Monday 29th April 2024
(7 months, 3 weeks ago)
Lords ChamberLeasehold and Freehold Reform Act 2024 View all Leasehold and Freehold Reform Act 2024 Debates Read Hansard Text Watch Debate Amendment Paper: HL Bill 50-III(a) Amendments for Committee (Supplementary to the Third Marshalled List) - (26 Apr 2024)
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, I thank noble Lords for their various amendments on the freehold estates and for the thoughtful debate.
Amendments 86 and 87 tabled by the noble Baronesses, Lady Thornhill and Lady Taylor of Stevenage, seek to prevent costs being passed over to home owners. Amendment 87 from the noble Baroness, Lady Taylor, seeks to prevent home owners having to pay any contribution towards the costs where work is required to rectify defects during the estate’s original construction. I fully agree that it is important that communal areas, whether a new road, a playground or open space, are built out to a proper and reasonable standard.
In some cases, elements of construction and maintenance that are subject to an estate management charge may have been delivered via a Section 106 planning obligation or through a planning condition. The local planning authority has enforcement powers to ensure that the relevant infrastructure is built out to the required standard, and it will discharge the obligation when it is satisfied that it has been properly delivered. Some Section 106 agreements may have in them a remediation clause, which will confer responsibility to rectify any problems back to the developer. When there is no remediation clause and management of the estate has been transferred to an estate manager, it will be for that manager to resolve the issue and take legal advice as to the best way forward, when appropriate. This may involve recourse to legal challenge in the courts.
In some cases, it may be relevant if the estate manager has an extant insurance policy that covers the particular issue—for example, subsidence—in which case the insurer might pay for the remediation works then pursue the developer itself. There may be some facts and circumstances where the home owner is not directly liable even though the costs of insurance, for example, may ultimately be passed on to the home owner. However, in cases where remediation or construction issues are not dealt with in a Section 106 obligation and this is not covered by building insurance, it will be for the home owners to pursue any claim for negligent construction through the courts. Furthermore, the potential financial and reputational damage of being challenged through the courts should provide a deterrent so that the developer delivers construction of the site to the required standard.
There are also some unintended consequences that mean I will not be able to accept this amendment. The first concern is the burden of proof. It may be very difficult to prove that the construction defect is the responsibility of the construction company, especially if it has been signed off by the local authority. Secondly, during the period of a dispute, what is expected to happen to the alleged defect? Without any means to raise funds to remedy it, there is a risk of those defects remaining unattended to until the estate manager has concluded the dispute with the construction company. While this litigation is under way, it could mean that the defects on the estate are not being rectified, potentially pushing the estate into further disrepair. This in turn could intensify the problem, creating more disputes between the home owner and the estate manager over whether costs are payable, because they are not relevant costs.
We also need to consider the safety of all those who use the estate. There may be a higher risk of injury to members of the public during a period in which defects are not resolved and, in the event of an incident, the estate manager may be liable. This liability could also sit with the residents themselves where they are members or directors of an estate management company. I recognise that there are, sadly, cases in which initial work is not of the expected quality. However, I hope that the noble Baroness, Lady Taylor, is aware that there are significant challenges to consider with regard to preventing estate managers reclaiming costs from home owners.
Amendment 86 from the noble Baroness, Lady Thornhill, would clarify that an estate management charge is a relevant cost only if it covers services or works that ordinarily would not be provided by the local authority. The impact of this amendment is that home owners on a new or existing managed estate would not be liable for any costs that a local authority would normally carry out. This might include maintenance and the improvement of roads and public open spaces. However, this term is difficult to define. For example, would it include insurance costs of the local authority?
I recognise the many concerns expressed here and in the other place about the fact that local authorities are not required to adopt new developments. I know that mandating adoption of new estates is a key recommendation of the Competition and Markets Authority as part of its recent market study into housebuilding. The question of adoption is very important, but unfortunately it is not something that this Bill can fully address. This is because legislation governing public amenities, such as roads, drainage and open space, is covered by other legislation outside the scope of the Bill.
Furthermore, on its own this amendment has considerable implications. For example, while it may stop payments by existing home owners, it does not take away responsibility for the upkeep of the area under the terms of the property deeds. These home owners would not have any means of raising funds to pay for such upkeep, because they would cease to be treated as relevant costs. This would prevent home owners complying with their legal obligations.
It would also be detrimental to existing home owners, as the condition and upkeep of communal areas may rapidly diminish, impacting on the condition of the area and the well-being of all the residents. This could make it very hard to buy or sell these properties. I should also stress that there would be no contractual obligation for local authorities to take on the management of an existing estate. They are extremely unlikely to do so unless they can ensure that they have sufficient finances to manage and maintain it.
Amendments 64 and 91 from the noble Baronesses, Lady Taylor and Lady Thornhill, seek to achieve the laudable aim of empowering home owners to take over management of the estates on which they live. While I support every effort to drive up the accountability of estate managers and empower home owners on existing estates, I hope I can persuade the noble Baronesses not to press these amendments.
We recognise the benefits of Amendment 64 from the noble Baroness, Lady Taylor. It would mean that a new right for home owners on freehold estates could be introduced in legislation to take on the obligations and liabilities associated with running an estate. There would, though, be many detailed practical issues to work through to deliver a right-to-manage type regime, particularly as estates contain different tenure types, such as leasehold and freehold houses, leasehold flats and commercial units. These issues would all require careful handling as they affect not only property rights but existing contract law.
I would like to reassure Members that we are listening carefully to the arguments being made for the Bill to go further to empower residents on existing freehold estates and, before Report, I would welcome further contributions on this, if noble Lords have them.
Amendment 91, tabled by the noble Baroness, Lady Thornhill, would enable residents to take ownership and possession of the estate management company where an inadequate service is being provided. The grounds presented to invoke this, although well-intentioned, seem unreasonably narrow. Many of these failures are company law issues or are already being dealt with through the Bill. Furthermore, there would need to be solutions for important issues, such as how to address the legal costs of transfer, as well as consequences for the company’s solvency if its equity is removed and it is assessed at a nominal value.
I do not consider that the reasons set out in the proposal from the noble Baroness, Lady Thornhill, provide sufficient basis for a nil-cost transfer. We are concerned that this very simple and broad power is not an appropriate way to address the significant substantive policy issues involved in transferring responsibility. As Members of the Committee will know, we are introducing measures in the Bill to empower home owners and make estate management companies more accountable to them for how their money is spent, including the ability to apply to the appropriate tribunal to replace a failing managing agent.
Amendment 93 from the noble Baroness, Lady Taylor of Stevenage, would require the Government to carry out a review of the extent and impact of non-standard terms and charges imposed by estate managers in property deeds and leases. We are aware that there are many different types of language in deeds and leases, but I do not think this review is necessary. First, home owners will face different obligations depending on what amenities the local authority is or is not responsible for. Secondly, where home owners are responsible, we are driving up the accountability of estate management companies with regard to how they spend the money they charge home owners. These reforms bring in significant protections to prevent exploitation of home owners, and we will of course keep these arrangements under review. I fully recognise the noble Baroness’s desire to provide further support to help home owners living on these estates, particularly in light of the Competition and Markets Authority’s recent report. However, I do not believe that these amendments are the right way of delivering the desired outcome, for the reasons I have explained, and I ask the noble Baronesses not to press them.
My noble friend Lady Finn’s Amendment 87A seeks to deliver the recommendation in the Competition and Markets Authority report that the Government prepare common adoption standards and mandate local authorities to take over responsibility for these public amenities once these standards are met. These are very important issues that must be carefully considered, but, as I mentioned previously, they are not things the Bill can fully address. Legislation on planning considerations and liability for governing public amenities are covered elsewhere and are outside the scope of the Bill. The Government’s thinking on this issue will be set out in our response to the CMA report.
On Amendment 87B, also tabled by my noble friend Lady Finn, it is right that estate managers should be held accountable for the poor delivery of services they provide. However, I do not think this amendment is necessary, as the Bill already contains adequate protections for home owners. Clause 72 makes it clear that any estate management costs must be reasonable and that services or works should be of a reasonable standard. Clause 75 grants home owners the right to apply to the appropriate tribunal for a determination on whether those charges are reasonable. Taken together, these clauses will incentivise estate management companies to charge the correct fees from the outset, thereby reducing the number of home owners being overcharged for works and services on their estate. However, I understand my noble friend’s concerns and those of other noble Lords who have spoken in this debate, and I can reassure them, as I said before, that we are carefully listening to these arguments. Given these considerations, I ask my noble friend not to press her amendments.
Baroness Scott of Bybrook
Member’s explanatory statement
This amendment is consequential on the other Government amendment to this clause.
Baroness Scott of Bybrook (Con)
My Lords, I will now speak to Amendments 66, 68 and 70 in my name. I start by noting that I fully recognise the challenges facing leaseholders, with rising service charges caused by the increased costs in managing and maintaining buildings. The Government are clear, however, that any increase in charges must always be reasonable. We also recognise that the existing statutory protections leaseholders have do not go far enough, which is why we are introducing measures in the Bill to empower leaseholders and help them better scrutinise and challenge the costs they are asked to pay.
Amendment 68 is a technical amendment to Clause 51. It provides further clarification on which parts of the regulatory regime should continue to apply only to landlords who charge and leaseholders who pay variable service charges. These are charges which will vary year on year, depending on the actual cost of providing services.
As currently drafted, the Bill provides such clarity only in respect of measures in the Landlord and Tenant Act 1985. This amendment makes it clear that certain measures and protections in the Landlord and Tenant Act 1987 and the Commonhold and Leasehold Reform Act 2002 should also apply only to leaseholders who pay variable service charges. These include, for example, the ability to appoint a manager and the requirement to hold service charge contributions in trust. Amendments 66 and 70 are minor consequential amendments because of these further changes to Clause 51.
I turn to Amendments 71 to 75 in my name. Amendment 71 clarifies what steps are required to ensure that the written statement of accounts is prepared properly. It follows feedback from and discussions with expert stakeholders after publication of the Bill. We are grateful for their observations. The amendment places an obligation on landlords to provide leaseholders with a report prepared in line with specified standards for the review of financial information. This report must also include a statement by the accountant that the report is a faithful representation of what the report purports to represent.
The amendment also makes it clear, for the avoidance of doubt, that leaseholders must make a fair and reasonable contribution towards the costs of the report. This permits landlords who are unable under the terms of the lease to recover such costs through the service charge to do so, to avoid financial difficulties. This may include right to manage or resident management companies.
Amendment 72 implies a term into the lease where the cost of the preparation of the report is to be payable through the variable service charge. Amendment 73 is a consequential amendment required because of the change to new Section 21D(2)(b).
Amendment 74 allows for the appropriate authority to expand the definition of
“the necessary qualification”
in Section 28(2) of the Landlord and Tenant Act 1985. This will allow the Secretary of State and Welsh Ministers to widen the description of people who are deemed capable of preparing the written report. Amendment 75 makes it clear that any regulations made will be subject to the affirmative procedure.
We will work closely with leaseholders, landlords and professional bodies to ensure we prescribe the right standards to be applied and the right level of detail. I beg to move Amendment 66 and hope noble Lords will support the other technical and essential amendments in my name. I look forward to hearing from noble Lords on their amendments relating to service charges.
The Earl of Lytton (CB)
My Lords, I do not think I am actually the next in line to speak on this, but I have Amendments 78C to 78G and 80A and 80B standing in my name. The intentions behind the Bill in relation to greater transparency and fairness are welcome, but, in my view, they do not go far or fast enough to deal with the current crop of egregious monetising schemes, where there seems to be no end to the inventiveness of the worst offenders.
My amendments go further than the Government’s proposals, for this reason. Some of what is in the Bill will take time to work through and, during that time, the same old abuses—or variants of them—will continue. I want the worst ones to stop immediately the Bill receives Royal Assent. It is part of an essential consumer protection package.
Amendments 78C to 78G, which I will deal with first, seek to close loopholes in the current law, require landlords to achieve value for money in the management of their buildings, promote competition in the property management sector and clamp down on the charging of unnecessary ancillary fees. Amendment 78C clarifies that the costs are to be treated as incurred as soon as there is an unconditional obligation to pay them, even if the whole or part of the cost is not required to be paid until a later date.
The moment when costs are incurred is particularly important in relation to Section 20B of the Landlord and Tenant Act 1985. That section prevented tenants being charged costs incurred more than 18 months before a demand for payment was made, unless they were informed that costs had been incurred and therefore would be payable.
Surprising as it may seem to your Lordships, there are conflicting decisions as to when costs are incurred for the purposes of Section 20B. In Jean-Paul v Southwark London Borough Council in 2011 in the UK Upper Tribunal, Lands Chamber, reference 178, it was held that costs are incurred only when payment is made; but, in OM Property Management Ltd v Burr in 2012, in the UK Upper Tribunal, Lands Chamber, reference 2, it was held that costs are incurred on the presentation of an invoice or on payment. Both leave it open to landlords to ask a supplier to delay the presentation of an invoice, or themselves to delay payment, to postpone the commencement of the 18-month time limit. I do not see this amendment as controversial, as it prevents abuse of the system and brings landlord and tenant law into line with accepted accounting practice.
Amendment 78D covers a situation under Section 19(1)(a) of the Landlord and Tenant Act 1985, where service charge costs are payable
“only to the extent that they are reasonably incurred”.
This amendment replaces the “reasonably incurred” test in relation to service charges with a stricter one of providing “value for money”.
It is established case law that, if a landlord has chosen a course of action that has led to a reasonable outcome, the costs of pursuing that course of action are reasonably incurred even if there was another cheaper outcome that was also reasonable. This wide margin of appreciation leaves leaseholders at risk of overcharging. A value for money test would require landlords to interrogate all options before spending leaseholders’ money. It is not an unreasonable test; it is one that most people use in daily life when considering any significant purchase.
Amendment 78E requires landlords to provide tenants with a range of information, and to update it regularly. It goes further than the Government’s Clause 55, under which landlords are required to provide information only on request. If leaseholders are to be encouraged to take greater interest in the management of their buildings, I do not think we should place obstacles in their way. It should not be difficult for a landlord of a well-manged building automatically to provide and keep up to date a data room of information.
Amendments 78F and 78G continue the consumer protection theme of these amendments by promoting competition in the property-management sector. Amendment 78F prevents landlords contracting with related parties or connected purposes, thus removing an obvious conflict of interest. The danger for leaseholders if a landlord company places contracts with its subsidiary is well illustrated by the Charter Quay case, in which the managing agent, which happened to be owned by the landlord company, was roundly criticised by the tribunal for placing onerous service contracts with other subsidiaries.
In the same vein, to promote competition through regular retendering, Amendment 78G places a maximum contract duration of five years. Although under current law landlords must consult leaseholders before entering into a qualifying long-term agreement—that is, a contract of more than 12 months—there is no limit on its duration. In practice, even limited consultation requirements are relatively easily avoided. Contracts between a holding company and one or more of its subsidiaries, or two or more subsidiaries of the same company, are not qualifying long-term agreements; neither are contracts for a year or less, even if they have been regularly renewed.
Amendment 78H seeks to reduce costs on leaseholders by setting out in statute details of cosmetic works that can be undertaken without approval from a landlord. Most leases contain very tightly drawn provisions in this respect, which are against undertaking virtually any type of work, no matter how insignificant, without the landlord’s consent. Provisions such as a prohibition of the
“cutting, maiming or injuring, or suffering to be cut, maimed or injured, any roof, wall or ceiling”,
are very common. The fees for consenting to some minor works often run into hundreds of pounds, so this amendment attempts to find a way to streamline that.
One may debate at length the areas where a more relaxed regime might impair the amenity of other residents, but I seek to establish the principle of getting away from the monetisation of consent for every mortal thing—from pets to paint colour, and light fittings to lino floors—and putting it in the past. There ought to be greater freedoms for leaseholders but, in noting that the Law Commission report implied that consent for floor coverings should be relaxed, I would only observe from experience that engineered timber floor finishes in particular are often a potent source of noise transmission affecting other residents—so the matter is nuanced. At this stage, I simply wish to sound out the Government’s willingness to draw up, say, a code of practice, or otherwise take steps to free up this area.
I now turn to Amendments 80A and 80B, which are really rather different. I would have had them disaggregated had I been a bit more alert on Friday afternoon, because they relate to insurance moneys. Amendment 80A requires landlords to pay the proceeds of a building insurance policy into a separate fund that is held on trust for leaseholders. It also requires landlords, on receipt of insurance proceeds, to begin immediately to repair or rebuild a building, as far as reasonably practicable.
Service charge funds already have to be held on trust for leaseholders and I contend that building insurance payouts should be treated in the same way. As noble Lords are aware, I have raised my concerns about the risk of landlord insolvency. It has been suggested to me that, if a landlord became insolvent, any insurance proceeds held by the landlord on entering insolvency would form part of the company’s insolvent estate, leaving leaseholders in a damaged or destroyed building as unsecured creditors. Holding insurance proceeds on trust would go some way to protect them from risks relating to landlord borrowings—of which more in relation to Amendment 80B.
Most leases require landlords to reinstate damaged buildings—as, I think, does statute in the case of damage caused by fire. Subsection (3) of the proposed new clause in Amendment 80B places that duty beyond doubt. It requires landlords to move quickly to repair or rebuild the damaged or destroyed building. It goes some way to closing a loophole commonly found in leases that gives landlords the right to terminate where it is not possible to reinstate a building within a certain period. That is often three years, which is likely to be insufficient time to effect reinstatement of a larger or complex building.
Amendment 80B closes what I consider to be another loophole for insurance. Most leases require that the landlord insures the building, with the cost charged to leaseholders. However, what concerns me is the ability of landlords to assign the proceeds of insurance policies as security for their borrowings.
Baroness Thornhill (LD)
My Lords, before the noble Baroness takes the Dispatch Box, I apologise to the Committee and to the noble Lord, Lord Moylan, in particular. Due to lots of pieces of paper, I commented on two amendments that are actually in group 4, so I reassure the Committee that I will not be repeating those comments.
Baroness Scott of Bybrook (Con)
My Lords, I apologise in advance for the length of my response. This is a large group so I might go on for quite a long time. I apologise for that, but I think it is important that I respond to all the amendments.
I thank the noble Lord, Lord Khan of Burnley, who spoke to the amendments from the noble Baroness, Lady Taylor. Amendment 67 seeks to give the right to challenge the reasonableness of a service charge to leaseholders who pay a fixed service charge. I recognise that leaseholders who pay fixed service charges do not have the same right to challenge the reasonableness of their service charges as leaseholders who pay a variable service charge. However, there are good reasons for that. The main sectors where fixed service charges exist are the retirement and social housing sectors, where households are often on limited or fixed incomes; certainty over bills is paramount for these homeowners. Leaseholders, especially on low incomes, who pay a fixed service charge have more certainty over the amount of their service charge compared with those who pay a variable service charge. They will know about and understand the level of the charge before they enter into an agreement.
Landlords benefit from not having to consider tribunal applications, but in return they have a clear imperative to provide value for money: if they underestimate the costs, they will have to fund the difference themselves. They will still need to provide the quality of service as set out in the lease since, if they do not, they may be taken to court for breach of that lease.
By giving the right to challenge fixed service charges in a similar way to how variable service charges can be challenged, there would likely be operational and practical challenges. For example, if landlords underestimate costs in one year but overestimate them in another, it is feasible and reasonable to be able to challenge the unreasonableness only in the year when costs are overestimated. It is not proposed to give the landlord an equivalent right to apply to seek to recover the balance of an underestimated cost on the basis that it would be reasonable to do so. There is a possibility that landlords may move to variable service charges, and that could have unintended and undesirable consequences for leaseholders with a fixed income who benefit from the certainty of fixed service charges.
Through the Bill, leaseholders who pay a fixed service charge will be given additional rights. Landlords will be required to provide the minimum prescribed information to all leaseholders. I consider that the additional rights given to leaseholders who pay fixed service charges will allow them to better understand what their service charges pay for, and to hold their landlord to account. I hope that, with that reassurance, the noble Lord will not move the noble Baroness’s amendments.
I thank the noble Lord for Amendment 69 in the name of the noble Baroness, Lady Taylor, which seeks to remove the provision that enables the appropriate authority to exempt certain categories of landlords from the requirement to provide a standardised service charge demand form to the leaseholder. I recognise the importance of all leaseholders receiving sufficient information from their landlord to enable them to understand what they are paying for through their service charge. Requiring landlords to provide leaseholders with a standardised service charge demand form contributes to increased understanding. However, I am aware that there could be instances now or in the future where it is necessary to exempt landlords from that requirement. It could be too costly or disproportionate to expect certain categories of landlords to provide that level of information. As the Minister for Housing mentioned in the other place, one example might be the Tyneside leases.
Prior to any exemptions being agreed, we will consult with stakeholders to determine whether an exemption is justified. I emphasise that the list of exemptions is expected to be small—if it is needed at all, in fact—and full justification will be required for any agreed exemptions. I note the noble Baroness’s concerns but I hope that, with this reassurance, the noble Lord will not move the amendment.
I also thank the noble Lord, Lord Khan of Burnley, for Amendment 76, which would create a power for the appropriate authority to prescribe the maximum costs that landlords may pass on to leaseholders for providing information. I recognise that leaseholders can face increasing service charge costs and that not capping costs for providing information could drive landlords to charge unreasonable amounts.
Lord Khan of Burnley (Lab)
My Lords, I know that the Minister has been speaking for a while, but I want to press her on this important point as we are talking about charges. There is a huge, fundamental area of concern in that the ground rent consultation has yet to be published. I know that it is unreasonable for me to ask the Minister to talk about any leaks or media announcements. However, how will this House be able to scrutinise it at this late stage of the Bill’s passage?
Baroness Scott of Bybrook (Con)
We debated ground rents last week, and I do not have anything to add. If there are any changes to the Bill, we will give sufficient time for all noble Lords to consider them.
Baroness Scott of Bybrook
“(7) The Landlord and Tenant Act 1987 (“the LTA 1987”) is amended in accordance with subsections (8) to (10).(8) In the provisions referred to in subsection (9), in each place they occur—(a) for “service charge” substitute “variable service charge”; (b) for “service charges” substitute “variable service charges”.(9) The provisions are—(a) in section 24 (appointment of manager by tribunal), subsections (2) and (2A);(b) in section 35 (application by party to lease for variation of lease), subsections (2) and (4);(c) in section 42 (service charge contributions to be held in trust), the heading and subsections (1), (2), (3), (4), (6), and (8).(10) In section 35(8), for ““service charge” has the meaning” substitute ““service charge” and “variable service charge” have the meaning”.(11) In section 167 of the CLRA 2002 (failure to pay small amount for short period)—(a) in subsection (1), for “service charges” substitute “variable service charges”;(b) in subsection (5), for “service charge” substitute “variable service charge”.”Member’s explanatory statement
This amendment would, in light of the amended definition of “service charges” in section 18 of the LTA 1985, make amendments to provisions in the LTA 1987 and CLRA 2002 that use that definition so that they refer to “variable service charges” (and accordingly preserve the current effect of those provisions).
Baroness Scott of Bybrook
Member’s explanatory statement
This amendment is consequential on the Government amendments to clause 51.
Baroness Scott of Bybrook
“(b) that, on or before the account date for an accounting period in respect of which a statement of account is provided, the landlord must provide the tenant with a written report about the statement prepared by a qualified accountant, which—(i) is prepared in accordance with specified standards for the review of financial information, and(ii) includes a statement by the accountant, in a specified form and manner, that the report is a faithful representation of what it purports to represent;(c) that the landlord must provide adequate accounts, receipts or other documents or explanations to the accountant to enable them to provide the report; (d) that, if the landlord incurs costs in obtaining the report, the tenant must pay the landlord a fair and reasonable contribution to those costs.”Member’s explanatory statement
This amendment would clarify that the obligations of the landlord are to obtain a report from a qualified accountant as to the accuracy of the statement of account and to provide adequate documents to the accountant, and would require the tenant to contribute towards the costs of the report.
Baroness Taylor of Stevenage (Lab)
My Lords, I shall speak to our Amendment 103, and comment on others in this group. I thank the noble Earl, Lord Lytton, for his careful and thoughtful consideration of how we might use the Bill to rectify some of the glaring building safety omissions that are an unfortunate legacy of the Building Safety Act. His proposals on building trustees warrant close consideration, especially as he has carefully set out how they might be funded. Taken together with proposals in later amendments for a property regulator, this could deal with a number of the loopholes that have caused an overall descent into property chaos, which has been the subject of much debate in this House, by matching independent local oversight with a national property regulator.
The noble Earl set out in his customary forensic way his justification for the amendments. I respect his professional expertise in this area, and I do not think I need to say any more than to welcome the issues he has covered. As the noble Baroness, Lady Thornhill, said, those could have been subject to pre-legislative scrutiny—but sadly, they were not. As was said earlier today, it is a mark of how your Lordships’ House can contribute to legislation that we have them before us today. It is a shame they could not have been incorporated at an earlier stage, because it is late now to debate such detailed proposals. I look forward to the Minister’s response, and I hope she will, as she always does, take the amendments seriously and tell us what the Government are going to do when they consider them.
Noble Lords would have received the excellent briefing, as I did this morning, from the National Residential Landlords Association. It says that “it is more critical than ever, in the context of the Government’s Leasehold and Freehold Reform Bill” that the building safety remediation scheme “is implemented without further delay to resolve the failings of the Building Safety Act’s leaseholder protections”. The noble Earl, Lord Lytton, said that he is not particular precious about this structure but, if we do not have it, what will the Government put in its place to do that?
We are now seven years on from the dreadful tragedy at Grenfell. It is shameful that so many leaseholders are still living with the fear of fire risks and the unbelievable pressure from the uncertainty around the financial commitments that they will face for their building remediation. It is the most terrible indictment of this Government’s failure to recognise the unconscionable impact on the lives of those affected, let alone the issues raised so many times in this Chamber of those who live in non-qualifying buildings but, nevertheless, have the leasehold sword of Damocles hanging over them.
The noble Baroness, Lady Thornhill, already mentioned the excoriating article in the Times this weekend. Martina Lees gives an incredibly thorough and well-researched account of the impact of the cladding scandal. Her investigation points out that
“15,000 residents have been forced to leave homes due to fire or fire safety defects”,
and that escalated last year with the evacuation of at least 21 buildings. She also says:
“Despite £9.1 billion of government grants being set aside to help fix homes, only £2.1 billion has been spent. The building safety crisis has trapped 700,000 people in dangerous homes and left almost three million owners with flats they cannot sell. Almost all are properties built or refurbished since 2000, with defects such as flammable cladding systems, combustible balconies and faulty fire barriers”.
I am familiar with faulty fire barriers from Vista Tower in Stevenage. She also points to government manipulation of figures, in that they
“cite a total of 4,329 buildings or 248,000 flats over 11 metres high with unsafe cladding. Of these, 23 per cent have been fixed”.
However, as Ms Lees points out,
“previous government data added up to 375,000 flats over 11m, making the number fixed just 8 per cent. The new total excludes more than 1,000 buildings where the developer must pay for repairs but does not know whether work is needed. It also precludes hundreds of blocks that did not get taxpayer help because they had the wrong type of fire risks … or were deemed below 18m … It leaves out up to 7,283 mid-rise buildings that the government had previously estimated to be unsafe”.
I am sure that the Minister will tell us that she does not respond to press stories in the Chamber, but the headline issues raised here are that affected leaseholders continue to endure this misery, with some having to pay rent for properties that they have been evacuated to, on top of the thousands of pounds of service charges that they face. Amendments in this group would at least provide some longer-term solutions to these issues.
My Amendment 103 seeks to recognise that financial pressure and ensure that there is at least a cap on the charges that leaseholders are expected to bear. Our preference going forward would be that developers are held ultimately accountable for any fire or other safety defect remediation in the buildings. In future, we hope that even greater consideration is given to how that might be achieved.
We also support the amendment of the noble Lord, Lord Foster; it is surprising only in that it is not already the case that buildings with electrical defects cannot be sold. If that is the case, surely this should be urgently rectified through the building regulations regime. I hope that we do not have to wait another two years to implement that.
Amendment 101 is in the name of the noble Lord, Lord Young, although he did not speak to it. It seeks to impose a deadline of June 2027 for remediation of fire safety defects. That is not an unreasonable target, as it would mean that an entire decade had passed since the Grenfell tragedy.
The noble Baroness, Lady Fox, made a very powerful case for the unintended consequence of the removal of the Section 24 manager. Her amendment and that of the noble Lord, Lord Bailey, seek to improve accountability. As this is one of the stated aims of the Bill, we look forward to the Minister’s response to their proposals.
Baroness Scott of Bybrook (Con)
I thank noble Lords for their various amendments on building safety and for the debate. I will respond to the amendments in turn.
I thank the noble Earl, Lord Lytton, for his amendments relating to a building trustee. Amendment 82C requires some buildings to have a building trustee, while Amendments 82D to 82M cover the process of appointment, duties, rights to information and how these trustees will be funded. The building safety trustee will either replace or complement the functions carried out by the landlord or a managing agent. I fully agree with the view that landlords and managing agents must manage and maintain buildings for which they are responsible and provide a good-quality service to tenants. However, I believe that this proposal would create additional complexity with little relative gain. The proposed mechanisms for funding these trustees increase the risk of pushing more landlords into escheat and it is hard to see how the levy proposals can be delivered. Secondly, we consider that there are better ways to deliver the desired outcome. As I have previously mentioned, we are bringing measures forward in the Bill that will drive up the accountability of landlords and their agents, so we do not agree with the noble Earl’s amendments.
I thank the noble Lord, Lord Foster of Bath, for his amendment, which seeks to improve electrical safety standards in buildings by identifying whether there is an electrical defect prior to sale, and for his continued interest in this very important issue for housing safety. This amendment would require a specified person to acquire an electrical installation condition report or electrical installation certificate prior to marketing the property, unless it is being sold for demolition or a full electrical rewire has been completed in the last five years. This is an important issue; we know that improving electrical safety is paramount to helping prevent fires and making sure that occupants feel safe in their homes.
As the noble Lord said, the Government have already taken firm action in the private rented sector by requiring PRS landlords to acquire an EICR at least every five years and to organise remediation works where necessary. We have also consulted on equivalent electrical safety standards in the social housing sector through our 2022 consultation and call for evidence. Here, we examined proposals to require social landlords to obtain an EICR for their rental tenants at least every five years and then to carry out remedial works within a set timescale. Our call for evidence also explored extending the proposed requirements to owner-occupier leaseholders within social housing blocks, so that the whole block is subject to these increased standards. We are aware of the noble Lord’s concerns about the sector that we have not yet hit—the owner-occupied sector. The Government are still considering responses to the consultation and the call for evidence, and we will update this House in due course.
I thank the noble Baroness, Lady Fox of Buckley, and the noble Lord, Lord Bailey of Paddington, for their Amendments 104 and 105B—I will also speak to Amendment 98, although my noble friend Lord Young of Cookham is not here—relating to changes of the definition of accountable persons under Section 72 of the Building Safety Act 2022 and other changes protecting the position of managers appointed under Section 24 of the Landlord and Tenant Act 1987.
I trust that noble Lords will understand that the Government cannot accept the proposed amendments. First, defining a Section 24 manager as an accountable person would move financial and criminal liabilities away from the existing accountable person to the Section 24 manager. It was the intent of the Building Safety Act that financial and criminal responsibilities for certain aspects of maintaining the building should always remain with the accountable person, and the accountable persons cannot delegate this responsibility to a third party. As drafted, the amendments could also mean that Section 24 managers would not be able to recover funds from the accountable person for the incidents of remediation works. I assure noble Lords that the Government are looking closely at this issue and at options to ensure that Section 24 managers can take forward building safety duties and get funding, where needed, from the accountable persons.
Baroness Scott of Bybrook
Member’s explanatory statement
This amendment is consequential on clause 67 repealing section 172(1)(a) of the CLRA 2002, which is amended by section 112(7) of the BSA 2022.
Baroness Scott of Bybrook (Con)
My Lords, I thank the noble Baroness, Lady Fox of Buckley, for her Amendment 85, which seeks to commit a Minister of the Crown to publishing a report assessing the state of the UK’s retirement leasehold sector within one year of the passing of this Act.
The Government recognise that leaseholders make up a significant proportion of the retirement sector, and are committed to ensuring that older people have access to the right homes in the right places to suit their needs. That is why the independent Older People’s Housing Taskforce was established in May 2023. The task force has been asked to look at the current supply of older people’s housing, to examine enablers to increase supply and to improve housing options for older people later in life. The task force has been commissioned to run for up to 12 months, and over this period has undertaken extensive engagement with stakeholders and gathered a great deal of evidence to inform its thinking and recommendations. The task force, as we have heard, will make final recommendations to Ministers this summer. I say to noble Lords who say we already have the review that I am not aware of that.
In addition, the Government have previously agreed to implement the majority of the recommendations in the Law Commission’s leasehold retirement event fees report. This includes approving a code of practice as soon as parliamentary time allows, to make event fees fairer and more transparent. The code will set out that these fees should not be charged unexpectedly, and developers and estate agents should make all such fees clear to people before they buy, so that prospective buyers can make an informed decision before forming a financial or emotional attachment to a property.
More widely, the Bill already introduces many elements that will help leaseholders, including those who live in retirement properties. As we move forward, the Government will continue to be mindful of the needs of leaseholders in retirement properties. The Government’s aim is to make sure that older people can live in the homes that suit their needs, help them live healthier lives for longer and, crucially, preserve their independence and their connections to the communities and places they hold dear. To reiterate, we have committed to making event fees fairer and more transparent and will bring forward legislation as soon as parliamentary time allows. With these reassurances in mind, I hope the noble Baroness, Lady Fox, will agree with me that this proposed new clause is no longer necessary, and I ask that the amendment be withdrawn.
Baroness Fox of Buckley (Non-Afl)
Briefly, I thank those who have spoken, as it is the last group of the day. The noble Baroness, Lady Thornhill, has made some excellent contributions throughout, but really summed up why I tabled this amendment in the first place. The noble Baroness, Lady Taylor of Stevenage, has obviously been reflecting on this issue too, as has the Minister. Particular thanks go to the noble Lord, Lord Best, who made the speech I wish I had made and obviously understands the issue in far greater depth than I do: I appreciate it. I hope that, none the less, the amendment has been useful in raising the profile of the issue.
I want to clarify one other thing. There is always a danger when we talk about the elderly as vulnerable people who might be preyed upon. We here are in a situation in which we might notice that people who are older can be the most ferocious and active, and not remotely vulnerable. In the film from the Free Leaseholders I was talking about, it was more that the elderly people interviewed said they had made a decision to be less active in fighting for their rights and maybe relax a bit and go into a lovely flat. They then found themselves in a situation where they had to become civil liberties fighters all over again, or lawyers or whatever, and that took up all their time and drained them. I do not want to want in any way to sound patronising. I want the sector to grow, but I do not think it will with leasehold. I beg leave to withdraw my amendment.
Baroness Scott of Bybrook
Member's explanatory statement
This amendment would align the terminology used with terminology used elsewhere in Part 5.
Baroness Scott of Bybrook
“(1A) But “administration charge” does not include an amount payable by a tenant of a dwelling in a case where all of the following conditions are met—(a) the tenant’s lease specifies that only a person who has attained a minimum age may occupy the dwelling;(b) the amount is payable under a term of the tenant’s lease or is otherwise payable in connection with the tenant’s lease;(c) the amount is payable if—(i) the tenant’s lease is granted, assigned or terminated,(ii) a lease of the dwelling which is inferior to the tenant’s lease is granted, assigned or terminated, or(iii) there is a change in the person or persons occupying the dwelling; (d) the amount is fixed or is calculated by a method determinable in advance;(e) any other conditions specified in regulations made by the appropriate authority.”Member's explanatory statement
This amendment would provide for “administration charge” in clause 81 to exclude “event fees” (which will generally be “fixed” service charges subject to the provisions regulating those charges inserted by Part 4).