Leasehold and Commonhold Reform

Debate between Lord Hanson of Flint and Peter Bottomley

Thursday 21st December 2017 Westminster Hall

[David Hanson (Delyn) (Lab)]

I thank the hon. Member for Worthing West (Sir Peter Bottomley) and my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) for securing this debate. I shall say straight away that I welcome the Government’s action last night, which will be helpful for the future.

My concern, which relates to that of other right hon. and hon. Members, is about what happens between now and the point at which any legislation is implemented, and what happens for all our constituents who have faced difficulties and challenges in the past. Those challenges have been so difficult for some of my constituents that they do not want the estates and houses that they have been involved in to be publicly identified because they fear a further loss of income on any future sale of their property.

Before I ask the Minister some specific questions, I will touch on a number of key areas of concern—similar to those outlined by other hon. Members—that have been raised with me: first, the lack of information at the time of purchase, which has been mentioned already; secondly, the concerns and information around the onward sale of freeholds to third parties; thirdly, the issue of what happens on split sites, which my hon. Friend the Member for Weaver Vale (Mike Amesbury) mentioned in his intervention; and fourthly, the element of devolution.

On the lack of information, I feel like I am in an echo chamber. The points that have been raised with me have also been raised throughout the debate, but are worth repeating. My constituents, of whom many were first-time buyers purchasing with Help to Buy and who were grateful to the Welsh Assembly and the UK Government for helping them, were forced to use solicitors recommended by the building company; did not get an explanation about what freehold or leasehold mean; did not get an explanation about potential future charges; never had it explained that those freeholds could be sold on to a third party, which might impact on their finances at a future date; and were offered different prices by the same company for the same freehold.

For the same house and the same freehold companies offered £1,500, £5,000 and £7,500 at the same time at purchase. People said, “Well, I cannot afford that now because I am on a Help to Buy scheme. I’ll undertake whatever you think is best for me,” and the advice was to have the leasehold, so people have found themselves on that. We need to revisit that for the future and get some clarity from the Minister about what that means now for people who have undertaken that scheme recently.

Onward sale is important. I know that the Minister will deal with that for the future and will consider completely banning the sale of leaseholds as a matter of principle, but I have a situation now where my constituents bought a property and the leasehold from what they thought was a reputable company, but found that the freehold has been sold on to a third party. Shockingly, my constituents did not even know and were not offered the chance to buy it at that time. In one example, one person happened to see the sales director of the company on site and asked to buy the freehold, which was sold to them, but the freeholds of the other 21 properties were sold to a third party. Only later did my constituents find out that that sale had taken place. They were not offered the chance to purchase as a first port of call, even if they had wanted to.

[Sir Peter Bottomley]

I think I am right in saying that the law is that if they had been in a residential flat, the freehold could not have been sold without it being offered to them. That should have been the law for the houses, but I suppose it was not because no one imagined that anyone would ever sell a leasehold house again.

[David Hanson]

I am grateful for that clarification.

This is not about the future; I am sure that the Minister is already receiving representations on a cross-party basis about what should happen in future. It is about how we deal with the past. For example, my constituents who wished to purchase the freehold from the company that had bought it—as they found out only at a late stage—not only have to pay an initial investigatory charge of several hundred pounds, but a premium of £1,000 on the purchase price. Many of the people in that position are either first-time buyers or retired. One of them, a former constituent of the shadow Secretary of State, my right hon. Friend the Member for Wentworth and Dearne (John Healey), who moved to my area to retire, has raised the issue with both of us. What is the situation with buy-back at a fair price and with fair charges? How will the Minister deal with those issues?

I mentioned split sites. There is a very big development site in my constituency, and when this scandal broke halfway through the development, the company in question decided, “Let’s get out of this quick—let’s forget this and try to limit our liabilities. We’ll sell the freeholds to the customers buying the houses.” Half the massive estate of 400 or 500 houses now has a leasehold with the company, and the other half is being developed without leasehold. How will somebody who has bought one of the houses with a leasehold ever be able to sell it, when—as my hon. Friend the Member for Weaver Vale pointed out—owners of houses on the other side of the street have a different situation as regards the leasehold and potentially different liabilities? Nobody will buy a house from the half of the estate with leaseholds if they can buy one from the half without.

I approached the company, which I will name; it is Persimmon, whose chief executive’s bonus this year was £118 million. When I asked whether it would sell or give the freehold to my constituents on the same basis as to the others, the answer was no. It said that it would sell it for £3,750—at a time when it is giving £118 million to the chief executive alone. My constituents, who have stretched themselves to buy their house in the first place, cannot afford to pay that. I then asked the company whether it would ensure that it did not sell the ground rent on in the meantime. Very gratefully, I am sure—that was sarcasm, for Hansard’s purposes—its reply said that

“we will not sell the ground rent to any third party until at least two years following the purchase of their leaseholds. In the circumstances we are prepared to confirm a minimum date of 14 July 2019, being two years from the date of our meeting.”

So Persimmon has said that it will not sell that on for the next two years, but there is no guarantee beyond that. My constituents cannot sell their houses, because over the road similar houses are being sold as freehold, but they are finding it difficult to pay the £3,750 because they are already stretched. That is particularly important for the Government, because many of these people are on Help to Buy. When the value falls, not only do the constituents struggle, but the Government lose out on any potential sale.

My last point relates to my personal circumstances. My constituency is as near to England as the south side of the river Thames to the House of Commons; we are literally two or three miles across the border. My hon. Friend the Member for Alyn and Deeside (Mark Tami), who was present earlier, is in a similar situation. The majority of houses in my constituency are built by companies based in Manchester, in the north-west of England. What discussions has the Minister had with the National Assembly for Wales, which has devolved responsibility for housing issues, about his proposals and plans for the future? If he introduces a ban in England, will it cover companies based in England on sites based in Wales? If he introduces regulations, what will the parallel consequence be for the National Assembly for Wales? My constituents are using these schemes, but the materials have been made in England, the profit is going to England and the policy was developed in England. That needs to be clarified, so will the Minister tell us what is happening with the Welsh Assembly?

I have three solutions for the Minister. First, he could work with the National Assembly for Wales, as well as in England, to give a definitive right to buy to constituents who have a leasehold with a third party or a particular company. There is even an argument that he should exert real pressure for a right to be given the freehold as part of the price. In my constituency, houses are being sold at the same price freehold as they are leasehold. That is simply not tenable. It is an extra piece of profit for a company that is already paying its chief executive £110 million.

If the Minister cannot get freeholds given freely, he needs to consider a price cap—and if he cannot solve that problem, he should at least consider a price cap on the charges that may accrue for future generations. The continued rise of the price as regards leaseholds is not acceptable. If he cannot find a mechanism to compensate people, he could legislate to freeze the price at its current level.

The Minister should also consider helping people who have bought a house on the Help to Buy scheme, but who now wish to actually buy what they thought they were buying in the first place: the land on which the house was built. Introducing a mechanism to give financial support to them to buy the freehold would be an extremely good contribution.

I welcome what the Minister has done so far. I know that we are in a pickle and a mess, although in a way I am relieved to hear that the problem affects not just people in Delyn and north Wales, but many others. There are real challenges for the people who are in this mess, and the Government and the Welsh Assembly have a duty and a responsibility to try to resolve it.