Commonhold and Leasehold Reform: Managing Agents
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Florence Eshalomi (Vauxhall and Camberwell Green) (Lab/Co-op)
I beg to move,
That this House welcomes the Housing, Communities and Local Government Committee’s First Report of Session 2026-27, Pre-legislative scrutiny of the draft Commonhold and Leasehold Reform Bill (HC40); notes the Government’s commitments to cap ground rents and to bring forward legislation in this Session to support the uptake of commonhold in place of leasehold; further notes the concerning practices of some property managing agents who fail to act in the best interests of homeowners; and calls on the Government to accept the Committee’s recommendation to legislate to create a body with enforcement powers to regulate property managing agents.
I am grateful to the Backbench Business Committee for granting time for this important and timely debate, which gives the House the chance to consider our Committee’s report on the draft Commonhold and Leasehold Reform Bill. I thank my fellow Committee members for their collaboration and cross-party work on the report, the excellent Committee staff for their help in preparing the report and the Committee’s two specialist advisers, Professor Nick Hopkins and Wendy Wilson, for their assistance throughout our inquiry.
Today’s motion invites the House to call on the Government to use the final Bill to legislate for the regulation of managing agents. Colleagues from across the House will be all too familiar from their inboxes with the “wild west” of managing agents, but first I would like to begin by discussing some of our findings on the draft Bill more generally.
For many of the 5 million leaseholders across England and Wales, these reforms have been a long time coming. After a decade of campaigning across party lines, we now have an opportunity to finally tackle the fundamental injustices of the leasehold system, once and for all. Leasehold reform has long commanded cross-party support. Ten years ago, the campaign in Parliament was championed by the former Member for Worthing West, Sir Peter Bottomley. His work chairing the all-party parliamentary group on leasehold and commonhold reform amplified leaseholders’ voices across Westminster. I thank the current chair, my hon. Friend the Member for Ellesmere Port and Bromborough (Justin Madders), for his tireless cross-party campaigning. It is in that cross-party spirit that my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) and Lord Gove generously gave evidence alongside each other in the opening session of our inquiry. The two former Housing Secretaries were united in their view that this draft Bill is welcome, and that the Government must go further and faster to deliver for leaseholders.
The draft Bill is technical and long—it runs to 164 clauses and 13 schedules—but if we take a step back, the problem that it seeks to address is about control. Control is supposed to be one of the main advantages for people of buying their own home.
For many leaseholders, a flat is their first foot on the housing ladder. They may have been drawn in by the banners on new build developments advertising the Government’s Help to Buy scheme. Many leaseholders were told that that was the affordable route to buying, via shared ownership. They expected control and a feeling of security, knowing that they could make the changes that they wanted in their own home and have control over the running costs, and would not be threatened with eviction by a landlord.
The benefits of home ownership simply do not apply to leaseholders. They are homeowners, yet they are tenants. Far from home ownership and the dream that they were sold, many of them are stuck in a living nightmare. In the words of one leaseholder, who shared their story with our inquiry:
“I thought I’d bought a flat, then discovered leasehold is a financial trap. I have no control over my finances, my relationships, where I live, or where I work”.
We all agree that this is an injustice that needs to be addressed. This afternoon’s debate is an opportunity for Members to reflect on the draft Bill and what additional measures might need to be included in the final version to ensure that we get these reforms right.
Perhaps the most headline-grabbing measure in the draft Bill is that it will cap existing ground rents at £250 a year. We must be absolutely clear across this House and in the other place that ground rent is money for nothing. An investigation by the Competition and Markets Authority found “no persuasive evidence” that leaseholders “receive anything in return” for ground rent. Many leaseholders have ground rents that double every 10 years or increase with the retail prices index.
Justin Madders (Ellesmere Port and Bromborough) (Lab)
I thank my hon. Friend, the Chair of the Housing, Communities and Local Government Committee, for recognising the work done not only by me, but by Peter Bottomley and Jim Fitzpatrick on the APPG. I was struck by a comment in the Committee’s report about the argument put forward by some freeholders that ground rents are used to cover service charges and that people will be put in danger if they are lost. The Committee used the word “shameful” for that argument. Does that not show that this system is a money-making racket? People are using any excuse to carry on that income stream.
Florence Eshalomi
I refer my hon. Friend to the evidence session at which we had representatives of freeholders—one of the most enlightening sessions for my Committee and my colleagues. We probed and pushed and tried to seek justification for ground rents, but none was forthcoming. That shows that they are a money-making scheme.
We must be absolutely clear, as the Competition and Markets Authority has said, that there is no place for ground rents. Last month, there were media reports that the Government are preparing to accept our Committee’s recommendation to bring the £250 ground rent cap into force in late 2027—one year earlier than previously planned. If those reports are correct, that will be welcome news for many leaseholders, who are calling on us to act with greater urgency.
However, even before the final Bill has been introduced, we hear threats of judicial review from a small number of organisations with very deep pockets. Rather than engaging with the process here in Parliament, they are preparing to challenge the democratic mandate of successive Governments, and the will of this House, to make these changes. Shame on them. They know that they have lost the political debate.
The Government should be emboldened by the fact that they have successfully defended judicial reviews in the past. We think they should push ahead with these reforms, but there is a real risk that these measures could be delayed if freeholders do launch such a challenge. The Committee has called on the Government to include a clause for the ground rent cap in the final Bill to ensure that it comes into force two months after the legislation receives Royal Assent.
We support the Government’s intention to change to peppercorn ground rent over time. We understand that that will need a transition period, as Ministers must be confident that they are striking a fair balance between the interests of competing parties, but it is not clear to us how the Government decided on their policy of a 40-year transition. Based on the evidence to our Committee so far, we think a shorter transition period may be justified and fair. That is why our report calls on the Government to publish more data in the coming months so we can be confident that we are getting the transition period right.
Another key focus of the draft Bill is the measure to replace leasehold with a new commonhold tenure. Commonhold will allow all homeowners to have a vote in how their block is run. Homeowners are not required to participate in commonhold if they do not want to, and many blocks will vote to appoint their chosen managing agent, but this modern tenure will offer homeowners the control that they do not have under the current leasehold system.
Justin Madders (Ellesmere Port and Bromborough) (Lab)
I start by referring the Chamber to my chairmanship of the leasehold and commonhold reform APPG, where I work closely with organisations such as the Leasehold Knowledge Partnership and the National Leasehold Campaign, to which I pay tribute.
As we have heard, complaints from constituents about management companies and the exorbitant fees they charge are something that we all deal with on a weekly basis. It is not a new phenomenon; it is something that I raised on the Floor of the House five years ago because I could see it becoming the next big scandal, and sadly that has come to pass.
Homeowners who buy their homes in good faith understandably expect to live in a functioning estate where responsibilities are clear and, where necessary, charges are fair. All too often, the opposite is the case. Homeowners are left in the pernicious situation of paying for services once in their council tax bill, and once again in extortionate service charges. Poor services are often exacerbated by a lack of accountability. Residents are forced to persistently chase matters, while frequently being passed from one organisation to another without resolution. But as soon as residents fall behind with a payment, these companies leap into action, often using aggressive debt collection tactics. Adding insult to injury, the financial structures of these estates are all too frequently opaque: governance structures lack transparency; companies are labelled as dormant for accounting purposes; and dodgy practice—where freeholders, management companies and debt recovery companies operate in an interconnected web—allows them to rack up eye-watering fees.
I will cite one very recent example from my constituency, where a constituent owed some service charges to RMG, with which I think we all are familiar. Looking at his bill, the constituent had been charged an instruction fee and a client admin fee on top of his service charges, adding another £600 to the bill, yet RMG had somehow managed to inflate the £1,100 owed in service charges to £3,300 by the time court papers were issued. There is no world where a trebling of this sum can be justified, and it just shows what a scam the system is.
Time and again, I see people raising problems from a range of new build developments in my constituency, including Ledsham Garden Village, Mersey View and Jacks Wood estates, where homeowners face a range of challenges. In Ledsham Garden Village, residents are facing combined service charges and fees running into hundreds of thousands of pounds, although only a fraction of the spending can be accounted for, which just rubs salt into the wound. Residents do not have any idea how the money is being spent and if it is being spent on the estate at all; they do not know whether the company is getting best value for money, how reserves are being used or how costs are allocated over different phases of the development. There are persistent maintenance issues, inconsistent grounds maintenance and safety concerns because of poor traffic management. People who buy their homes in good faith deserve better. Then there are the Jacks Wood estate in Ellesmere Port and the Mersey View estate in Bromborough, where the adoption process has effectively stalled, leaving residents in limbo.
The regulation of managing agencies is clearly something this House would like to see, but I would like to make some further suggestions. We could introduce standard costs across the country for estate management fees so that there would be a baseline from which to judge these companies. Residents could be given a far greater say over who manages their estate. We could have three-yearly ballots in law on whether they wish to carry on with the same management agents, which could end the “put up or shut up” approach that a lot of these companies adopt. As we have heard suggested today, an immediate step the Government could take would be to make it a condition of any planning permission moving forward that the developers must hand over the whole estate adoption to the local authority and pay a commuted sum for it, ending that revenue stream entirely.
Andrew Cooper
On the point about estate adoption, I wonder whether my hon. Friend agrees that we need to get on and implement section 42 of the Flood and Water Management Act 2010, which would require sewerage to be adopted as part of the public sewer as soon as possible.
Justin Madders
Yes, indeed. Residents of an estate in Eastham have been paying for a sewer that they cannot actually locate, which just shows that there is too much ambiguity over what these charges are for.
Finally, local authorities could be given powers to use their resources to bring estates up to an adoptable level and then charge the developers for that work retrospectively. The developers do not want to do it, and we need to find a way of breaking that logjam. These are just some of the measures that, alongside the many welcome reforms from this Government, would improve the lives of hundreds of thousands of people.
The Minister for Housing and Planning (Matthew Pennycook)
I start by declaring an interest: my wife is the joint chief executive of the Law Commission, whose work I will cite in the course of my remarks.
It is a pleasure to respond to this vital debate on behalf of the Government, and I warmly congratulate my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi) on securing it. Commonhold and leasehold reform and the regulation of property agents are issues of the utmost importance to millions of homeowners across the country, and I commend her and the Backbench Business Committee for giving the House an opportunity to debate them in detail. Let me briefly put on record once again my sincere thanks to her, the other members of the Housing, Communities and Local Government Committee, and its Clerks for the huge amount of work undertaken in support of pre-legislative scrutiny of the draft Commonhold and Leasehold Reform Bill.
This has been an excellent debate, with many informed and passionate contributions, and I thank all hon. Members who have participated. Collectively, those contributions have served to reinforce both the complexities and challenges of leasehold reform and the strength of feeling that exists across the country in respect of the need to act boldly and urgently to provide relief to the millions of leaseholders and residential freeholders currently suffering as a result of unfair and unreasonable practices—and make no mistake: they are suffering. We have heard of some particularly egregious cases in this debate.
What may seem like prosaic matters to many—service charges, ground rents, consent fees—are the source of acute financial hardship and misery for huge numbers of those living in one of the approximately 5 million leasehold dwellings in England and Wales. Let me be as clear as I can from the Dispatch Box: leaseholders are being routinely gouged by freeholders and managing agents acting on their behalf. They are being gouged as a result of a system that denies leaseholders control over the homes they live in and have paid for and subjects them to extraction in the form of punitive, escalating ground rents, unreasonable or extortionate charges, unjustified permissions and administration fees, and onerous conditions, often imposed with little or no consultation.
I have said it many times before, and I will say it again: this is not what home ownership should entail. Leasehold is blighting lives. Leasehold is a barrier to a fair and efficient modern residential property market. Leasehold is an anachronism in the 21st century. The aim of this Government by the end of this Parliament is nothing short of dismantling it and bringing the corresponding emancipation of leaseholders.
I will heed your strictures, Madam Deputy Speaker, so I do not have time to respond to all the specific points raised, such as points about freehold estates, service charges, development value and the retirement sector. Those were all well-made points, and, as ever, I am more than happy to speak to hon. Members outside of the Chamber. I assure the House that none of those issues are an afterthought. Where there are provisions in the 2024 Act, we are working at pace to take them forward; where there are issues outside of the draft Bill, such as freehold estates, we have consultations and are analysing feedback, as my hon. Friend the Member for Hartlepool (Mr Brash) knows.
In our manifesto, we made a clear and unambiguous commitment to act where previous Governments had failed and finally bring the leasehold system to an end. The forthcoming commonhold and leasehold reform Bill is not the end of that story, but it is integral to honouring that manifesto commitment. As the Committee’s report rightly recognises, the draft legislation represents a significant step towards ending the leasehold system for good, delivering greater fairness for leaseholders while laying the foundations for a reinvigorated commonhold model. I am immensely grateful to the Committee for its detailed and thoughtful scrutiny of the draft Bill. Its report provides a valuable set of recommendations as we continue the process of augmenting, strengthening and refining the Bill for introduction. As my hon. Friend the Chair of the Committee knows, we are considering each of those recommendations carefully, and I hope we can report back in the not too distant future.
I want to make some very brief remarks about commonhold and ground rent, but before I do, let me address the main issue that has been the subject of today’s debate, which is that of property managing agents and the Committee’s recommendation that we establish a new, independent public body as a regulator of them, with enforcement powers. I agree with my hon. Friends the Members for Brent West (Barry Gardiner) and for Luton South and South Bedfordshire (Rachel Hopkins) and others who have mentioned the importance of control. I continue to believe that giving leaseholders control over the buildings they live in is our overriding priority, and that that will help to tackle the majority of abuses.
However, I want to reassure hon. Members that I have listened and heard the serious concerns raised on both sides of the House about the performance of managing agents, both on freehold estates and in leasehold blocks—I know from my own caseload how serious these problems are. Managing agents play a key role in the maintenance of multi-occupancy buildings and freehold estates, and as the shadow Minister said, their importance will only grow as we transition towards a commonhold future. That is precisely why we have committed to strengthen the regulation of managing agents.
As hon. Members know—it has been mentioned several times—the previous Government committed in 2018 to regulate the property agents sector. It asked a working group chaired by Lord Best, who I am very pleased to see in the Gallery, to advise them on how to do it, yet over multiple years they failed to act on that report’s findings. We have already progressed work on a number of those recommendations, including mandatory professional qualifications.
However, I will state candidly that in taking forward those and other measures designed to strengthen the regulation of managing agents, we have a choice about how we do so. We face those choices in the context of a substantive Bill that is already around 260 clauses and 20 schedules and could grow further, and the fact that we have made very clear—I stress this point again to hon. Members—that this is not the only piece of legislation required to meet our manifesto commitments. Other pieces of primary legislation are required, not least to enact the remaining Law Commission recommendations on enfranchisement and the right to manage.
I want to make it clear, though, that I take very seriously the Committee’s recommendation of a new independent regulator. I am certainly not going to stand at the Dispatch Box and rule one out—indeed, I am personally extremely sympathetic to it—but we will set our overarching position on the regulation of estate, letting and managing agents in due course. I can assure hon. Members that in finalising that position, we will continue to consider all aspects of Lord Best’s report.
I can feel your eyes upon me, Madam Deputy Speaker, so I am going to skirt over commonhold—I am more than happy to speak to any hon. Members who have particular concerns about that—and speak briefly about ground rents. In particular, I want to touch on the decision the Government made in the draft Bill. We committed in our manifesto to
“tackle unregulated and unaffordable ground rent charges”,
and we are delivering on that commitment through the Bill. As hon. Members know, the draft Bill will cap ground rents at £250 a year initially, changing to a peppercorn after 40 years. This will deliver immediate relief for hundreds of thousands of leaseholders during this Parliament, and over the lifetime of that policy position, it will save leaseholders between £10 billion and £12.7 billion. It is a significant intervention. After 40 years, all ground rents will change to a peppercorn, ensuring that they are brought to an end in their entirety.
However, it is our view that a 40-year transitional period is necessary to avoid unintended consequences and ensure stability for leaseholders and the wider property market. This is a balanced and fair solution to the problems caused by unaffordable, unregulated ground rents. I agree with my hon. Friend the Chair of the Select Committee that the cap must be introduced as soon as possible, so that leaseholders can benefit from reduced costs and more easily access mortgage financing when looking to move home. Subject to parliamentary timings, we are seeking to introduce the ground rent cap by 2028 at the latest. That is not the end of 2028—it is a point in time in 2028 at the latest—but I want to stress the words “at the latest”. It is up to this House to ensure that pieces of legislation progress more quickly.
Before concluding, I can helpfully clarify the answer to the very specific question that the shadow Minister put to me. There is no ambiguity about the fixes that need to be made to the 2024 Act. It is really unfortunate that we have to make fixes to that Act.
We should not be repairing primary legislation through new primary legislation, but we confirmed in the King’s Speech on 13 May that fixes to those flaws will be included in the forthcoming substantive Commonhold and Leasehold Reform Bill.
To conclude, I once again thank my hon. Friend the Member for Vauxhall and Camberwell Green for applying for this debate, the Backbench Business Committee for granting it, and all those who have participated in it for sharing their concerns, insights and case studies. I look forward to providing the Committee with a formal response to its report as quickly as we possibly can—notwithstanding the current constraints—and I look forward to continued engagement with the Committee as our substantive Commonhold and Leasehold Reform Bill progresses and as we continue to implement those reforms to the leasehold system that are already in statute.