Leasehold and Freehold Reform Bill

Earl of Lytton Excerpts

Committee stage
Monday 29th April 2024 Lords Chamber

[Baroness Thornhill (LD)]

I am pleased to say the good news is that we are all on the same page in this regard. The noble Baronesses, Lady Taylor of Stevenage and Lady Finn, have set out the context and the evidence for this. Like the noble Baroness, Lady Taylor, I too had many meetings in my former role about the fact that this issue affected individuals, whether with regard to roads or, in one particular acrimonious case, to playgrounds. So I think we all know which way we are going.

I shall speak to the amendments in my name and make a few general comments about this whole set-up. Amendments 86 and 91 deal with what we now know as the fleecehold issue. As has been said, we all know exactly what that entails. The commercial substance of the arrangement that is eventually arrived at really is a leasehold. Homeowners are often fleeced by the management company, which charges exorbitant fees for maintenance, and may be unable to force directors to hold annual general meetings or provide proper accounts, which I feel should be a basic right. However, leaseholders do not want to publicise the issue because it will reduce their ability to sell the property when they leave, a matter that has not been touched on. You do not want to tell a potential buyer what they are letting themselves in for, which is why the transparency measures in the Bill are important.

Management companies are often non-profit-making, passing on costs of maintenance to owners of homes, but are controlled by the original developer and outsource maintenance work to businesses connected to that developer. There is a body of evidence showing that that leads to increased costs, as local companies could often do the work far more cheaply. A significant problem is that homeowners do not have the resources to take the company to court or force it to hold meetings or to get competitive quotes for required work. In many cases their conveyancing solicitor was recommended by the developer, so the initial advice given was not truly independent.

Amendment 91 would ensure that residents could take ownership of an estate management company if the company had not provided residents with a copy of its annual budget, invited residents to an annual general meeting or acknowledged correspondence from residents. There are existing provisions that allow leaseholders to gain control of their freehold or the right to manage their own lease, but freeholders are assumed not to need that kind of provision. This amendment seeks to address circumstances where freeholders are trapped in a situation where they are being taken advantage of. Crucially, it would allow them to take control of the assets that are vital for the proper enjoyment of their homes.

I say to the Minister that I note the Government are bringing forward the appointment of a substitute manager, which I think is very similar, beginning in Clause 88. However, the householders in that situation would have to prove to a tribunal that the existing management was at fault, which can be difficult. It is the complexities in getting a substitute manager appointed that my amendment highlights. They may be up against the other side’s lawyer, and it is not unusual for KCs to be brought into tribunals in circumstances like this. It is indeed a fault-based policy, and it is a very complex matter to get redress. You cannot just sack the company if you want to take control with your own residents’ management company. Simply put, the amendment is a short cut to being able to take control without such complexities and is less adversarial.

Similarly, Amendment 86 would mean that services or works that would ordinarily be provided by local authorities were not relevant costs for the purpose of estate management charges. I make no apology for saying that this amendment is our statement of principle; we believe it is a matter of principle. The amendment would prevent freeholders being charged twice, first through council tax and then through their management company, for essential services such as roads and pavements. We are aware that there are significant issues as to how and why this situation has arisen, and we urge the Government to look into it further.

Among the other amendments, I single out Amendment 87 from the noble Baroness, Lady Taylor, which seems entirely sensible. It seeks to ensure that householders are not bailing out private developers for shoddy construction or defective homes. It is not right that someone who has paid a premium for their home is then expected to pay maintenance costs to sort out the mess left by the original developer cutting corners or, in some instances, breaching building regulations.

On the other amendments in this group, the Minister is well aware of the thrust and direction that we are all pushing in. I am aware that the business models for development are predicated on whether or not these assets remain the responsibility of the freeholder, the developer or the local authorities. The arguments for this are very varied, ranging from—and I have heard this said—“Local authorities are strapped for cash and we do not want to maintain these amenities” to “Local authorities are asking for impossible standards that are not set centrally and that will add to our costs”, or “Local authorities set standards that mitigate against creating decent workplaces that people want to live in”. A similar example that I had to deal with was there being no trees on the pavements because the local authority felt that they were too difficult to maintain and added cost for looking after both the pavements and the trees. Who wants to live on an estate with no trees?

We need to return to this issue on Report, as the noble Baroness, Lady Finn, said—otherwise, we are piling up problems for tomorrow.

[The Earl of Lytton (CB)]

My Lords, the themes that have been touched on by the three noble Baronesses who have spoken to this group are familiar to me as a professional. They all pivot around these common realm assets—if I can call them that—that are left behind or, at any rate, put into some sort of park mode when the rest of the estate has been built out. These are things that have not been adopted and are placed in the care of an estate management company.

Local authorities may have all sorts of good reasons, within their own scope, for not wanting to adopt novel surfacing, additional lighting, planters or special features. But alongside this there are allied issues because, if they do not adopt, the construction cannot be guaranteed to meet adoption standards—by that I mean roads, drains and all the other things that would normally meet standards that are very often laid down in legislation.

This is an open goal for corner-cutting, which goes on. I cannot tell your Lordships how many times I have been asked to advise on the fact that there are defective drains outside the property, somewhere in the common realm—under the road, common parking areas or landscaped areas—and nobody knows what has happened. It can be not only drains and road construction but engineered embankments, landscaping and ponds: these do not necessarily get constructed to the right standards either, but it can be hugely expensive to try to fix them after the event, and that is where the problem is. The question of just parking them in a management company that then charges whatever it likes goes to the heart of standards, responsibility and the funding of the maintenance of them.

The accountability of management companies seems to be in many instances next to zero. The burden on the freeholders, where the costs charged to them reach that magic figure at which lenders start putting their ears back and question whether they want to lend, results in the sort of lock-in that we well know affects leasehold flats subject to remediation.

I very much support this group of amendments, although they probably need to go further in establishing responsibility and funding. That is something of which the Government really need to take notice, because this is an absolute scandal—not just for the fact that it has gained this moniker of “fleecehold” but because it affects people in their own homes and cannot be allowed to persist.

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[Baroness Scott of Bybrook (Con)]

My Lords, I will now speak to Amendments 66, 68 and 70 in my name. I start by noting that I fully recognise the challenges facing leaseholders, with rising service charges caused by the increased costs in managing and maintaining buildings. The Government are clear, however, that any increase in charges must always be reasonable. We also recognise that the existing statutory protections leaseholders have do not go far enough, which is why we are introducing measures in the Bill to empower leaseholders and help them better scrutinise and challenge the costs they are asked to pay.

Amendment 68 is a technical amendment to Clause 51. It provides further clarification on which parts of the regulatory regime should continue to apply only to landlords who charge and leaseholders who pay variable service charges. These are charges which will vary year on year, depending on the actual cost of providing services.

As currently drafted, the Bill provides such clarity only in respect of measures in the Landlord and Tenant Act 1985. This amendment makes it clear that certain measures and protections in the Landlord and Tenant Act 1987 and the Commonhold and Leasehold Reform Act 2002 should also apply only to leaseholders who pay variable service charges. These include, for example, the ability to appoint a manager and the requirement to hold service charge contributions in trust. Amendments 66 and 70 are minor consequential amendments because of these further changes to Clause 51.

I turn to Amendments 71 to 75 in my name. Amendment 71 clarifies what steps are required to ensure that the written statement of accounts is prepared properly. It follows feedback from and discussions with expert stakeholders after publication of the Bill. We are grateful for their observations. The amendment places an obligation on landlords to provide leaseholders with a report prepared in line with specified standards for the review of financial information. This report must also include a statement by the accountant that the report is a faithful representation of what the report purports to represent.

The amendment also makes it clear, for the avoidance of doubt, that leaseholders must make a fair and reasonable contribution towards the costs of the report. This permits landlords who are unable under the terms of the lease to recover such costs through the service charge to do so, to avoid financial difficulties. This may include right to manage or resident management companies.

Amendment 72 implies a term into the lease where the cost of the preparation of the report is to be payable through the variable service charge. Amendment 73 is a consequential amendment required because of the change to new Section 21D(2)(b).

Amendment 74 allows for the appropriate authority to expand the definition of

“the necessary qualification”

in Section 28(2) of the Landlord and Tenant Act 1985. This will allow the Secretary of State and Welsh Ministers to widen the description of people who are deemed capable of preparing the written report. Amendment 75 makes it clear that any regulations made will be subject to the affirmative procedure.

We will work closely with leaseholders, landlords and professional bodies to ensure we prescribe the right standards to be applied and the right level of detail. I beg to move Amendment 66 and hope noble Lords will support the other technical and essential amendments in my name. I look forward to hearing from noble Lords on their amendments relating to service charges.

[The Earl of Lytton (CB)]

My Lords, I do not think I am actually the next in line to speak on this, but I have Amendments 78C to 78G and 80A and 80B standing in my name. The intentions behind the Bill in relation to greater transparency and fairness are welcome, but, in my view, they do not go far or fast enough to deal with the current crop of egregious monetising schemes, where there seems to be no end to the inventiveness of the worst offenders.

My amendments go further than the Government’s proposals, for this reason. Some of what is in the Bill will take time to work through and, during that time, the same old abuses—or variants of them—will continue. I want the worst ones to stop immediately the Bill receives Royal Assent. It is part of an essential consumer protection package.

Amendments 78C to 78G, which I will deal with first, seek to close loopholes in the current law, require landlords to achieve value for money in the management of their buildings, promote competition in the property management sector and clamp down on the charging of unnecessary ancillary fees. Amendment 78C clarifies that the costs are to be treated as incurred as soon as there is an unconditional obligation to pay them, even if the whole or part of the cost is not required to be paid until a later date.

The moment when costs are incurred is particularly important in relation to Section 20B of the Landlord and Tenant Act 1985. That section prevented tenants being charged costs incurred more than 18 months before a demand for payment was made, unless they were informed that costs had been incurred and therefore would be payable.

Surprising as it may seem to your Lordships, there are conflicting decisions as to when costs are incurred for the purposes of Section 20B. In Jean-Paul v Southwark London Borough Council in 2011 in the UK Upper Tribunal, Lands Chamber, reference 178, it was held that costs are incurred only when payment is made; but, in OM Property Management Ltd v Burr in 2012, in the UK Upper Tribunal, Lands Chamber, reference 2, it was held that costs are incurred on the presentation of an invoice or on payment. Both leave it open to landlords to ask a supplier to delay the presentation of an invoice, or themselves to delay payment, to postpone the commencement of the 18-month time limit. I do not see this amendment as controversial, as it prevents abuse of the system and brings landlord and tenant law into line with accepted accounting practice.

Amendment 78D covers a situation under Section 19(1)(a) of the Landlord and Tenant Act 1985, where service charge costs are payable

“only to the extent that they are reasonably incurred”.

This amendment replaces the “reasonably incurred” test in relation to service charges with a stricter one of providing “value for money”.

It is established case law that, if a landlord has chosen a course of action that has led to a reasonable outcome, the costs of pursuing that course of action are reasonably incurred even if there was another cheaper outcome that was also reasonable. This wide margin of appreciation leaves leaseholders at risk of overcharging. A value for money test would require landlords to interrogate all options before spending leaseholders’ money. It is not an unreasonable test; it is one that most people use in daily life when considering any significant purchase.

Amendment 78E requires landlords to provide tenants with a range of information, and to update it regularly. It goes further than the Government’s Clause 55, under which landlords are required to provide information only on request. If leaseholders are to be encouraged to take greater interest in the management of their buildings, I do not think we should place obstacles in their way. It should not be difficult for a landlord of a well-manged building automatically to provide and keep up to date a data room of information.

Amendments 78F and 78G continue the consumer protection theme of these amendments by promoting competition in the property-management sector. Amendment 78F prevents landlords contracting with related parties or connected purposes, thus removing an obvious conflict of interest. The danger for leaseholders if a landlord company places contracts with its subsidiary is well illustrated by the Charter Quay case, in which the managing agent, which happened to be owned by the landlord company, was roundly criticised by the tribunal for placing onerous service contracts with other subsidiaries.

In the same vein, to promote competition through regular retendering, Amendment 78G places a maximum contract duration of five years. Although under current law landlords must consult leaseholders before entering into a qualifying long-term agreement—that is, a contract of more than 12 months—there is no limit on its duration. In practice, even limited consultation requirements are relatively easily avoided. Contracts between a holding company and one or more of its subsidiaries, or two or more subsidiaries of the same company, are not qualifying long-term agreements; neither are contracts for a year or less, even if they have been regularly renewed.

Amendment 78H seeks to reduce costs on leaseholders by setting out in statute details of cosmetic works that can be undertaken without approval from a landlord. Most leases contain very tightly drawn provisions in this respect, which are against undertaking virtually any type of work, no matter how insignificant, without the landlord’s consent. Provisions such as a prohibition of the

“cutting, maiming or injuring, or suffering to be cut, maimed or injured, any roof, wall or ceiling”,

are very common. The fees for consenting to some minor works often run into hundreds of pounds, so this amendment attempts to find a way to streamline that.

One may debate at length the areas where a more relaxed regime might impair the amenity of other residents, but I seek to establish the principle of getting away from the monetisation of consent for every mortal thing—from pets to paint colour, and light fittings to lino floors—and putting it in the past. There ought to be greater freedoms for leaseholders but, in noting that the Law Commission report implied that consent for floor coverings should be relaxed, I would only observe from experience that engineered timber floor finishes in particular are often a potent source of noise transmission affecting other residents—so the matter is nuanced. At this stage, I simply wish to sound out the Government’s willingness to draw up, say, a code of practice, or otherwise take steps to free up this area.

I now turn to Amendments 80A and 80B, which are really rather different. I would have had them disaggregated had I been a bit more alert on Friday afternoon, because they relate to insurance moneys. Amendment 80A requires landlords to pay the proceeds of a building insurance policy into a separate fund that is held on trust for leaseholders. It also requires landlords, on receipt of insurance proceeds, to begin immediately to repair or rebuild a building, as far as reasonably practicable.

Service charge funds already have to be held on trust for leaseholders and I contend that building insurance payouts should be treated in the same way. As noble Lords are aware, I have raised my concerns about the risk of landlord insolvency. It has been suggested to me that, if a landlord became insolvent, any insurance proceeds held by the landlord on entering insolvency would form part of the company’s insolvent estate, leaving leaseholders in a damaged or destroyed building as unsecured creditors. Holding insurance proceeds on trust would go some way to protect them from risks relating to landlord borrowings—of which more in relation to Amendment 80B.

Most leases require landlords to reinstate damaged buildings—as, I think, does statute in the case of damage caused by fire. Subsection (3) of the proposed new clause in Amendment 80B places that duty beyond doubt. It requires landlords to move quickly to repair or rebuild the damaged or destroyed building. It goes some way to closing a loophole commonly found in leases that gives landlords the right to terminate where it is not possible to reinstate a building within a certain period. That is often three years, which is likely to be insufficient time to effect reinstatement of a larger or complex building.

Amendment 80B closes what I consider to be another loophole for insurance. Most leases require that the landlord insures the building, with the cost charged to leaseholders. However, what concerns me is the ability of landlords to assign the proceeds of insurance policies as security for their borrowings.

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[Lord Gascoigne (Con)]

Time.

[The Earl of Lytton (CB)]

I will be very brief. Some of the costs that have arisen are as a result of Fire Safety Act and Building Safety Act provisions set up by the Government. Some time ago, I asked the people I work with to set up an online resource, which I commend to noble Lords. It is www.buildingsafetyscheme.org. I hope that it will help a number of people to unpick what is a very complex situation.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, the number of amendments discussed today highlights just how many issues there are with the exploitation of leaseholders. The noble Baroness, Lady Taylor, mentioned the option of some pre-scrutiny with people who have expertise in this area—although I am not suggesting that I am one of them. That might have benefited this legislation.

Normally, with leasehold properties, people think that they are buying a house or a flat, but then they are laden with decades of financial obligations to a landlord who can charge a ridiculously long list of things to the leaseholders. That does not seem to be a very fair system. There are far more problems than your Lordships’ Committee will be able to resolve, so there is clearly a need for further legislation when a new Government come to power. I hope that the new Government will consider the issues raised in Committee, including my Amendment 78B, which shines a light on the growing trend of public assets being funded by leaseholders. For example, green spaces, play areas and roads are often being charged to leaseholders, even when they are freely accessed by the wider community.

These leaseholders are facing a double taxation: they are paying their council tax, which is used to fund play areas and roads provided by the local authority, and they are also being charged by their landlord for play areas and roads that are within the estate. There seems to a case for these publicly available assets to be brought into local authority management, ownership and funding. I would appreciate it if the Minister, and any budding future Ministers, could give their thoughts on the issue and perhaps undertake to look at it further.

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Moved by

[The Earl of Lytton]

82C: After Clause 65, insert the following new Clause—
“Building trustee(1) A prescribed building must have a building trustee.(2) In this section a prescribed building is—(a) a higher-risk building as defined by section 65 of the Building Safety Act 2022, or(b) a building where—(i) 50 per cent or more of the internal floor of the building (taken as a whole) is not occupied for residential purposes, and(ii) the total service charge payable for the building exceeded £250,000 in the last financial year, or(c) a building where a recognised tenants’ association has requested the appointment of building trustee, or(d) a building where a court or tribunal has ordered the appointment of a building trustee.(3) The Secretary of State may by regulations amend the definition of prescribed building.(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.(5) In this section—“building” means a self-contained building, or self-contained part of a building, in England that contains at least two dwellings;“prescribed” means prescribed in regulations made by the Secretary of State;“recognised tenants’ association” has the same meaning as in section 29 of the Landlord and Tenant Act 1985.”Member's explanatory statement
This amendment requires higher-risk buildings (over 18m), and buildings where 50% or more of the floor space is not residential and with a total service charge of more than £250,000 to have a building trustee. A building trustee may also be appointed at the request of recognised tenants’ association, or by a court or tribunal.

[The Earl of Lytton (CB)]

My Lords, I move Amendment 82C and will speak to Amendments 82D to 82M standing in my name. These draw on good practice in the management of multiunit developments in Australia, Europe and North America and seek to replicate best practice here. They are also designed to address some of the concerns raised in earlier debates, particularly in the context of the proposed change to the threshold for enfranchisement in mixed-use developments from 25% to 50%. I suggest that similar amendments to a future commonhold Bill would go some way to meeting concerns that have been expressed about the risks associated with a wholesale move to that tenure.

The amendments provide for the appointment of a building trustee. It is proposed that this should apply in the largest and most complex developments. Building trustees might also be appointed at the request of a recognised tenants association or by the courts. The building trustee will be an independent and impartial figure whose primary role of auditing performance would ensure that interest rights, responsibilities and performance of the landlord were properly balanced with those of leaseholders and, more importantly, that the building is properly maintained and the service charge provides value for money. I noted in our earlier discussions the Minister’s comments to me about value for money, but it is the benchmark used by the National Audit Office for local authority finance, I believe—I eyeball noble Lords who have experience in that line of business.

Amendment 82C sets out the buildings this would apply to, and Amendment 82D outlines the trustee duties—I will rattle through the amendments at some speed. Amendment 82E is about the appointment process of the building trustee. Amendment 82F sets out the trustee entitlement to documents and information.

There is, of course, the question of who pays for the building trustee. It would be unreasonable—particularly during a cost of living crisis—to burden leaseholders, especially as many of the buildings covered by Amendment 82C are already facing increased service charges owing to the new safety requirements under the Building Safety Act. Instead, Amendment 82G provides that the costs of building trustees would be covered by a levy on providers of commercial and residential mortgages and block landlords, excluding enfranchised building and tenant right-to-manage companies.

Amendment 82H sets out what would be the baseline value-for-money benchmark. This is necessary because there is a risk of inevitable bias in the management under the auspices of a party to the leasehold arrangements. This might be perfectly reasonable in terms of the person instructing the management, but still fall well short of the optimal.

One of the Bill’s key aims is to make it cheaper and easier for leaseholders to enfranchise. I welcome that. My amendments are designed to augment these plans by providing a light-touch oversight to ensure effective, efficient and economic management of a building. This backstop would require reassurance to lenders, leaseholders and other stakeholders that a freeholder-managed or resident-managed building will be properly looked after.

The reassurance offered by the building trustee is needed, as there is strong evidence that, monetising policies by a few freeholders apart, leaseholders themselves are often reluctant, unable or lack the skills to take on the responsibility and liabilities for the management of increasingly complex buildings, or to direct the professional managers adequately. Indeed, some complaints reaching my mailbox are about residents’ own management companies, and the Government’s own research found that leaseholders were concerned about issues of working with neighbours, lack of time and reluctance to take on additional responsibilities beyond those necessary as a home owner.

That touches on a point raised by the noble Lord, Lord Moylan, in a previous group, because although most leaseholders will appoint a managing agent to undertake the day-to-day running of a building, they themselves remain responsible for key decisions and setting priorities, such as service charge levels, authorising maintenance schedules and dealing with arrears. It can be difficult to get collective agreement on these issues, with resultant detriment to the management of the building fabric. According to data from the Scottish House Condition Survey, half of all housing is in what it describes as “critical disrepair”, and almost half demands “urgent attention”. The situation is most acute in tenements, so I appreciate that this probably relates to older buildings, but paying for common repairs or maintenance was the most frequent cause of disputes in these buildings.

By taking a whole-life view of the building, the building trustee can seek to avoid that Scottish experience by providing an independent assessment of maintenance needs and condition, and ensuring sufficient provision is put aside to maintain the building properly. Amendments 82I and 82J would require landlords to provide a 10-year plan of anticipated expenditure on capital works and building maintenance, and to establish a sinking fund to avoid leaseholders facing large, unanticipated bills. The plan and the fund would be subject to an independent audit and assessment by the building trustee to ensure that necessary works, and only necessary works, were planned for and adequately funded.

In an open letter to lenders on taking commonhold as a security, dated 21 July 2020, the Law Commission recognised that

“the value of a lender’s security is inherently linked to the management and maintenance of the building in which a flat is located. A failure to keep the building in repair, to insure it properly, or to keep sound finances all have significant potential to jeopardise the value of a lender’s security”.

The same is, of course, true for leasehold buildings. That is why I believe that professional landlords and lenders should cover the cost. It is the banks and the building societies whose capital is at risk. The building trustee should provide a cost-effective way of reassuring them that the flats they have lent on are being properly managed, and of maintaining the value of the security. The same is true of commercial lenders on mixed-use developments. I envisage that the Secretary of State would outsource the appointing of building trustees to an external body, as provided for in Amendment 82E.

Two significant further powers would be conferred on the building trustee through Amendments 82H and 82K. Amendment 82H would allow the building trustee to apply to the tribunal on behalf of leaseholders to seek refunds of expenditure that does not provide value for money. Amendment 82K would allow the building trustee to adjudicate in disputes between landlord and leaseholder, and between leaseholders. One of the main areas where I see this provision being used is service charge arrears. It is particularly important in leaseholder-managed blocks that do not have the wider financial resources of the major landlord groups that service charges are paid promptly. Failure to do so prevents a building being managed properly, and in extreme cases places all residents at unnecessary risk. If essential safety works could not be undertaken or building insurance obtained, that would create real problems.

Evidence from other parts of the world suggests that condominium statutes do not have sharp enough teeth to recoup outstanding contributions efficiently and effectively. In England and Wales, we currently fall between two extremes. I have sympathy with those noble Lords who argued in a previous debate that forfeiture, with the exorbitant windfall that it can offer landlords, is inherently unreasonable. Equally, I recognise the point the Minister made in previous discussions that civil debt recovery proceedings can be lengthy. The building trustee’s power to adjudicate offers a faster and less formal route of dispute resolution than the court, and supports the building’s cash flow.

Amendment 82L would provide for the building trustee to take over the management of a building if its landlord becomes insolvent. Historically, this has happened to very few landlords. However, the Committee will recall that I have previously raised concerns that not all landlord groups have the funds needed to meet the building safety remediation liabilities and could therefore become insolvent. The financial position of these groups may get significantly worse, depending on the Government’s decision on ground rents. Some of the country’s largest landlord groups—I refer to E&J Estates, which is landlord to around 40,000 homes, Long Harbour, which is landlord to around 193,000 homes, and Regis Group, which is landlord to around 30,000 homes—have significant borrowings that are due to be repaid from ground rent income over the next 40 to 60 years.

To the best of my knowledge, the Government’s final position is still unknown but, based on press comments on the Secretary of State’s own preference, it is reasonable to assume that the finances of landlord groups dependent on ground rent income to repay their borrowings will come under further, if not fatal, stress. This is not just my view; it is also that of the Government, whose own impact assessment states that

“there may be potential insolvencies/forfeiture and associated costs where the freeholder defaults on contractual obligations as a result of the cap”.

However, it does not seem that there has been further assessment of just exactly what this would mean in practice.

The collapse of a major landlord group would be without precedent and could cause tens of thousands of leaseholders in hundreds of buildings to be in serious trouble. In blocks subject to intermediate leases, it is likely that contracts covering everyday management and maintenance would be at risk because there would be no landlord to provide instructions. Conveyancing and lending transactions, which are already under stress, would be paused as there would be no one to process essential documents such as notices, deeds of covenant, landlord certificates and leaseholder deeds of certificate. The ability of the building trustee to assume the management of a building in such circumstances, and prevention of possible management contract termination, is an essential backstop that prevents leaseholders being left in limbo for months while they try to set up an alternative arrangement for managing their buildings and/or await the outcome of the administration or liquidation.

Finally, Amendment 82M would simply ensure that the building trustee has relevant qualifications for the task.

I hope your Lordships will see the merit in these arrangements, and that the Minister will be able to agree that measures such as this are a necessary complement to the Bill’s intentions. While I commend these amendments to the Committee, I simply say that I am not set on this particular structure, but the principle needs further examination to provide the point that I have constantly been on about—namely, consumer protection. On that basis, I beg to move.

[Lord Foster of Bath (LD)]

My Lords, I will speak to Amendment 95A. The Long Title of the Bill is very clear. It includes the phrase

“in connection with the remediation of building defects”.

Much of the debate has been on the management and funding of remediation and maintenance, but the early identification of defects is clearly really important in order to avoid some of the problems that can occur, as, tragically, we have seen, for instance, in the Grenfell Tower fire.

That fire was caused by a faulty electrical appliance, but there is also a large number of fires caused by faulty electrical installations. Indeed, the charity Electrical Safety First has calculated that there are around nine such fires every single day in England and Wales. On average, they cost about £32,500, but they have in many cases ruined lives, and on a few occasions have meant, tragically, that people have lost their lives. Quite clearly, it makes a great deal of sense to identify faults at the earliest possible opportunity.

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The amendment would also create the precedent that leaseholders should not be expected to contribute fully to the ongoing management of their property. It is a fundamental principle of leasehold property that leaseholders are liable to pay through the service charge for the ongoing management of their property. I hope that, with these assurances about the action that the Government have taken and are taking, noble Lords will agree not to press their amendments.

[The Earl of Lytton (CB)]

My Lords, it is my privilege to thank all noble Lords for their contributions to the debate on this group. I pay tribute to the noble Lord, Lord Foster of Bath, for his contribution. As the noble Baroness, Lady Thornhill, said, he has been a doughty campaigner on this issue without pause for breath. It is absolutely right to consider electrical safety in buildings.

I also particularly mention the noble Baroness, Lady Fox of Buckley, for her important contribution. It raised something that has bothered me for a long time—namely, that I do not see a long queue of people wishing to be the accountable person. Indeed, I do not think this has been correctly thought out. There is an assumption in the Building Safety Act 2022, and again in this Bill, that somehow these things are going to be accepted and fall into place. When it comes to liabilities, they do not automatically happen and they do not just fall into place.

I thank the Minister very much for her comments on my amendments. She said they would create additional complexity for very little gain and that there were better ways to deliver the outcomes. I am not sure what she thinks those better ways are, given that we are dealing with a situation that is a legacy of the Building Safety Act—which is getting on for two years old—but has not been fixed, and meanwhile people are in great difficulties in their homes as a result. There needs to be legal responsibility, proper accountability without gaps and resource in terms of funding, from wherever that will come. There is a necessity to identify that secure and adequate resource, but we do not have that at present.

I will very likely return to these amendments—or these subjects, anyway—at later stages on the Bill. In the meantime, I beg leave to withdraw the amendment.

Amendment 82C withdrawn.