, including when and to whom the right should apply; whether to include former landlords in possession of a leaseback; the terms of participation; the premium payable; the cost of the claim; and any remedies available if damages are appropriate. Bluntly, they go to the core of an individual’s rights, so the whole framework for the regime needs to be in place in order to ensure certainty on who has those rights and how they can best be exercised in practice. As a result, while I understand and appreciate the sentiment behind the new clause, it is a broad power to set out a regime that is extremely complicated, and the Government are unable to accept it at this time, while accepting the principle and hoping that in the future we can make progress on it.
Barry Gardiner
I am grateful to the Minister for recognising the need to do something in this area and accepting that there is a problem here that it would be best to resolve. I simply point out that leasehold reform Bills tend to come infrequently before Parliament, and I urge him to come back at a later stage with his best endeavours to resolve the problem. On that basis, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 50
Control of boards of estate managers
“(1) Within six months of the passage of this Act, the Secretary of State must by regulations provide for—
(a) every estate manager (see section 39(3)) to be constituted such that a controlling majority on its board is held by an owner or lessor of a managed dwelling (see section 39(5));
(b) the requirement stipulated in paragraph (a) to be in place within two years of the sale or lease of the first managed dwelling.
(2) Regulations under subsection (1) may amend primary legislation.”—(Richard Fuller.)
This new clause would provide for the Secretary of State by regulations to oblige every estate management company to have a majority of residents on its board within two years of the sale or let of the first house or flat on the managed estate.
Brought up, and read the First time.
Richard Fuller
I beg to move, That the clause be read a Second time.
I am receiving some interesting guidance from the Government Whip that I should seek to speak at length on the new clause, which is contrary to all his earlier exhortations, which were rather of the flavour that I should shut up entirely. I am not getting any further guidance from the Whip, so I will go at my own pace.
New clause 50 is a suggestion to the Minister. We have discussed the general hope that people subject to estate management charges should have much greater control over their estate management companies. They potentially should have the right to self-manage and it should be much easier for them to change from one estate manager to another. At the moment it can take a considerable time for estate management companies essentially to be set up and/or for them to go through what is essentially a transfer to resident control. I think all members of the Committee know this, but I will just inform them that we have had a number of representations from people who have talked about how long they have had to wait, including someone who said that a family had to wait up to 13 years for the right to manage their own estate management company and endured poor service over that entire period.
As the Minister thinks about his options to bring forward on Report or in further deliberations improvements to the rights of people, the new clause suggests that, by law, within two years of the sale or lease of the first building a majority of the directors of the estate management companies should be residents of their community.
Lee Rowley
This is an interesting new clause that bears a few moments’ consideration, and I am grateful to my hon. Friend for tabling it. Obviously, the first challenge is the matter of Henry VIII powers. I will put that aside for the moment, but we have genuine concerns about whether the new clause would get past the Delegated Powers and Regulatory Reform Committee on the basis of whether it is proportionate.
Richard Fuller
That was a very helpful and thoughtful response from the Minister, so I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 51
Ability to change estate management company
“(1) Within three months of the passing of this Act, the Secretary of State must consider and report to Parliament on the situation of homeowners who have been told that they cannot change their estate management company because they are named on a TP1.
(2) The report required by subsection (1) must include proposals for legislative change to enable such homeowners to change their estate management company where appropriate.”—(Richard Fuller.)
Brought up, and read the First time.
Richard Fuller
I beg to move, That the clause be read a Second time.
Again, this new clause originates from some of the inbound traffic that we have received as we have considered the Bill. I seek clarification from the Minister about the extent of these changes. The Committee was advised by a number of citizens about the status of estate management companies that are written into the deeds or other legal documents that are signed upon purchase. One such citizen wrote:
“Our management company…is named in the TP1, so we have no rights to do this”—
that is, to essentially appoint their own managers.
This is a probing new clause: I just want the Minister to be clear about the impact of the Bill on individuals such as the person whom I just quoted. As a consequence of the Bill’s provisions, will they be able to change their estate management company, or is there some legal trick about the original documents that were signed on purchase that would mean they are not brought into the ambit of those new rights?
Lee Rowley
As my hon. Friend outlined, the new clause would introduce a requirement for the Government to assess the situation of homeowners with estate management companies explicitly named on their deeds within a three-month timeframe.
I am sympathetic to the concerns that my hon. Friend raised. I know that he recognises that this is a complex area and that there are detailed issues to be worked through. As well as being clear about the nature of the problem, there could be issues about defining the scope of estate management functions and what criteria need to be met. The Law Commission carried out a review of the right to manage for flats, but that is not always directly transferable to freehold estates. It will take some time to carry out a review, and we need to engage with people across the sector. Then, the CMA report is coming. None the less, I recognise my hon. Friend’s concerns that the comprehensive measures in the Bill do not go far enough, and I acknowledge his desire for the Government to go further. I am listening carefully to his concerns on this matter. On that basis, I hope that he might withdraw his new clause.
Richard Fuller
It is not actually clear that the Minister was addressing new clause 51 as I was expecting; that may be the fault of my hearing. I was seeking clarification about the TP1—transfer of part of registered title—form, which is used by developers when selling a house to explicitly name an estate management company that will be in situ. That may be the norm; I do not know. However, can the Minister clarify, if the way that it is originally set up is not the norm and it is a legal device, whether it has greater legal standing, and whether the rights of people for whom the estate management company is defined in form TP1 will be included in the rights that we are trying to establish with the rest of the Bill? If we introduce changes that increase the right to manage and so on, will they be covered? I may well have missed it, because the Minister is much more knowledgeable about the Bill than I am, even after all our deliberations. However, just to the specific point about the legal forms, will he consider bringing that in as part of this?
Lee Rowley
I want to double-check the valid points made by my hon. Friend. I will commit to writing to him on that specific point to make sure that we are covering in the way that he expects.
Richard Fuller
That is very kind of the Minister. With that assurance, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Schedule 1
Redress schemes: financial penalties
“Notice of intent
(1) Before imposing a financial penalty on a person under section (Financial penalties), an enforcement authority must give the person notice of its proposal to do so (a ‘notice of intent’).
(2) The notice of intent must be given before the end of the period of 6 months beginning with the first day on which the enforcement authority has sufficient evidence of the conduct to which the financial penalty relates.
(3) But if the person is continuing to engage in the conduct on that day, and the conduct continues beyond the end of that day, the notice of intent may be given—
(a) at any time when the conduct is continuing, or
(b) within the period of 6 months beginning with the last day on which the conduct occurs.
(4) The notice of intent must set out—
(a) the date on which the notice of intent is given,
(b) the amount of the proposed financial penalty,
(c) the reasons for proposing to impose the penalty, and
(d) information about the right to make representations under paragraph 2.
Right to make representations
2 (1) A person who is given a notice of intent may make written representations to the enforcement authority about the proposal to impose a financial penalty.
(2) Any representations must be made within the period of 28 days beginning with the day after the day on which the notice of intent was given to the person (‘the period for representations’).
Final notice
3 (1) After the end of the period for representations the enforcement authority must—
(a) decide whether to impose a financial penalty on the person, and
(b) if it decides to do so, decide the amount of the penalty.
(2) If the enforcement authority decides to impose a financial penalty on the person, it must give a notice to the person (a ‘final notice’) imposing that penalty.
(3) The final notice must require the penalty to be paid within the period of 28 days beginning with the day after the day on which the notice was given.
(4) The final notice must set out—
(a) the date on which the final notice is given,
(b) the amount of the financial penalty,
(c) the reasons for imposing the penalty,
(d) information about how to pay the penalty,
(e) the period for payment of the penalty,
(f) information about rights of appeal, and
(g) the consequences of failure to comply with the notice.
Withdrawal or amendment of notice
4 (1) An enforcement authority that gives a notice of intent or final notice may at any time—
(a) withdraw the notice of intent or final notice, or
(b) reduce an amount specified in the notice of intent or final notice.
(2) The power in sub-paragraph (1) is to be exercised by giving notice in writing to the person to whom the notice was given.
Appeals
5 (1) A person to whom a final notice is given may appeal to the First-tier Tribunal against—
(a) the decision to impose the penalty, or
(b) the amount of the penalty.
(2) An appeal under this paragraph must be brought within the period of 28 days beginning with the day after the day on which the final notice is given to the person.
(3) If a person appeals under this paragraph, the final notice is suspended until the appeal is finally determined, withdrawn or abandoned.
(4) An appeal under this paragraph—
(a) is to be a re-hearing of the enforcement authority’s decision, but
(b) may be determined having regard to matters of which the enforcement authority was unaware.
(5) On an appeal under this paragraph the First-tier Tribunal may quash, confirm or vary the final notice.
(6) The final notice may not be varied under sub-paragraph (5) so as to impose a financial penalty of more than the enforcement authority could have imposed.
Recovery of financial penalty
6 (1) This paragraph applies if a person fails to pay the whole or any part of a financial penalty which, in accordance with this Schedule, the person is liable to pay.
(2) The enforcement authority which imposed the financial penalty may recover the penalty or part on the order of the county court as if it were payable under an order of that court.
Proceeds of financial penalties
(1) Where an enforcement authority imposes a financial penalty under section (Financial penalties), it may apply the proceeds towards meeting the costs and expenses (whether administrative or legal) incurred in, or associated with, carrying out any of its functions under this Part of this Act.
(2) Any proceeds of a financial penalty imposed under section (Financial penalties) by an enforcement authority other than the Secretary of State which are not applied in accordance with sub-paragraph (1) must be paid to the Secretary of State.”—(Lee Rowley.)
This new Schedule, to be inserted after Schedule 8, would make further provision about the imposition of financial penalties under NC19.
Brought up, read the First and Second time, and added to the Bill.
Title
Lee Rowley
I beg to move amendment 28, in title, line 5, leave out “charges and costs payable by residential”
and insert
“the relationship between residential landlords and”.
This amendment is consequential on amendments to Part 3.
This is a consequential amendment to remove the reference to part 3 in the long title of the Bill. It ensures that it provides an accurate description of the Bill’s contents to reflect the impact of the measures the Committee has brought forward. That includes the amendments to enable the first-tier tribunal to vary or discharge an order to appoint a manager of a premises without an application.
Amendment 28 agreed to.
Matthew Pennycook
On a point of order, Sir Edward, may I take the opportunity to put on record our sincere thanks to you and your colleagues in the Chair for overseeing our proceedings over recent weeks; our hard-working Clerks for their assistance; the Doorkeepers and Hansard reporters for facilitating the Committee’s work; and officials in the Department and our own staff for their support? I also briefly thank all hon. Members who have contributed to the Committee’s deliberations and debates. It is not entirely unexpected, given the uncontentious nature of the Bill; nevertheless, we very much appreciate the generally constructive and good-humoured nature of our proceedings.
Finally, I thank the Minister for his thoughtful engagement with the arguments the Opposition have made in an attempt to improve this limited Bill. He has dutifully held the line in attempting to justify the decision to resist a large number of sensible and reasonable amendments. Nevertheless, I suspect we can look forward to seeing a number of them return with the Government’s seal of approval in the Bill’s remaining stages.
Lee Rowley
Further to that point of order, Sir Edward, I wish to put on record my thanks. I echo the thanks of the hon. Member for Greenwich and Woolwich to everybody who has been involved in the Bill, and I thank him and all colleagues here who have helped us get through this. I am grateful for colleagues’ time and also—even though I may not be in order in making this acknowledgment—I thank those in the Gallery who have taken the time to come here and listen. I am grateful to everyone for getting the Bill through this stage and I look forward to seeing everyone on Report.
The Chair
I thank both of you for those gracious words. The Opposition spokesperson warned me at the beginning that the Bill was as dry as dust. It is certainly very complicated and you have all done extremely well in a very complex part of the law. We should all be proud of ourselves. Order.
Bill, as amended, to be reported.