Leasehold and Freehold Reform Bill

Debate between Baroness Hayter of Kentish Town and Lord Young of Cookham

Committee stage
Wednesday 1st May 2024 Lords Chamber

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I declare a non-financial interest in having worked with the Property Institute and other groups that have supported this area for many years. Also, as the noble Lord, Lord Best, alluded to, I chaired a committee working on one aspect of this matter, which I will come to shortly.

As the noble Lord said, it is quite unusual for this call for regulation to come not only from the consumers who would benefit but from the professionals already working in the field. It is virtually unanimous; in fact, among the organised groups, it is unanimous that this is the regulation under which they would like to work. The agencies and their representative bodies are waiting for this to happen.

As has just been described, in a way the reasons are obvious, not only outside but within this House. We know that, as was mentioned, the Best report was welcomed, I think universally; the Select Committee on Industry and Regulators has called for it to happen; and in the world outside there is still an expectation—a hope—that this might happen. A number of us want an election soon but we could even put it off—if that would be the only thing needed to get this through, we will put up with more of this Government.

It is fairly obvious that housing is not just bricks and mortar. Homes are fundamental to people’s financial and emotional well-being. Get this right, and their own quality of life improves dramatically. Get it wrong, and it is debilitating, stressful and expensive. It starts, of course, with the purchase, or indeed the sale, of a leasehold property, which is a more complicated transaction than simply buying a freehold house. So even at that stage, transparency, clarity, openness and proper explanation by estate agents are essential, and so, therefore, is the need for their expertise in these specialist areas of purchase and sale.

However, even once it has happened and you are living in the leasehold property, that can be a particularly fraught arrangement. With leasehold management there is a three-way relationship between the landlord, the resident—that is, the leaseholder or the owner—and the managing agent. Marriages with three in are always a bit complicated, but in this case, of course, you have the managing agent, who is appointed by the landlord but who has duties and, even more importantly, a close working relationship with the leaseholder. That adds an element of necessary expertise in how to handle it.

As important is the complexity of the law involved in this. It covers particular rights that are different from those associated with a freehold house. There are the safety issues, which have been well rehearsed in Committee. There are consumer issues and fiduciary duties, as well as myriad external bodies and requirements that have to be met. Frankly, managing agency is no task for an amateur. Agents need to be trained in ethics as well as the law and building regulations, and they need to be checked to ensure that they are fit and proper to handle both people’s money and their safety, and to prepare all the legal and other paperwork essential for running a complex operation. That is why we require regulation and oversight of this important profession.

As was mentioned, a code of conduct is needed across the industry, not simply to provide the requirements on agents but, importantly, to enable consumers to understand and thus to be able to enforce their rights. As the noble Lord, Lord Best, said, a cross-industry group that I had the privilege to chair and whose outcome was welcomed by the department has prepared the code and it is ready and waiting, so the work in setting up this regulatory body would be less than otherwise. It is there, ready and waiting for the legislation to make adherence to that code a legal requirement. That is the key to professionalising the industry and enhancing the experience of all who deal with managing agents—landlords and leaseholders alike.

It is not sufficient, welcome though it might be, to have an ombudsman to adjudicate and put things right when things have gone wrong. We need to prevent problems arising, which means raising standards, ensuring compliance, requiring training and qualification, and continuing professional development in a world of statutory requirements that seem to be changing, not just year by year but month by month, as is the technology involved in building, which we know about.

The Best way is the only way. Let us give the noble Lord what he has been asking for for so long and just get this report into law—let us get on with it. I am delighted to support Amendment 94.

[Lord Young of Cookham (Con)]

My Lords, I will add a very brief footnote to the excellent speeches made by the noble Lord, Lord Best, and the noble Baroness, Lady Hayter.

The point I want to make is that the market is changing. We are moving away from a position where the freehold of blocks of flats was owned by the Grosvenor estates, Cadogan Estates, the Portman Estate —professional freeholders—and they were well able to choose responsible managing agents and keep an eye on them. We are moving away from that to a position where more and more of the blocks of flats are owned by the leaseholders. It is a trend that I that I welcome—indeed, the Bill accentuates that trend—and eventually we will end up with commonhold. Against that background, it becomes even more important that the managing agents should be professional. The background is changing and the need for this is now much more urgent than it was a few years ago.

I very much hope that the Government will be able to respond to the eloquence of the noble Lord, Lord Best, and introduce regulation of managing agents. However, if they cannot, he hinted at two intermediate steps, which I think the Government might be able to take. One is requiring mandatory qualifications. As the noble Lord said, these have already been introduced for the social housing sector and could be expanded to protect leaseholders and private tenants. The second thing the Government could do, which the noble Lord also mentioned, is to introduce the mandatory code of practice, drawing on his working group on the regulation of property agents—this case was well made by the noble Baroness, Lady Hayter.

The Government could do one final thing which has not been mentioned so far. There is a government document called the How to Lease guide, and they could make that a mandatory document to be shared with consumers who purchase a leasehold property, in exactly the same way in which landlords and agents must provide the How to Rent guide to tenants. Therefore, if my noble friend cannot go the whole hog, I very much hope that she can smile warmly on intermediate steps, which might then pave the way to the final introduction of regulation of managing agents in the very near future.