Leasehold Reform (Ground Rent) Bill [HL]

Baroness Andrews Excerpts

Monday 24th May 2021 Lords Chamber

[Baroness Andrews (Lab) [V]]

My Lords, I welcome the Bill although, as the Minister might expect, with some caveats. But I welcome the way in which he introduced it and the context in which he placed it. Four years after it was promised in 2017, a leasehold reform Bill has reached this House—and it is an important start to remove what the Minister called the massive and increasing disadvantages that leaseholders have to contend with. The law has until now not been on their side, and this helps redress that.

We recognise that leasehold reform has been in process for decades. The Law Commission has done its work after endless investigations and consultations, but the Minister will know that, along with many others in this House, I am disappointed that the Government have not been able to bring forward the full range of leasehold reforms that we were promised. The Minister spoke about bringing them forward later in this Parliament. Inevitably, my first question is: what does that mean and can he be more specific? As we know, this Bill will deal with new leases only.

However, the Bill is a start in addressing the scandals and abuses that leaseholders have faced for years. As the Minister said, the problem is that leaseholders receive no clear service in return for these ground rent payments and it is not always clear what costs leaseholders will have to pay when they purchase their home. How very true. A survey for Propertymark, which has been campaigning for leasehold reform for years, found that 57% of leaseholders had no idea of the escalating costs they would face and, tragically, 50% were first-time buyers. Had they known, 93% said that they would not have chosen a leasehold home. They certainly had no idea that their ground rents could double in 10 years. This has been a real scandal, documented throughout by the Leasehold Knowledge Partnership, which has charted years of distress and anxiety among leaseholders.

While we have to wait for that bigger scandal to be fixed, we can welcome the Bill as incredibly important, not least because it abolishes ground rents and therefore cuts off the income stream that underpins the current leasehold system. If investors are not incentivised to buy up leaseholds for their ground rents, that removes the risk they will appoint managing agents who see leaseholders as little more than cash cows. Once that happens, there is a prospect that buildings may start to be run in the interests of the people living in them, as opposed to the interests of investors who see them as little more than accounting entries. It is a systemic change, which can root out abuses throughout the system, and I welcome it as such.

However, inevitably, I have some questions for the Minister. What is the Government’s estimate of the number of homes that will actually be affected when the Bill is enacted in 2023? Given that leasehold properties are not evenly distributed across the country, which areas of the country will benefit most? Secondly, how will the Bill interact with the Government’s plans for reinvigorating commonhold, which we certainly welcome. How will the timetables overlap? I ask this because, if the Government succeed and synchronise the introduction of commonhold plans with this Bill, it is possible that there may be none or very few residential leaseholds to which the Bill will apply because most flats will surely be sold as commonhold.

Thirdly, given that the Bill will become law in 2023, what does the Minister think the effect of knowing that ground rents are about to be abolished will be on the housing market for leasehold homes?

The Minister raised the question of the definition of rent, and I would like him to clarify what he said when he winds up. Does the Bill intend to force future leases to be redrafted to restrict the definition of rent? As he knows, the problem is that many modern leases define rent as including ground rent and service charges and sometimes building insurance. Will that continue or will it be changed? The argument is that, if you exclude them from the definition of rent in strict form, the landlord cannot take advantage of the forfeiture. I would be most grateful for an answer on that point.

The Minister referred to enforcement. The problem is that this is going to be left to the trading standards departments. How realistic is that? He must be aware that those departments are chronically underfunded and under huge pressures, as are other local government departments that have been stripped out, such as planning and conservation. It is really unlikely that local authorities will get involved, not least on the grounds that leaseholders are better off using civil claims to recover prohibited ground rent. What plans do the Government have to encourage local authorities to ramp up the capacity of the local trading standards?

In conclusion, let me return to those not helped by the Bill. It is significant that the property associations welcome the Bill. Indeed Mark Hayward, the chief policy adviser at Propertymark, has said that the legislation will

“go a long way to help thousands of homeowners caught in a leasehold trap”.

However, it has called on the Government to extend the provisions on ground rents to those who already hold a leasehold property to create a “level playing field”.

Power has been in the lands of the freeholder for far too long. Aggressive and escalating ground rents continue to be a scandal against which there is no redress. I know that the Minister understands and appreciates the work of the Leasehold Knowledge Partnership, so he will know of the countless cases it has collected. For example, recently there was a story of a lady living in south London whose ground rent is threatening to reach £1 million in the next 50 years at the rate of escalation. The problem is that in some ways—and this lies at the Government’s feet—the situation of leaseholders has gone on getting worse. The cladding scandal is, of course, in a class of its own, but the extension of permitted development rights is another way in which the rights of leaseholders to protect themselves and their homes against ruthless developers are being lost as upward extensions are permitted outside the protection of normal planning law.

I hope that the Minister, while he basks in the welcome given to the Bill, will also reassure us that the Government are only too aware of its limitations, and the imperative to act fast to protect current—as well as future—leaseholders, who have waited patiently but in increasing anxiety for so long.