Leasehold and Freehold Reform Bill

(Limited Text - Ministerial Extracts only)

Committee stage
Wednesday 1st May 2024 Lords Chamber

[Baroness Taylor of Stevenage (Lab)]

My Lords, I add my tribute on the sad and sudden passing of Lord Stunell. We worked very closely with him on the levelling-up Bill, and he was such a great asset during the passage of that Bill. Looking at his record over the years, his was a life dedicated to public service, to both national and local government. I hope the noble Baroness will take our condolences back to the Liberal Democrat group, and we will pass them on to his family as well.

The noble Earl, Lord Lytton, is right to call this issue a sorry tale of shame. It is clear from the number of building safety amendments in this group and this Bill, and previously in the levelling-up Bill, that there appears from our debates to be a cross-party consensus from most of us, except the Government Front Bench, of such deep dissatisfaction with building safety in general and the glacial progress on remediation in particular. It was carefully calculated in the recent Times article by Martina Lees, referred to earlier, to show that only 8% of buildings in need have been remedied, not the 21% that the Government claim, and which was mentioned by the right reverend Prelate the Bishop of Lincoln.

As important is the huge number of non-qualifying leaseholders whose dreams of property ownership have turned to nightmares, as the horror of their uncertain financial position, the escalating costs of remediation and the impossibility of selling homes—I have seen evidence of this, as valuers are currently placing values at zero or negative—snatch away their aspirations and leave behind only extreme anxiety. Numbers vary, but the Times estimates the number of affected homes to be up to 1.5 million and, as other noble Lords have said, upwards of 4 million people are affected.

An excellent briefing from the National Residential Landlords Association points out that data remains lacking and estimates that there are approximately 1.3 million leaseholders in buildings less than 11 metres in height and 400,000 leaseholders, referred to by the noble Baroness, Lady Thornhill, in high-rise buildings who are non-qualifying because of other eligibility criteria. Many leaseholders are unaware of their non-qualifying status or are alerted to it only when they receive an invoice for remediation works or attempt to sell their property. It is important to remember that many leaseholders are understandably reluctant to speak out on this issue for fear of further devaluing what they thought was going to be a very valuable property asset.

The scale of this problem is eye-watering. I agree with comments made previously by Members of your Lordships’ House that, unless this is addressed urgently, as more and more leaseholders discover their liability, another enormous injustice scandal will unravel, which will scar whole generations of home owners. The noble Earl, Lord Lytton, referred to the fact that this will escalate over time to the detriment of freeholders and leaseholders, but with the balance of personal financial risk sitting with leaseholders.

The system the Government put in place, which was subject to an update in your Lordships’ House at the end of March, may have made some progress, but as a spokesperson for Grenfell United said:

“Government’s shockingly slow progress towards remediation shows a complete lack of political will to keep people safe in their own homes”.


Giles Grover, of the excellent group End Our Cladding Scandal said:

“The majority of unsafe buildings across the country still don’t have plans in place to fix all issues”.


The 7,283 mid-rise buildings that the Government have estimated to be unsafe are missing from any plan for remediation as they are deemed non-qualifying, and the unbearable pressure of remediation is falling on the ordinary people who make these flats their homes. While the Government have brought forward legislation and statutory instruments to deal with this situation, progress has been slow because issues are being dealt with piecemeal as they arise. Even when legislation has been considered, such as the Building Safety Act 2022, which should have been a comprehensive solution, too often amendments were rejected with serious impacts and consequences for leaseholders only now becoming more apparent.

The noble Earl, Lord Lytton, proposes a comprehensive and detailed framework to encompass the whole situation around building safety remediation that would give more structure to the current piecemeal approach. While I understand that the level of detail that he proposes in this scheme will almost certainly not be greeted by the Minister with the wholehearted approval that it probably deserves, I hope the principle of having such a framework in place and the thorough approach set out by the noble Earl will at least be a matter for reflection and future consideration as the Bill progresses.

Amendments 96 and 97, tabled by the noble Lord, Lord Young of Cookham, his Amendments 99 and 100, to which I have added my name, and Amendments 105E and 105F, tabled by the noble Earl, Lord Lytton, are aimed at ending the iniquitous distinction between qualifying and non-qualifying leaseholders. We cannot simply allow the nightmare that many non-qualifying leaseholders are enduring to continue.

We totally support the aim of Amendment 102, in the name of the noble Baroness, Lady Pinnock, in terms of holding the Government to account for the building safety remediation programme. The reporting mechanisms so far do not appear to have accelerated progress on remediation, although it has to be said that the bringing to justice of some of the worst developer offenders, such as those involved with Vista Tower in Stevenage, is welcome. I hope the Government will accept this amendment and bring regular updates before your Lordships’ House, but it would be even better if there could be target dates for outstanding work to be completed. The fact that remediation has dragged on for so many years is a cause of great frustration, anxiety and financial hardship to those affected. Do the Government have a view about a projected end date for these works to be completed? A deadline, even if it is not met by everyone involved, is great for concentrating the minds of those involved in remediation.

In response to the points made by the noble Baroness, Lady Thornhill, and the noble Lord, Lord Empey, I agree with the noble Baroness that it is not just developers who are responsible for this issue. But a big problem here has been the deregulation of the building control function, taking it away from local authorities and allowing developers to pick and choose who their building control inspectors will be. That has been greatly responsible for some of these issues.

Our Amendment 105 is simple and straightforward in its aim. It would bring the beleaguered non-qualified leaseholders, who are in desperate need of remedies for their building defects, within the remit of the Building Safety Act 2022. Surely, if we are concerned about ensuring that people feel safe and are safe in their homes, we can all support that. It remains our position that it should not be the responsibility of leaseholders to suffer the financial consequences of defective building. Amendment 105C in the name of the noble Earl, Lord Lytton, has a similar aim.

I support my noble friend Lord Rooker in his campaign to highlight the danger of—I was going to call them electricity surges, but I had better not now because I will get into trouble with him—neutral current diversion. I want to come back to the case that Martina Lees quoted of Viv Sharma and his Ukrainian wife Julia, who had to leave their nine-storey block when the fire service deemed it unsafe. It had more than 17 defects, caused by the original developers, which should never have been approved by building control. They have been offered less for their property than they bought it for 15 years ago, and they have had to pay for temporary accommodation. Julia has said:

“I’m now 50. How am I supposed to rebuild my life?”


That situation—which is morally wrong, as the noble Lord, Lord Young, said—remains in place. Such situations should have been remedied by the Building Safety Act but were not. We now have another opportunity to put things right, so I hope the Government will do so by accepting the amendments before us today.

[The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)]

My Lords, I first add my tribute to Andrew, Lord Stunell. I have sat opposite him for many hours in this Chamber and in Committee, being challenged by him in a detailed but always good-humoured way. I am going to miss him. I did not know where he was this week to begin with, and I asked questions. He will be sorely missed, particularly on the issues that we talk about as a group of Peers. I send his family, friends and colleagues our best wishes. May he rest in peace.

I thank noble Lords for the amendments on building safety and for this thoughtful debate. It is an important issue. I will take all the amendments in turn and put the Government’s view. I thank the noble Earl, Lord Lytton, for Amendments 93B and 107. Their aims were debated extensively during the passage of the Building Safety Act 2022 and the Levelling Up and Regeneration Act 2023. I thank the noble Earl for his years of important campaigning on building safety, and for tabling these amendments again and speaking to them in such a detailed way. We continue to consider his arguments and are always willing to listen carefully to the ways in which we could improve the current regime. That is why the Government tabled several clauses in the other place to clarify and extend the protections in some particular areas of this Act.

However, I reiterate that implementing a new building safety remediation scheme would reverse what has been achieved by the regulatory regime set out in the Building Safety Act. Creating a system which mirrored the existing regime would delay essential remediation already being carried out. It would also create uncertainty for leaseholders across the country. The responsible actors scheme, the developer remediation contract, remediation orders and remediation contribution orders are already delivering many of the noble Earl’s objectives, requiring developers to fix problems that they have caused.

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[Lord Empey (UUP)]

On that matter, if a company was responsible for defective property and the company became insolvent, am I to understand that the directors of that company would be capable of recommencing building another property? Or is the Minister saying that the individuals could be followed through the courts for remediation, rather than being able to sidestep their responsibilities?

[Baroness Scott of Bybrook (Con)]

My Lords, that is an interesting and very legal point. Rather than speaking off the top of my head, I would like to get it right and write to the noble Lord.

I move to Amendments 96, 97, 99 and 100. I thank my noble friend Lord Young of Cookham for these amendments. Amendments 96 and 99 would extend the leaseholder protections to buildings under 11 metres and to collectively owned leaseholder buildings. It is generally accepted that the risk to life from historic fire safety defects is proportionate to the height of buildings. As this risk is lower in buildings under 11 metres, such buildings will require remediation only in very exceptional circumstances. Given the small number of buildings that have required this—it is three across the country; the developers have remediated two of them and we are in negotiations on the third to get that remediation done—our assessment remains that extending the leaseholder protections to these buildings is neither necessary nor proportionate.

Where leaseholders in buildings under 11 metres face remediation costs, it is important, as I have said so many times at the Dispatch Box, that they contact the department immediately and we will look into that individual building on a case-by-case basis. If necessary, we will write to the building owner to seek assurances that any proposed works are necessary and proportionate, and that the rights to redress are being fully utilised.

The Government understand that some leaseholders in these buildings are still facing higher insurance premiums, with insurers citing building safety as the reason for the increase. The Association of British Insurers and its members have stated that premiums should reduce where buildings comply with building regulations. We expect insurers to honour their commitments and make sure that premiums are priced fairly and appropriate to the level of risk.

Regarding collectively owned leaseholder buildings, the Government made the decision that the leaseholder protections in the Building Safety Act would not apply to these buildings. As a result, people would still have to pay to remedy the safety defects in their building as owners. Residents who own the freehold would have to pay not only their portion of remediation costs but for any residents who did not participate in the purchase of the freehold.

Since the Building Safety Act, the Government have continued to examine the situation faced by collectively owned leasehold buildings. For instance, the Building Safety (Leaseholder Protections) (England) Regulations 2022 provide owners in these leaseholder-owned buildings with access to remediation contribution costs. We have listened and we have acted.

I turn to Amendment 97. The existing leaseholder protection package is designed to maintain a fine balance between leaseholders’ and freeholders’ rights. The amendment distorts the balance disproportionately in favour of leaseholders and risks unfairly benefiting one group of investors, leaseholders, to the detriment of another—the freeholders.

Regarding Amendment 100, our intention has always been to protect individuals living in their own homes, rather than those who have purchased property for financial or commercial reasons. Changing the leaseholder protection regime so that it is linked to a share of ownership, rather than individual properties, would also introduce an unnecessary level of uncertainty and complexity into the protections.

Regarding cessation certificates, it is not clear what effect such a certificate would have or how a landlord would know when to serve one. The responsibility for the costs of fixing historical building safety defects should rest with those responsible for creating them. The Building Safety Act was clear that, when this is not possible, responsibility for remediation should be shared between stakeholders in the property. Concentrating responsibility on a single group would risk a number of unintended consequences, including freeholders becoming insolvent. Taken together, the changes made by this amendment would therefore complicate the regime unnecessarily and slow the progress made towards the remediation of buildings.

I thank the noble Baroness, Lady Thornhill, who spoke on behalf of the noble Baroness, Lady Pinnock, to Amendment 102 about the reporting requirement for building safety remediation. The Government are committed to accelerating remediation and protecting affected residents. The total number of buildings reported to have started or completed remediation works in England has more than doubled since the end of March 2023. Along with monthly updates, Ministers have also committed to providing the other place and those interested with regular updates on progress, the latest of which was provided on 26 March.

My noble friend Lord Young of Cookham asked about ACM cladding. Another noble Lord mentioned pathways. I realise that pathways do not mean delivery, but, importantly, all residential buildings in England taller than 11 metres have a pathway to fixing unsafe cladding, either through taxpayer-funded schemes, developer-funded schemes or social housing provider-led remediation. This protects leaseholders from these costs. In addition, 99% of high-rise buildings with unsafe Grenfell-style ACM cladding identified before 2023 have been made safe or have work under way to make them safe. The proportion of buildings remediated continues to shift as more buildings are being identified and 90% of all high-rise buildings with ACM cladding have been made safe or have work under way on them.

My noble friend Lord Young also brought up the issue of decanting. The Government amended the Bill in the other place to make it explicit that the costs of alternative accommodation for residents, when they are decanted from their homes to avoid imminent threat to life or of personal injury, or because remediation works cannot take place while residents are in occupation, can be recovered. They can recover those costs through a remediation contribution order, which is an important change to the Bill.

The department continues to take steps to support applicants to start on site more quickly. Local authorities, fire and rescue authorities and the Health and Safety Executive can take enforcement action against those not progressing remedial works. Where building owners are failing to make acceptable progress, those responsible should expect further action to be taken.

Some 55 of the largest developers signed legally binding contracts committing to remediate, or to pay to remediate, life-critical fire safety defects in 1,500 buildings over 11 metres that they had a role in developing in England over the 30 years to April 2022. Together with the building safety levy, this will see industry contribute an estimated £6 billion. The department publishes information on developer progress based on quarterly returns submitted by developers, and this is available. I make it clear that the introduction of new reporting requirements involves time and cost, which need to be balanced against the need to continue our progress in building remediation. So I ask the noble Baroness not to press the amendment.

I thank the noble Baroness, Lady Taylor of Stevenage, for her Amendment 105. Similarly to Amendment 97, it would open the door to changes which distort that balance disproportionately in favour of one group, to the detriment of another. It is important that legislation provides clarity for leaseholders, freeholders and the courts. The Government believe that having definitions of qualifying and non-qualifying leases in primary legislation provides greater certainty to all interested parties—an important consideration given that this is a pivotal part of the legislation for so many people across the country.

I thank the noble Earl, Lord Lytton, for Amendments 105C to 105G, which seek to make several changes to the building safety regime and, in the case of Amendment 105G, the insolvency regime. Amendment 105C would rewrite the developer remediation contract by statute. This would unfortunately serve to create operational legal confusion about what developers’ obligations are, which buildings need to be identified and remediated, and what standards this should be done to, resulting in delay and litigation. I hope the Committee agrees that the Government should instead focus on holding developers to account for remediating unsafe buildings as quickly as possible.

On Amendment 105D, it is right that the Government have worked with major developers that have built defective buildings to secure binding commitments to remediate, worth an estimated £3 billion. However, I do not believe it would be fair also to target these specific developers to pay a disproportionate share of other remediation costs for buildings that they have no connection with. That is why we are focused on setting up the building safety levy to contribute funds to our programmes to remediate buildings over 11 metres. The levy is estimated to raise a further £3 billion over 10 years, or more.

We have had much debate on the merits of Amendment 105E, and I gave my views on Amendments 96, 97 and 99. As I mentioned, relatively small numbers of residential buildings under 11 metres or five storeys require remediation. These buildings are considered to be at low risk of historical fire defects, and I maintain that this change would disproportionately and unfairly place the obligation for remediation of non-life-threatening defects on freeholders. Meanwhile, extending protection to leaseholders who have not purchased the freehold would place the financial burden of remediation entirely on leaseholders who own a share of the freehold, making it less likely that these buildings will be remediated.

As for providing leaseholder protections to leaseholders who own more than three dwellings, I reiterate the points raised earlier. Landlords owning a number of properties are likely to have these as investments, and a fair balance needs to be met. The Building Safety Act was not designed to benefit investors; it is to help individuals living in their own homes.

On Amendment 105F, removing qualifications for passing on costs for defects in service charges would widen the scope of the leaseholder protections considerably. This would risk the burden of remediation costs falling disproportionately on landlords, whether or not those landlords are also some or all of the leaseholders in the building. The amendment also provides for members of a building industry scheme to cover remediation costs. I have already mentioned my concerns with the similar approach in Amendment 105D.

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We have the opportunity here to implement the very sound recommendations of the working group of the noble Lord, Lord Best, by incorporating them into the Bill as set out in Amendment 94. I hope the Government will accept this and end the decades of delay we have seen on this issue, but if they do not and the noble Lord decides to return to it on Report, he will certainly still have our support.

[Baroness Scott of Bybrook (Con)]

I thank the noble Lord, Lord Best, for his Amendment 94, and for his and other noble Lords’ persistence in pushing for the creation of a new regulatory body to oversee property agents. I put on record my sincere thanks to him for his valuable work on regulation over very many years. I note that he is also a member of the Industry and Regulators Committee, which recently concluded that the case for regulation of the property agent sector still remains. Ministers will respond to the committee in due course.

However, as the noble Lord is acutely aware, the Secretary of State indicated in the other place that he did not consider that this was the right time or the right Bill to set up a new regulator for property agents. I know that he and other noble Lords will be disappointed, but perhaps not surprised, by this. However, the Government remain committed to driving up professionalism and standards among property agents. Leaseholders deserve a good service for the money they pay, whether from their landlord or their managing agent, where one is in place.

The noble Lord once again brought up, as he has many times with me, mandating professional qualifications. This was one of the areas that the Government asked the noble Lord’s working group to look into as part of its review. I assure him that that remains on the table.

At this point, I will respond to the interesting idea from my noble friend Lord Young of Cookham about the How to Lease guide. Interestingly, I spoke to officials about this idea not too many hours ago, building on the guide to renting. That is something that could be put in place. I will work further on it and talk to my noble friend more.

Industry plays an important role in driving up standards, and we welcome the ongoing work being undertaken by the industry and others to support this. This includes the efforts of the noble Baroness, Lady Hayter of Kentish Town, and her independent steering group in preparing an overarching code of conduct. I thank her for that. I know that the Government are very interested and looking at it in much more detail. This is an important development to ensure that all consumers are treated fairly and agents work to the same high standards. I echo what many noble Lords have said. We have some excellent agents in this country who do a fantastic job. The agents we are talking about are the rogue agents, who I know noble Lords are trying to ensure come up to the same high standards. I thank the noble Baroness for her work on this.

I should also stress that measures in this Bill, alongside existing protections and work being undertaken by the industry, seek to make managing agents more accountable to those who pay for their services. That includes making it easier for leaseholders to take on the management of their buildings themselves, where they can directly appoint or replace agents.

However, I recognise the strength of feeling expressed on this issue at Second Reading and today by a number of noble Lords, and the ambition of all noble Lords who spoke to drive up the standards of property agents. The noble Lord, Lord Truscott, the noble Baroness, Lady Bennett of Manor Castle, and others spoke about individual cases where managing agents have been either good, as we heard from the noble Lord, Lord Truscott, or extremely unacceptable.

I will continue to engage with the noble Lord, Lord Best, my noble friend Lord Young of Cookham and any others who would like me to on this issue during the remainder of the Bill’s passage. I know I already have a meeting in my diary with the noble Lord, Lord Best, in a week or so. With the assurance that we will keep working on this, and following what I have said, I hope the noble Lord will withdraw the amendment.

[Lord Best (CB)]

My Lords, I am very grateful to all noble Lords who have spoken—all of them in favour of the concept of a regulator of property agents. I think the case is now unavoidable. My especial thanks to the noble Baronesses, Lady Hayter and Lady Taylor, and the noble Lord, Lord Young of Cookham, for supporting this amendment, and to the noble Baroness, Lady Thornhill, who, if we were allowed one more name on the list, would have been there as well. It was great to hear illustrations from real life from the noble Lord, Lord Truscott, bringing a consumer perspective to the story. The noble Baroness, Lady Bennett, shared stories of cowboy agents. I am afraid they do exist, and we should be doing something about it.

The Minister offered me some consolation. We are going to meet again soon, and she recognises the strength of feeling that everybody has been expressing. I thank her for continuing to engage on the subject and I hope there is something we can salvage, before the Bill finally passes, that will at least make a start on this really important mission of creating a regulator to the benefit of the 5 million leaseholders out there. I beg leave to withdraw my amendment.