Leasehold and Freehold Reform Bill

Baroness Andrews Excerpts

2nd reading
Wednesday 27th March 2024 Lords Chamber

[Baroness Andrews (Lab)]

My Lords, it is a great pleasure to follow the noble Lord, who has been indefatigable in his pursuit of justice and improvements to the leasehold system. The Minister is going to have a huge amount of help to improve the Bill; she has already heard from the noble Lord, Lord Best, about how to improve the regulatory system, and there will be lots of advice coming from around the House, as there has been from every part of the industry that knows about leasehold.

I welcome the Bill, but like many others in the House—as I am sure the Minister will hear in the rest of the debate—I think it is a disappointing Bill because it does not fulfil the full task that the Law Commission undertook. Mr Gove, who is ever cheerful, was hardly right when he said at Second Reading in the other place that the Bill would mean

“the effective destruction of the leasehold system”.—[Official Report, Commons, 11/12/23; col. 659.]

That is not so, sadly. It does serious damage, but the leasehold system survives and will go on inflicting and perpetuating real damage, as we have heard already from around the House. He also conceded that more improvements were necessary and I think we have heard several, very powerful reasons for that. Without delaying it, I am sure that this House can improve the Bill very seriously.

The failure to follow the full recommendations of the Law Commission is particularly frustrating because it is one area of the complex and disastrous housing landscape where a solution can be found through the law. The Government have said that there has not been enough legislative time; I say very gently to the Minister, because I know she is not responsible, that if the Government had not distracted both Houses with legislation such as the Rwanda Bill, then we might have had more legislative time. There certainly would have been more time to consider, for example, the proposition made by the noble Lord, Lord Best, about introducing a regulator, or addressing the impact on building safety.

The Government would also not have had to introduce 124 of their own amendments, 34 new clauses and a new schedule in Committee. We are making legislation on the hoof. Legislation like this, which is consensual, ought at least to have the benefit of proper and thorough scrutiny, and we will give it that in this place, not least to some of those 72 very constructive amendments which came forward from the Opposition in the other place—all of which were, of course, rejected.

Reference has been made to this bizarre medieval system of leasehold which we have inherited. Like the feudal laws it echoes, it places all the power in the hands of the freeholders, who are indeed free of all obligations to show responsibility, transparency or fair treatment to the leaseholders beholden to them. Leaseholders live with insecurity compounded by secrecy. They live with no control over what the freeholder is up to next—they never know, especially with offshore companies. They are subject to arbitrary cuts and things being loaded into maintenance, over which they have no control; the cases mentioned by my noble friend on the Front Bench were extraordinarily powerful. They are subject to bad or indifferent property management, as the noble Lord, Lord Best, has described. They worry constantly about whether they should or could afford to extend the length of lease, or pursue enfranchisement—what does it involve and what will it cost?—or what the implications are if they rent out, stay in or sell their homes? No other form of tenure faces such intractable problems.

We talk these days about the precariat; this is at the very edge of the precariat, and more so the 70% of leaseholders living in flats. Yet they have less protection in this Bill, which does not offer them what they need. I speak from experience: as a leaseholder in a block of flats in London, I am in that precariat. This is a speech of two halves, and the second half will be about a particular issue that comes on top of all the others.

If the Bill had been comprehensive, it would certainly have abolished leasehold for all properties. While I welcome the ban on new leasehold houses, I cannot understand the logic of not extending that to flats—not for political reasons alone. I welcome the changes which will make it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freeholds. It is long overdue to be able to extend a 90-year lease to 990 years. As has already been said, why could the Government not have followed the logic and given leaseholders greater protection against losing their homes if they are found to be in minor breaches of the lease? I take comfort from what the Minister has said, and I look forward to seeing what the Government will bring forward; I just hope it will deal with the problem. Also, why did they not follow the logic of placing in the Bill, the purpose of which is to reduce the cost of enfranchisement, a clear legal obligation to encourage leaseholders to acquire their freehold at the lowest possible cost when determining the applicable deferment?

Many of the amendments put forward in the other place will have served the purposes of this Bill very well. It would have been right and sensible to give leaseholders the right to buy up their ground rent, or to provide that all new flats should include a requirement to establish and operate a residents’ management company. Every day, we see the evidence for how effective resident management buyouts are, with lower costs, higher standards, and so on. As other Members have said, the Bill might have also included provision to give leaseholders the right to a share of the freehold, which is the first step towards the preferred option of commonhold. The extension of the protections around the Building Safety Act are very welcome.

We have heard already several times about the importance of the work done by the noble Lord, Lord Best, on the property agents working group. If the Government were worried about Henry VIII clauses, because that is what they said, it would be the first time I have ever heard, in this House, any Government be worried about Henry VIII clauses. I am not going to take that seriously and I do not think anyone else should either. All I hope, at this point, is that the Government find a better reason for supporting the case put forward by the noble Lord.

I am sure we will have a lot of further discussion in Committee, and I am grateful to the Minister for already having engaged with me on a particular issue that I will bring forward in Committee, unless the Government choose to do so. I ask the House to indulge me while I tell a particular tale which affects quite a lot of leaseholders in London, and it is a sort of extension of many of the issues.

Many leaseholders in blocks of flats around and beyond London have been threatened in recent years by upward extensions. Upward extension has been made possible by permitted development; there is no right to be consulted or requirement for a planning application, and there is no strength in objection. No affordable housing provisions are required nor is there provision for disability, and the proposed new homes are market-rent and do not help solve London’s housing crisis.

There is no provision for compensation caused by disruption or decanting of tenants. Imagine an 80 year-old who has been living in the top floor of a four-storey house who suddenly finds she is on a building site. She cannot afford to move, no one is going to help her, and she has to stay put. That is the situation facing the residents of my block of flats at the moment.

Extraordinarily, building control does not help. The way building control operates means that permission can be given without construction methods being tested in advance. There could be a builder who has never done this before, who suddenly decides to put a concrete structure on top of four storeys, and no one will actually know whether it is going to work. Building control will not take action until it has gone through the process. There is, in fact, potential damage or danger by construction methods and approach, recognised by departmental circular 3 of 2020, but it is given pretty short shrift. This is a really awful situation to be in when, as a resident, you have no power to challenge.

We were in that situation when we were threatened by two storeys. There was no consultation and minimal information. Permission was sought and granted, first for one storey under normal planning rules and then for two. We lost our judicial review on the one storey, and, extraordinarily enough, we won on appeal on the two storeys, because we were within the catchment area of a hospital heliport. It was nothing to do with planning or our rights; it was only by accident. We are still under threat of a one-storey extension.

In this Bill, I want the Government to honour their promise. The development ambitions of freeholders, all across London and beyond, are having a chilling effect on the ability of leaseholders to seek and afford enfranchisement. The new hazard is that the development value of the plans brought forward by our freeholder have doubled the collective enfranchisement cost from £0.75 million to £1.75 million. This puts it outside of the reach of most of the residents. The Law Commission proposed a remedy in its valuation report, and the Government—Mr Jenrick, no less—said in the House of Commons on 11 January 2021 that:

“Leaseholders will also be able to voluntarily agree to a restriction on future development of their property to avoid paying ‘development value’”.—[Official Report, Commons, 11/1/21; col. 10WS.]


The Bill has an impact assessment, thank goodness. Buried in it—you have to be forensic—in annex 2, paragraph 12, is the recognition that the prospect of paying development value can make enfranchisement prohibitively expensive, contemplating that there will be a new right for an option not to pay development value on condition that leaseholders guarantee not to develop themselves. I will draw my remarks to a close soon, but the assessment is detailed. It also contemplates that the freeholder would be due reasonable out-of-pocket expenses, if they have been genuinely incurred. The freeholder gets some profit, but the leaseholder gets absolutely nothing out of this. The Law Commission did not recommend it—this is an invention of the Government.

I have asked the Minister whether she thinks this is something that the Government can honour in the Bill, and she has said that it is a live issue. That is all I need for now, because I trust the Minister to take this issue seriously. It is quite a general issue. I will come back and discuss this with her, if the Government feel that they cannot. She has already told me that the permitted development review is under consultation and that there may be an implication there. Perhaps she could tell me more about that.

We will certainly engage over the course of Committee, and I will not make any further argument at this point, other than simply to say that I welcome the Bill. It is a huge opportunity; let it not be a missed opportunity. Let us use the resources and expertise in this House to make the Bill as robust and comprehensive as we can. I believe that there is quite a lot of good will on the part of the Government to do that.