Leasehold Reform (Ground Rent) Bill [HL]

Baroness Jones of Moulsecoomb Excerpts

Committee stage
Monday 14th June 2021 Grand Committee

[Baroness Jones of Moulsecoomb (GP) [V]]

I congratulate the noble Baroness, Lady Grender, on her clear exposition of her very sensible amendments. It is obvious to everybody that rogue landlords have an easy ride in this country. It is far too easy for such unscrupulous landlords to get away with far too much, and that extends to freeholders abusing leaseholders with exploitative ground rents. In shorthold tenancies, a lot of wrongdoing occurs unintentionally by uninformed or incompetent landlords, but that is not the case in freeholder-leaseholder relationships, where the freeholder is usually a big corporate entity that is professionally managed and legally advised. For that reason, any breach of this Bill is likely to be wilful, intentionally exploitative and involve large sums of money.

It is obvious, then, that the penalties currently contained in the Bill are paltry and unsuitable to deter or to punish the criminal behaviour. As a proportion of these massive landowners’ revenues and profits, a minimum penalty of £500 is irrelevant. I would much rather see financial sanctions on companies being similar to those under the data protection laws, which specify penalties as a percentage of a company’s global turnover. That is how you get companies to sit up and pay attention. At the very least, these penalties should be much higher than they are in the Bill. I am sure that the Government know that, so I have no idea why they chose this figure of £500, which is absolutely ludicrous.

[Lord Stunell (LD) [V]]

My Lords, as my noble friend Lady Grender has clearly set out, the current provisions in the Bill to enforce compliance by those who are determined to do wrong will not work, and that view has been strongly supported by the noble Lord, Lord Naseby, and by the noble Baroness, Lady Jones of Moulsecoomb. The three reasons for that are quite clear: the penalties themselves are trivial; the enforcement system will be ineffective; and rogue landlords will prosper.

First, the penalties themselves are trivial. The noble Lord, Lord Naseby, has made the point perhaps better than I can, but in many cases £500 will be less than the current annual leaseholder charge. Indeed, with escalation clauses in place, over the lifetime of the lease £500 might be seen as very small change indeed. The case for making these penalties bite is overwhelming, simply because the unscrupulous who carry on as though the law has not changed will readily write off these penalties as essentially meaningless. I shall not engage in a bidding war with the noble Lord as to how high we should go, but each of us in our different ways would make the point that £500 is nowhere near enough to be effective as a deterrent.

It is not just nowhere near enough to be effective as a deterrent; it is not anywhere near enough to pay for a sound enforcement policy. The enforcement system will be ineffective. It is supposed to be paid for by the pitifully small fines, which will be paid not by all those who offend but all those who are successfully prosecuted—only those fines will contribute to the funding of the trading standards department. It will therefore be the case that the trading standards department exercises passive power only, exercised, if at all, only when a big fuss is made about a particular case, perhaps by a local councillor or an MP.

It is extremely doubtful that any responsible financial officer of a local authority, when building a budget for the next year, would authorise the recruitment of staff to enforce legislation on the basis that it would be funded by £500 for each case that is won. Of course, it would need recruitment of staff because, as my noble friend Lady Grender pointed out, there has been a 50% reduction in staff in trading standards over the past decade and a loss of skills to go along with that. This new burden, to be dealt with effectively, would have to have additional resources. I am sure that the Minister is not content simply to put in place a deliberate paper tiger of enforcement—unless that does in fact suit the Government’s purpose: something that looks okay in the Bill but about which their landlord friends can be told, “Don’t worry, just keep your head down and carry on.”

That brings me to Amendment 16, to which I have added my name. We have to stop rogue landlords prospering. Of course, they already do prosper, and that is what the Bill is all about: stopping abuses or restricting behaviour which, though lawful, ought not to be. Those with a great deal of power in a contractual relationship, the landlords, are imposing oppressive terms on those with very little power, the leaseholders. And those who impose the most care the least. Rogue landlords will weigh up the risks and rewards and reach a commercial judgment. They can easily afford to treat the penalty system as a small marginal cost as it stands; they know it will not even cost them £500 per breach but only £500 per breach which leads to a successful prosecution—that is quite a different thing.

That successful prosecution will be rare without Amendments 14 and 15, which seek to generate the money for there to be a team of people who can enforce it. That is where the importance of Amendment 16 lies, in introducing an effective banning order regime. Only with a clear process for banning repeat offenders, driving them out of the market, can the stakes be raised sufficiently high to deter rogue landlords and, in the most egregious cases, drive them out of business.

I want to hear the Minister say to your Lordships that he genuinely wants this Bill to deliver an effective regime of penalties and punishments that will safeguard the good intentions of this legislation against the small minority of unscrupulous landlords who seek to bypass it and who continue to exploit leaseholders regardless. One way the Minister can do that is by accepting these three amendments. The Bill as drafted certainly does not give us those assurances. If he does not accept the amendments, he surely has a duty to your Lordships, and to leaseholders themselves, to explain what alternative mechanisms he proposes to put in their place instead.

--- Later in debate ---

[Baroness Ritchie of Downpatrick (Non-Afl) [V]]

My Lords, I support Amendment 19, in the names of the noble Lords, Lord Kennedy of Southwark and Lord Lennie, and Amendment 20, in the name of the noble Baroness, Lady Pinnock.

Like other noble Lords, I pay tribute to the 72 people who lost their lives in the Grenfell tragedy some four years ago. There have been many lessons from that tragedy for housing management purposes, and I hope that the Government and housing organisations learn much from them.

As it currently stands, this legislation will undoubtedly have a potential long-term financial impact for existing long-term leaseholders, as they will be excluded from it. I agree with the noble Lord, Lord Lennie, who said that, while the legislation is welcome—I definitely welcome it, and the Northern Ireland devolved authorities introduced similar legislation—it barely scratches the surface. There is no doubt that existing leaseholders will have to pay onerous ground rents with no sense of freehold. Amendment 18, which the noble Lord did not move, referred specifically to the need to remove ground rent for all leaseholders.

This legislation is quite limited and the Government have promised other legislation. When will that be brought forward? Can the Minister give us a revised timeframe with exact dates therein? The delay in bringing forward this limited legislation and the need for other aspects in relation to enfranchisement were raised at Second Reading and again today. I welcome the Bill’s proposals, but I feel that enacting the amendments would ensure that the Government could bring forward legislation at a later stage and provide the important financial assessment on the holders of long leases that is urgently required.

To introduce fairness and equity into the property market, the new clause introduced by Amendment 19 should be accepted by the Government to ensure that an assessment takes place of the financial impact for tenants in long leases of dwellings that examines lease forfeiture, transfer fees, redress schemes and enfranchisement. The Law Commission report made recommendations in respect of enfranchisement following promises by Theresa May’s Government in 2017 to tackle unfair and unreasonable abuses of leasehold, particularly the sale of new leasehold houses and onerous ground rents. With the legislation applying only to new leases, why are the Government allowing developers to exploit home owners through exorbitant ground rents? Why the piecemeal approach to this legislation? Why did the Government not bring forward more comprehensive legislation?

I believe the Government should accept Amendment 19. If enacted, it would enable the Government to have an assessment of the current housing situation to indicate whether further legislation to ameliorate the situation is required. I fully agree with Amendment 20, in the name of the noble Baroness, Lady Pinnock, which tries to help those facing fire remediation work. Again, I think of the whole area of Grenfell.

There is also a view in some quarters, particularly in the management of the property sector, that the government impact assessment accompanying this Bill demonstrates the negative impact of this legislation on the housing market: increasing house prices and creating more barriers to entry for consumers trying to get on to the property ladder. It has been suggested that, without proper and careful consideration of the detail and, in particular, the effects of these changes on apartment buildings, this legislation could have far-reaching implications across a range of issues, including building management, accountability and, crucially, the safety of apartment buildings. This is on top of the immediate impacts on the price of flats and the ability of prospective owners to buy new builds, which have been revealed in the impact assessment. Would it be possible for the Minister to comment on these observations in relation to the management of the property sector? Do the Government have any solutions in mind?

I look forward to the Minister’s answers to all these questions. I support the amendments in the names of my noble friends Lord Lennie and Lord Kennedy of Southwark, and of the noble Baroness, Lady Pinnock.

[Baroness Jones of Moulsecoomb (GP) [V]]

My Lords, I regret to say that I found the Minister’s rejection of the previous group of amendments extremely thin. I have always been puzzled why, when we have so many experts in your Lordships’ House—I do not include myself in that number—the Government would not listen to common sense and accept amendments that would have an impact and massively improve the legislation. I very much hope that we will bring these amendments back on Report and win a majority of the House round, so that the Government have to listen and improve the legislation, which is extremely thin.

When I was on the London Assembly, I was chair of the housing committee at one time. Just a few years before Grenfell we had a very similar incident in the area I lived in. Because it was so close to me, I was able to visit the block and see the problems. The housing committee wrote a short report and, although very short, the things we found wrong with the building—Lakanal, down in Camberwell—were almost exactly the same things that went wrong at Grenfell. We could have learned from Lakanal; we could learn from Grenfell and the awful death toll experienced there. We have to say that we cannot let people get away with making the same mistakes again and again.

It is welcome that the Bill bans exploitative ground rents in new leases, but it offers absolutely nothing to the thousands of leaseholders already trapped in exploitative ground rent arrangements. I think in particular of the dreadful time that the thousands of residents in hundreds of flammable apartment blocks are currently experiencing. Again, I do not live in such a block and do not have a vested interest. There is sheer chaos and uncertainty, particularly in blocks recently deemed safe but which have since been re-categorised as dangerous and needing expensive remedial work. Many of these blocks now need waking watches to patrol 24 hours a day—a little bit like in your Lordships’ House—and ensure that the building is evacuated in the event of fire. Fire systems that were previously deemed state of the art are now considered woefully inadequate and have to be totally replaced, so that every single apartment unit is individually alarmed.