Building Safety

Earl of Lytton Excerpts

Tuesday 11th January 2022 Lords Chamber

[Lord Greenhalgh (Con)]

Not today. But we are well aware of the practice, which goes beyond just whether they are domiciled, of using special purpose vehicles. We are looking at how we deal that issue, where the developer is known, creates an entity over there, away from the rest of the business, does the development in isolation using the funding, and then wraps it up at the end of the development. We are looking at all these issues, through law and tax. Whatever levers the Secretary of State has, he is looking to deploy them to make sure that the polluter, in the broadest sense, will pay.

[The Earl of Lytton (CB)]

My Lords, I add my congratulations to the Minister on his untiring work here. The Statement made in another place yesterday is certainly extremely welcome. As a practising chartered surveyor and valuer, I am particularly determined to ensure that the regime where the purveyors of shoddy buildings have not been properly held to account must stop, but I understand the immense complexity, raised by other noble Lords, to do with insurance and other matters downstream from the immediate problem.

My first and last concern is the point made, in particular, by the noble Baroness, Lady Pinnock: namely, that innocent people have devoted their life savings and invested their homemaking, their very being and their work/life balances in properties which have been found to be not constructed to safe standards. This is an appalling social and mercantile evil—let us make no bones about it.

I request that the Minister confirm that this cannot and must not be turned into a tax solution. The reasons for that will be self-evident. It would be both unfair and an unbelievably blunt instrument. It will almost certainly require hypothecation, and would merely serve to collectivise what should be an individually assessed liability; the Minister mentioned that it will be property by property.

Like the noble Lord, Lord Blencathra, I fear that there will not be a great queue at the Minister’s door with open cheque books, and I suspect it will be necessary to move to plan B, because it is not just the cladding but an awful lot of other defects—

[Baroness Scott of Bybrook (Con)]

Will the noble Earl ask his question, please? There are other people waiting.

[The Earl of Lytton (CB)]

Does the Minister agree that the only remaining viable route that is coherent across the piece is, in effect, the polluter pays amendment, the draft of which had the scrutiny of top legal minds, such as Daniel Greenberg QC? Furthermore, does he agree that this is the only means whereby the perverse habits of what is known in the trade as value engineering will become something of the past, and in future that the inculcation of consistently good construction methods will be the lasting legacy of Grenfell?

[Lord Greenhalgh (Con)]

The noble Earl is right that this is a crisis of epic proportions that has affected hundreds of thousands of leaseholders and has been caused over many decades. I have probably visibly aged while holding this brief, because some of the stories from leaseholders are simply harrowing. That is one reason why I am delighted that the House collectively feels that we are making a big step in the right direction.

I also agree that we should challenge some of the practices that have led to this, such as value engineering, which is essentially a way of cutting corners and trying to inflate profits, often by compromising the integrity of the building. These practices simply must stop. Making the polluter pay and doing so at the individual building level is the way to ensure that the quality of the buildings in future will be far better than what we have seen in the past 30 years in this country.

Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

Earl of Lytton Excerpts

3rd reading
Wednesday 8th December 2021 Lords Chamber

[Baroness Pinnock (LD)]

My Lords, on behalf of my noble friend Lord Fox, I thank the noble Lord, Lord Callanan, for the constructive meetings that helpfully resolved the issues in the part of the Bill dealing with directors’ disqualifications and insolvency. I thank the Minister for the time he devoted to discussions on the Bill and the private meetings we held to try to resolve various issues, some of which remain; nevertheless, we are happy that the Bill has to pass to deal with the issues in front of us. I am still concerned about its retrospective nature, an issue that we did not fully resolve, inevitably. As the noble Baroness, Lady Blake, has said, the reforming of business rates is still a major concern. But with that in mind I wish to thank everybody who was involved, particularly Sarah Pughe, from the Lib Dems’ legislative team, for her help and advice. I am grateful for the way the Bill was discussed and debated so that we were, in the end, able to support it. With that, I thank the Minister for his help.

[The Earl of Lytton (CB)]

My Lords, I will make a contribution from, as it were, the technical Benches on the matter of non-domestic rating. I thank the Minister—this will probably be the only time I can thank him publicly—for writing to me about matters he raised when we were at a previous stage of the Bill, in connection with the package of measures the Government have put in place to try to alleviate the problems facing businesses. I do not know whether the right term is “sidestep”, but I suspect he did not quite get the point I was making. Where a major manufacturer carries out works to meet an environmental target—for decarbonisation, for example—and in doing so wrecks something tantamount to a building or structure, or an item covered by the plant and machinery order, a proportion of its value automatically gets built in as an addition to the rateable value. That has been described to me as the double whammy of having to pay for the improvement to meet a government-imposed target, and additional rates. I was trying to focus on specific instances involving a building or structure, or the plant and machinery order, but I leave that to one side because that was to some extent an overture to what the Bill is about. I mention it only because the Minister was making the point about the assistance the Government have provided.

As for the Bill itself, I obviously regret a business rating measure of such a binary nature preventing the effects of coronavirus being properly reflected in rental values as a material change of circumstances for the purposes of making appeals against the assessments. Although the government package of reliefs and other support for the business sector is extremely welcome, it none the less pales into insignificance compared with what businesses could have expected, had a material change of circumstances applied. I will leave that there.

The Government say that the material change of circumstances was never intended to apply to things like pandemics. Well, probably not, but there has never been a time like this when HM Treasury and HMRC have been quite so keen to protect their income streams come what may, regardless of the precise effects on businesses. I hope this Bill does not have the consequences I fear it might, but I remain concerned that the whole process of business rates is beginning to drive responses, which should always be a warning sign with any taxation measure going forward. That said, I thank the Minister and the Bill team, and other noble Lords who have spoken up for the business rate payer. I wish this Bill a safe passage, and I hope it will not fulfil my worst prognostications.

Leaseholders: Safety Remediation Costs

Earl of Lytton Excerpts

Thursday 4th November 2021 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I am delighted that the noble Lord, Lord Stunell, has secured this debate. His party, with cross-party support, has spear- headed the cause of those caught up as blameless home owners in the wake of fire safety measures following the Grenfell tragedy. Like him, I am a member of your Lordships’ Built Environment Select Committee. I declare my professional involvement with property and construction. My focus is particularly on property economics, leasehold issues and the sheer level of collateral damage being inflicted on an entire home ownership sector.

So I am glad to have this opportunity to speak on the matter once again, because the problems have not gone away, nor has the ruination of people’s lives and finances due to failures to construct buildings to a standard of safety and competence we should expect. It is not as if the required standards of the past 40 years have gone away, or that overarching principles of safe construction have been abandoned; rather, there has been attrition in the oversight of those charged with the solemn duty to comply with them together with what is termed “value engineering”.

You could not get away with constructing a car to unsafe standards, so why permit a building constructor to plead the principle of caveat emptor on a far more important element in people’s lives? Unsafe buildings cause deaths. The Motion in the name of the noble Lord, Lord Stunell, refers to safe housing. Yes, indeed, one’s home should be a place of sanctuary, of occupation on one’s own terms, of security, and is often the embodiment of the owner’s entire capital asset. Destroy the safety, security, comfort, predictability and confidence that this embodies and you do much more than create some remediable, physical or financial loss. It results in trauma of impossible and inescapable proportions for individuals and households, and a loss of faith in the sector and in what the Government are doing about it.

As we have heard, this has gone far beyond the cladding issue alone. Investigations have revealed a raft of omissions and defects in construction that, had they been known about at the time, would not have passed the regulatory material suitability or code of practice standards when a building project was approved and subsequently implemented. It is a fundamental truth that those home owners now faced with unsaleable properties, eye-watering service charges and remediation costs purchased in good faith and had no part in the creation of those defective buildings. It is also the case that the identity of those responsible for construction deficiency is, in most cases, known.

So, while I advocated the Government getting ahead of the curve and leading the way on this very complex issue, with many economically powerful players, I did not mean to suggest that the taxpayer should bail out the home owners. Of course, there is a role for a compensatory fund and a levy, and the Government are acting on this but only for the limited capacity of the most at-risk buildings. That leaves a gap between the scope of what the Government set out to do and the extent of the problems, as we now know them.

I believe that the Government should be the instigator and driver of a more encompassing framework. Here I pay tribute to the comments of the noble Lord, Lord Young of Cookham, because much of what I say will dovetail with them. The framework should ensure that those responsible are indeed held to account, that home owners are thereby accorded relief from their resultant woes and that confidence is restored.

In the last five months, I have had many discussions with Steve Day, an inspirational campaigner who is well known to the Minister and who was faced with a huge remediation bill on an east London flat. Due in large part to his persistence, a group colloquially termed the “polluter pays” movement has grown up and garnered very considerable support. I wish to address the principles behind it this afternoon. It borrows from the principles in the Environmental Protection Act, seeking to make the polluter—or, in this case, the developer or constructor and his team responsible for the works—liable for the consequences of their failures. It differs from the EPA in that it would not try to apportion individual responsibility in some proportional manner but would provide joint and several liability on the developer or builder and leave those who are responsible to sort it out among themselves, after the Government have recovered the money.

It would make the first point of recourse for appeals to the First-tier Tribunal to keep things out of the mainstream courts as far as possible, thus discouraging economic might from bullying much weaker parties. It would attach parent company liability by a device customarily used by the Competition and Markets Authority, when treating a company and its subsidiaries as a single liable entity. It would remove the protection of special purpose vehicles, which developers have often used to try to ring-fence, if not actually escape, liability.

The polluter pays principle asks the Government to employ industry experts to check whether builders built to the required standards, including manufacturers’ instructions. If not, it then places the burden of proof on constructors to evidence that their installations met building regulations in force at the time of construction. If they do not have the evidence or they broke the building regulations in force at the time, they would need to put their hands in their pockets. As we have seen all over the media and in professional reports, there has been widespread non-compliance with construction standards, despite the fact that there is a very profitable housebuilding sector—so I believe that a large recovery potential is in fact there.

The polluter pays principle would also provide a way forward for proportionality in risk assessment, providing for the full range of property types, building heights, defect categories, and so on. It would draw on a vastly greater resource than the Government currently propose under their levy, and it would not impose a blanket levy on the many good and conscientious builders and their development teams. But it needs government to get ahead of the current freefall in risk-averse reactions and broker a pan-sector approach.

As a consequence, if this was taken forward, it would in fact set in place a legacy that would restore confidence and counter the perversity of the race to the bottom in construction standards and the culture of getting away with things if you can, rather than doing a good job and going that little bit further.

I fervently hope that, given the information, background, purposes and mechanics, the Government will see fit to incorporate this into the Building Safety Bill as an amendment of their own. If so, I will strongly support it; if not, I shall argue for one to be incorporated notwithstanding. I put it to the Minister that, in all justice and morality, this demands action. The problems of damage to market confidence, sector economics, social fabric, and personal health, well-being and life chances simply cannot be allowed to persist. This is a systemic failure that must not be allowed to persist. I know he has listened to the polluter pays argument, but I now ask him to take it forward.

Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

Earl of Lytton Excerpts

2nd reading
Tuesday 19th October 2021 Grand Committee

[The Earl of Lytton (CB)]

My Lords, the procedure for this debate before Second Reading was queried at the time of the Chief Whip’s commitment Motion. I had not realised that not only has this procedure been used only once before—namely, last October during our hybrid phase—but, so far as I know, the Procedure Committee has not reported on it. I have to say that I consider it unsatisfactory to separate in time and place the bulk of debate here from a decision to give a Second Reading some other time in the Chamber. Can the Minister confirm what discussions with the Procedure Committee have taken place about using this procedure now that we are out of hybrid mode? He may need to come back to me on that on some other occasion.

As to the matter for debate, noble Lords will know of my involvement, over a lifetime as a property professional, with business rates and local government finance and in this House, from the day of my maiden speech to the present time. With my having declared that matter, it will come as no surprise that it is the rating part in Clause 1 of the Bill that I seek to address, and that only. I do not propose to disappoint the Minister in what I have to say, but I apologise in advance because I will need a little time to explain it. I declare at the same time that I am an occupier of business premises and I benefit from a small-business exemption—but, for the avoidance of doubt, I did not claim any Covid grant or relief for the interruption of business activities.

I acknowledge that the Government have made great efforts to relieve business rate payers of many of the worst effects and burdens that have arisen during the pandemic, but it is far from the case that it has been applied equally to all, or indeed evenly across the spectrum of property. Nor has it been in any way linked to impact or means, so far as I can tell.

I also acknowledge that, having introduced measures to grant emergency relief, it might be seen as perverse to allow those who benefited from them to make further claims for the same period due to material changes of circumstances, or MCCs. However, it would be simplistic to go down that road. I do not believe that those who set about to make MCC appeals were those same beneficiaries or intended to claim for the same period, given that the duration of relief was not known at that time. Indeed, it is likely that they were not one and the same. Either way, it should be a simple matter to make provision to prevent such double counting, if indeed there is evidence of it.

MCCs have always been available where substantial change has affected the assumed annual value of property; a supermarket opening up down the road, affecting traditional high streets, or changes in highway arrangements, affecting trade—that sort of thing. However, the Government suggest that this was never intended to address an issue of global impact such as a pandemic. From the dawn of rating under the statute of Elizabeth I to the General Rate Act 1967—on which I cut my professional teeth—and on to the present day, there has been plenty of time to ponder such matters, and yet we have this measure only now. Coincidence? I think not.

The reality is that in the pandemic some sectors did well, others realigned their processes and activities to stay afloat, and a further group floundered and continue to do so. It is not correct to say that the pandemic produced a general downturn lasting for more than a year, which is the usual benchmark for dealing with material matters for rating valuation purposes.

It is a concern that the Government took so long after the commencement of the lockdown to come forward with a measure of this type. Effectively, a year elapsed before the Government chose to lay, initially, a statutory instrument with prospective effect, with the promise of a Bill with retrospective effect—which is where we are now, of course. I do not believe that proper consultation with business rate payers was part of that process.

The courts have been at pains to point out that rateable values are meant to represent the benefit of occupation to the occupier. Where government prevents or limits such beneficial use, rateable values should reduce—but not, it seems, where HM Treasury deems otherwise. As a result, appeals against assessments on grounds of MCCs were made in good faith, in time, and were validated long before the end of March 2021. No attempt was made to avoid this wasted cost and effort during the period when doubtless many public servants were furloughed, but equally the resources were there to consider and act in an appropriate and timely manner on such issues. The Valuation Office Agency was actively involved in negotiations regarding these MCC appeals, in conjunction with ratepayers’ representatives.

I have received representations from, among others, Heathrow Airport—referred to by the noble Lord, Lord Bourne of Aberystwyth—and some advice from rating experts Gerald Eve. If ever there was an MCC event sufficient to interrupt the operation of the nation’s largest airport, this had to be it. While late in the day a grant scheme was set up, it was capped at £2 million per hereditament, so amounted to a flea-bite of a concession in something like the Heathrow rates bill.

Worse than that, it selectively, and, I suggest, unreasonably, failed to address the issues affecting very large assessments and operations such as Heathrow and Gatwick, which to all intents and purposes were completely shut down by force of law while, at the same time, support was given to other types of activity that were still able to keep going, as we have heard. It is therefore hard to comprehend precisely what sort of a material change of circumstances would afford any relief to such a large enterprise, given the effect of the Bill. Nor does it dispel the impression of selective discrimination against a specific class of undertaking.

It is not just about mega-businesses of this sort—many others have suffered equally. Although the productivity may have held up, the double overheads of supporting remote working staff and maintaining empty office buildings have none the less been significant. The Government have protected office tenants from being hounded by their landlords to pay rent for space that they were prevented from physically occupying but have offered them zero protection when it came to business rate bills. That seems to be nothing short of double standards.

The Government have promised to set in place a £1.5 billion discretionary business rates relief fund in place of the MCC reductions that this Bill will now negate. I doubt whether many local authorities will exercise discretion in favour of an international airport, or indeed any but a relatively local cause célèbre, however significant the larger employment and economic activities are of big undertakings that underpin local economies and employment.

The explanatory paper produced at the same time as the SI gives examples in which a ratepayer with a £95,000 assessment might get £7,300 of relief, despite their turnover collapsing to zero. What that tells us is that any benefit is likely to be minimal and that £1.5 billion is a drop in the ocean. To follow what other noble Lords have said, could the Minister please clarify how the Government arrived at this sum of £1.5 billion as appropriate recompense for ratepayers badly impacted by the pandemic? Having been announced in March 2021, in the 2021 fiscal year, does this sum relate only to that year, with nothing further, or is it intended that there should be some further funding for 2021-22?

I find it disturbing that a deliberate decision has been made not to provide information as to how the £1.5 billion will be apportioned between councils and how they should make decisions as to which businesses in their areas should receive some of it—until, that is, this Bill is passed. Of course, that leaves businesses and billing authorities alike in no position to make any plans in relation to it. Can the Minister explain why he cannot today publish a draft of the proposed allocation of the £1.5 billion to each local billing authority and share the draft guidance planned to be issued to councils explaining the circumstances in which the Government believe that businesses should qualify for a share of the cash?

The apparent intention is to make the distribution according to the official data on the impacts of the pandemic on different sectors and not according to estimates of the impact on a property’s value. All this is apparently to ensure

“an even and more proportionate allocation of support”.

We were told that this would enable a speedier payment of support than would have been possible under the usual MCC appeal rules. I am afraid that I do not entirely follow that.

I feel that this is a matter of a veil of obfuscation. Fundamentally, it is about protecting Treasury income streams, first and foremost—and I am afraid that it is just too bad if businesses crumble. It lacks equity and fairness; the most desperate of businesses will be least able to mount a case or may have already gone under, waiting in desperation for government support that has failed to materialise. There is nothing in prospect for those at tipping point now. I have long said, and will say again, that if HM Treasury can think of nothing better to do than to disadvantage businesses which suffer serious losses, due in significant part to government edict, it will be of small concern to it that, in response, reduced exposure to a tax on business floorspace—perhaps by trading increasingly on the web—becomes a standard business plan and, for those who cannot avoid it, a fetter on the nature and extent of the financial risks they will be prepared to underwrite on behalf of the taxman. The moral hazard in all this is that it continues to underpin government willingness to game the system without taking adequate responsibility for the outcome. I suspect that, by the time the £1.5 billion fund kicks in, it will be too little and almost certainly much too late.

Of course, part of the answer is much more frequent revaluations—that, of course, is well beyond the scope of this Bill—but there was supposed to be a fundamental review of business rates, and many expected it to have progressed beyond the 2017 findings. I invite the Minister to give us an update on that if he is willing, but it is no wonder that some on the political spectrum suggest abolishing business rates altogether. It does not need to be so. It would be a perfectly good, fair and cheap-to-run system save for government insistence on overworking it and, essentially, unfairly treating businesses ever since the arrival of the poll tax in 1990. It is a salutary tale of mismanagement, and Clause 1 of this Bill continues the fundamental error.

I leave your Lordships with this thought: what else follows from this further incursion into business rate payer protections and stability of local government budgets?

Leasehold Reform (Ground Rent) Bill [HL]

Earl of Lytton Excerpts

Report stage
Tuesday 20th July 2021 Lords Chamber

[Lord Etherton (CB)]

I wish to speak to Amendment 3, in my name. I am extremely grateful to the Minister for speaking to me about my concerns about Clause 1(4). It is important that today, we have had an acknowledgement that Clause 6, which I understand is the way the Government intend to deal with preserving the right of a landlord to continued receipt of ground rent for the duration of the original lease, does not extend to a situation where the tenant requests, and the landlord might otherwise agree, subject to this Bill, to grant an extended demise or an extended grant of property.

At the moment, the Bill does not address one of the two circumstances in which, in the normal course of events, there will be a deemed surrender and regrant by operation of law, which operates irrespective of the intention or awareness of the parties. The Minister says that it does not matter because the landlord can always agree with the tenant to grant a separate lease of any extended area of land which the tenant wishes to include in the lease, and that the landlord would otherwise be willing to grant. This leaves a very messy situation. Clause 6—which, with respect, is not entirely straight- forward—is intended to deal with the second situation whereby there is a deemed grant and surrender, and that is where there is any extension to the duration of the lease.

The second normal circumstance is not addressed at all. It is an everyday occurrence, not an unusual one, for a tenant and a landlord to agree informally to changes in the area of the lease. Therefore, subject to the solution that is proposed, which is a separate lease of this grant of extended land included within the lease, there is nothing in the Bill that addresses this. This can be dealt with quite simply, either by taking out Clause 1(4) or by extending Clause 6 to include this second situation, which is the granting of greater land than is currently within the original lease. It makes absolutely no sense to include something dealing with the one but not the other, when those are the only two circumstances which would normally give rise to a deemed grant and surrender. It leaves a lacuna in the Bill, in that there still may well be a landlord who is not aware of the terms of the Bill and who may not appreciate that granting, in accordance with the tenant’s request, a greater piece of land to them has the effect of removing the ground rent to which the landlord would otherwise be entitled.

Although I very much welcome what the Minister has said about many of the amendments he has tabled, and his explanation, legally speaking we are left with a very untidy situation. There is now a distinction between the two circumstances in which there is a deemed surrender and regrant, one being expressly dealt with in Clause 6, and the other not at all. That could lead to a landlord with no awareness of the situation—and with no intention of doing so—losing the benefit of the ground rent under the original lease.

[The Earl of Lytton (CB) [V]]

My Lords, it is a pleasure to follow the noble and learned Lord, Lord Etherton, and I thank the Minister for introducing this group of amendments, in which I have two: 5 and 39. I declare my property interest but hasten to add that it does not involve long leasehold; I also declare my interest as a property professional. I particularly thank the Minister for meeting me this morning at short notice; I very much appreciate that and I think it is fair to say that we had a frank and generally constructive conversation. I am indebted to the British Property Federation for the comments it sent me, to the Wallace Partnership Group for its observations on the Bill, and to the Homes for Later Living group, which is a retirement homes specialist.

The pivotal point here is the question of who takes on the responsibilities of property management and things such as safety oversight, particularly in complex buildings. I am thinking of developments such as Salford Quays, but there are others in the pipeline, including King’s Cross and Battersea, that will come on stream and are in the process of evolving even as I speak.

The British Property Federation believes—and I agree with it—that most leaseholders in these large, complex, often urban developments will not want to take on the sort of responsibilities implicit in the management and future-proofing of the common areas and common parts of buildings in these multi-occupied developments. Hardly had I considered that point when it was pointed out to me that a poll by Savanta found that only 31% of people would willingly take on the management of their apartment block, even when faced with the option of saving on ground rent. I have some experience that reinforces this, so much more so when we come to the scale of some of these urban and often redevelopment situations that are truly industrial in their complexity.

A buy-to-let investor is hardly going to have interest in participating in the day-to-day running of an estate. Freeholders, with a nil or peppercorn rent and no other interest beyond the maintenance and management charges that may be taken away from them by right to manage, are hardly going to have an interest in taking on costs that they might not be able to recover. By that I mean costs on things such as long-term capital expenditure on visual improvements or repurposing parts of the development—matters that are not a service charge and therefore there is some question as to the degree to which they could be recovered. With no skin in the game, how is the freeholder going to finance or forward-fund these things? For practical purposes, the Bill ends up providing us with the opportunity for non-responsive freeholders.

If leaseholder-led arrangements fail or the leaseholders want to hand back the management process, an effective freeholder is traditionally there as a backstop to take on the responsibilities. Curiously, under the Bill that onus will persist, with the freeholder having a peppercorn rent. I question whether the liabilities will in fact be shouldered in that way or can be imposed in practice.

I do not intend to press either of my amendments, but it is worth my while going into Amendment 5 in a little more detail. The amendment would make leases that meet certain criteria excepted leases and therefore still able to operate on a ground rent principle. Freeholders would thereby be incentivised to invest in the property in the long term and to bring their expertise, their ability to deal with complex developments at scale and their property management skills and safety oversight.

As buyers of individual long leaseholds, consumers would still have the choice at the market-wide level as to whether they wanted to live in a block run by a freeholder and pay a ground rent or to purchase a flat in a communally run block. Consumers would also retain the right, as they have now, to enfranchise or exercise their right to manage and take over the block, which the Government have said they will seek to make easier as they work on a second leasehold reform Bill.

I propose the choice of a functioning leasehold system in larger and particularly complex apartment building arrangements because, as I say, there is good evidence that a lot of leaseholders do not want the responsibility of running these blocks. It must be pointed out that service charges relate to current expenditure. They do not customarily cover future investment, improvement or adaption and may potentially be challengeable by leaseholders.

A point about retirement developments was rather eloquently made by Homes for Later Living. These often have specialised development models, including extensive communal facilities, so although they are not the same as these large, mixed-use commercial redevelopments, they have some of the same problems.

--- Later in debate ---

[Lord Berkeley (Lab)]

My Lords, I support the amendments in this group and I am grateful to the Minister for finding the time to have a meeting with me. It was very helpful.

I shall come on to another amendment I have later. For this group, the noble and learned Lord, Lord Mackay, mentioned the need to speed things up. I entirely support that. We should get the rest of the Law Commission’s report on the statute book as quickly as possible. The noble and learned Lord’s amendment and that from my noble friend Lord Lennie are fundamental in trying to, shall we say, stem the tide of very unfair practices that seem to have developed in some parts of the market. I do not know how widespread it is, and I am quite surprised that the CMA has not been more helpful because its role, after all, is to look after the interests of consumers. Sometimes I feel that it possibly does not do that, but we can discuss that another time.

I have the pleasure of being on your Lordships’ Built Environment Committee that has just started one inquiry—out of two—into housing. At our meeting this morning, I was struck by three of the witnesses all saying that security of tenure was one of the biggest problems in housing. Whether it is leasehold or rental, it does not really matter very much. It is important to understand that people need to have some comfort that they can continue to live where they are living if they want to, and that the amount that they pay cannot go shooting up because of the wishes of the owners or other people involved in a way that could not have been foreseen when they took out the lease. It is not good when people are locked in—there are many press comments about it—and cannot sell. What do they do? That is before you get into the problem of cladding, which again is outside this discussion.

I am not sure whether my noble friend’s amendment or that of the noble and learned Lord is the best one. They both try to find some way of providing financial comfort to those who have been caught in this sudden upsurge—to me anyway—of increasing ground rents or other similar charges.

When we do these stages, it is funny that the Minister answers before the amendment has actually been proposed—but that is another thing we will get to. I look forward to my noble friend speaking on this matter, as he is much more knowledgeable than I am on it. I shall also be very interested to hear what the Minister has to say. It is really important that something like this is done very quickly, long before the next stage of the Law Commission’s report becomes a Bill.

[The Earl of Lytton (CB) [V]]

My Lords, I am largely supportive of this group of amendments, particularly the one moved by the noble and learned Lord, Lord Mackay of Clashfern. It always seemed to me that some of these clauses, particularly relating to escalating ground rents, were unfair, with hidden implications that were not apparent to purchasers at the time when they were entered into. The CMA intervention is welcome but the ongoing blight continues. This is certainly an evil that causes me to support this amendment very much.

I also support Amendment 9. This seems to be a logical provision against pre-emption and creates, as I see it, greater transparency, which really should be the hallmark of landlord/tenant relationships in this area.

It is unfortunate perhaps that I am speaking before Amendment 26 has been spoken to. I see it as potentially retroactive, and think it might remove the value of an asset without fair compensation. In its specific scope, it would not distinguish between a fair and reasonable ground rent and one that was flagrantly unfair. I do not in any way defend leasehold interests as such, but if we go down this road it has much wider public interest and property law implications.

Again with Amendment 30, I would have liked to have spoken after the noble Lord, Lord Stunell, whom I believe will speak to it, but, from a technical standpoint, the question of rent is a payment that in this instance the tenant makes to the landlord for the bits of the property which exist but which are not within the tenant’s specific demise under their leasehold. It is not a service charge. Are we at risk of getting rent and services provided for rent confused—in other words, the use of property as opposed to a tangible benefit in terms of the service charge? In general, however, subject to those points, I support this group of amendments.

[Lord Stunell (LD)]

My Lords, I will speak to Amendments 7, 8, 9 and 30. I will focus most of my remarks on Amendment 9, but I cannot speak without first saying that the amendment tabled by the noble and learned Lord, Lord Mackay of Clashfern, which I see as essentially introducing an early buy-out option for existing leaseholders, is the next necessary step and should have been endorsed by the Minister and incorporated in this legislation. It is yet another of the unfinished bits of business dogging our debates on the Bill. Like others, I am looking forward to Amendment 26 being presented by the noble Lord, Lord Lennie, which, as far as I understand its meaning and intention, has essentially the same purpose of moving forward the implementation of leasehold reform for that cohort of existing leaseholders who will be left out of this legislation. As such, in principle, we support that strongly.

Amendments 7, 8, 9 and 30, tabled by my noble friend Lady Grender and myself, are various alternative approaches to ensure that if the limited circumstances of this Bill are as far as the Minister is prepared to go, it is at least not a cause of exploitation of existing leaseholders who may be very close to agreeing an informal lease extension. The process of informal lease extensions is a well-accepted norm in the leasehold industry and, as was discussed extensively at previous stages of this legislation, one which comes into play when the existing lease is within sight of its end. That may be some distance away but nevertheless the value of the lease is declining rapidly, and perhaps its mortgageability on resale is compromised because there is not a sufficient existing term of the lease. If a completely new lease is not to be entered into, an informal lease extension may be negotiated between the leaseholder and the proprietor.

The noble Earl, Lord Lytton, described Amendment 9 as an anti pre-emption provision. Perhaps his three-word soundbite says it all. The risk at the moment is that an owner—or, should we say, one of the less-scrupulous landlords—may see this as an opportunity to preserve the value of his asset by offering an informal leasehold extension on terms which would be applicable under the current legislation now to pre-empt the possibility of that extension value declining to nil once the new legislation comes into force.

The Government have set their face against either of the approaches set out by the noble and learned Lord, Lord Mackay of Clashfern, at least at this stage, and I suspect that they will strongly resist the amendment proposed by the noble Lord, Lord Lennie. That is a pity and comes despite the evidence that has been put on the table by the Leasehold Knowledge Partnership and the examples given by my noble friend Lady Grender in Committee, which were referred to extensively at Second Reading. That leaves precisely the problem that I have outlined. An informal leasehold extension may very well be useful to both parties when the leaseholder is shortly to sell or is making arrangements prior to disposal, but clearly it is dangerous if the leaseholder simply wants to continue their lease.

It is also dangerous if the condition for entering negotiations is that the lawyers will be appointed by the owner, and it is dangerous if the new terms which are inserted into that leasehold extension are not drawn properly to the attention of the leaseholder. The evidence shows that it is not unusual for escalator clauses to be built into those leasehold extensions, which are not transparent and not brought clearly to the notice of the leaseholder who is going to sign. The risk is that unscrupulous landlords can see very clearly that, after Royal Assent, their golden goose will be stuffed. If I can mix my metaphors, they have an incentive to offer new lamps for old when it comes to extensions. To offer informal leasehold extensions to unsuspecting leaseholders locks them into a new, unfavourable set of terms when, if they had waited, under the full enactment of the Bill they would have been eligible for its new provisions limiting the ground rent to a peppercorn.

We have tried to fix this statutorily. Amendments 7 and 8 set this out in different ways, but Ministers resisted our efforts strenuously. We have had discussions with the Minister, which I have very much welcomed. He has been very generous with his time and with his officials’ time in working on this problem. Amendment 9 is therefore really quite modest in its intent and its impact. It simply proposes that landlords should have an obligation to alert their leaseholders in advance of these changes coming into force of informal leasehold extension terms being altered by this new legislation. It is a proportionate safeguard which is not onerous on landlords but gives leaseholders a clear sight of the forthcoming changes before they commit to less favourable terms under the existing law. It does not prevent those to whom the balance of advantage still lies with a speedy signature on the existing terms for an informal leasehold extension from choosing to do so, but it seeks to protect the unwary from making a costly mistake which ultimately, as in one or two of the examples which my noble friend Lady Grender brought to the House in Committee, may lead to them losing that property entirely.

I intend to test the opinion of the House on Amendment 9 when the appropriate moment arises.

--- Later in debate ---

[The Earl of Lytton (CB) [V]]

My Lords, I welcome the opportunity to speak to the amendment just moved by the noble Baroness, Lady Pinnock.

I am a fan of what I see as post-occupation evaluation. I welcome the amendment for that alone. I would more comfortable if it did not just refer to leaseholders, because the whole dynamic—as regards the ongoing interaction between leaseholders, freeholders, management and so on—is ever moving. That needs to be seen in the round. It should include not just the financial matters referred to in the amendment but a more holistic measure in terms of the sense of place, security, ability to control or influence outcomes and user contentment. I suspect that the Government have a system anyway for reviewing the effects of legislation, but I ask whether that is frequent enough to meet the noble Baroness’s objectives. In general, I support the other amendments in this group.

The noble Baroness referred to the driver behind this being the tragedy of Grenfell. Although the process of evaluation and what has come out of it may be seen, in government terms, to be moving at lightning speed, it has not been nearly fast enough for leaseholders and those who pay service charges. The consequences of that have been amply exposed by the noble Baroness and are ongoing. This is truly a tragedy for many households, which have walked unknowingly into a situation created by the neglect of others. The auguries are not particularly good. The proposal, as I interpret it, to leave the power in the hands of leaseholders to claim—admittedly on a longer timeframe—against those who did not observe basic construction standards creates an almost insuperable hurdle.

It is appropriate that I pay tribute to those outside the House who have promoted the polluter pays principle. I know that this matter has been brought to the attention of the Government, and it would place the basic strict liability on those who failed to make the grade in construction standards. My question is: when are the Government going to act on it? I consider the matter of such importance that if the noble Baroness decides to test the opinion of the House, I shall be voting with her.

[Lord Stunell (LD)]

My Lords, this is a devastating case, again, of unfinished business. We have talked several times about unfinished business in respect of reforming the whole leasehold system. The noble Baroness, Lady Pinnock, has spoken with great passion about the need to deal with the unfinished business of getting the damaged blocks discovered since the Grenfell fire put back in a safe and workmanlike position. That is a terrible story, which is still unravelling and still producing—I think we can say—shock and amazement as the evidence comes out of the inquiry at Grenfell. As the noble Baroness, Lady Pinnock, said, it is not an isolated failure. I ought to have started by reminding the House that I was the Minister with responsibility for building regulations between 2010 and 2012, which was well before this but is nevertheless relevant.

There was a failure of regulation, a failure at every level of the supply chain, a failure of the designers and a failure of those responsible for monitoring progress. Of course, the fallout is not simply that one building was found to be dangerous and defective and burned at the cost of 72 lives, but that more than 400 other buildings have been found to be equally defective or worse. As is so often the case, once you begin to look, you see plenty else. The British Woodworking Federation estimates that 600,000 defective fire doors are installed in buildings in this country. In that context, it is good to know that the Government have come forward with a compensation scheme, allocating £5 billion. Perhaps the Minister can tell us whether the guidelines for applying for that compensation have yet been published. My last understanding is that they have not, but maybe he can bring some information to your Lordships’ House today.

It has to be right that this House considers the situation facing those leaseholders and, in so far as we can, safeguards their position. This is actually a very modest amendment; it calls only for a review within six months, not for the spending of government money, so there is nothing for Ministers to shy away from. It would simply make sure that this legislation, relevant to the ongoing tragedy of Grenfell and the ongoing battle that hundreds of thousands of leaseholders are facing with enormous bills—which the noble Baroness, Lady Pinnock, eloquently spelled out—cannot be passed by your Lordships’ House without serious consideration.

I know that the Minister has repeatedly found himself at the Dispatch Box having to say essentially the same thing: “This is not the time; this is not the place; this is not the right legislation.” We have to reply to him: “Well, when is the time? Where is the place? Where is the legislation?” We need to see some answers. Certainly, this is a matter we wish to press in the oncoming vote.

Leasehold Reform (Ground Rent) Bill [HL]

Earl of Lytton Excerpts

Monday 24th May 2021 Lords Chamber

[The Earl of Lytton (CB) [V]]

My Lords, I welcome the opportunity to debate this Bill and in doing so refer to 45 years of professional interest in the matter and my interest as the first chairman of the Leasehold Advisory Service. Although I have personal interests in residential and commercial lettings, they do not include long leasehold and, as a technician, I take no particular position for or against it. I, too, am a vice-president of the Local Government Association.

First, to positive matters: I pay tribute to the Government for moving to tackle some of the known problems and abhorrent abuses with long leaseholds—especially that of escalating ground rents. For years, I have advised clients against taking on such leaseholds, so that maybe makes me part of the problem. But I do think that much swifter action could have been taken to deal with them—but there we are. I welcome the measures. I also welcome the actions of the CMA. But, before we get too excited, I would just point out that 18,000 escalator rents, as I would call them, equate to 0.4% of all leasehold ground rents.

Anything that speeds up the leasehold transaction process is, of course, good for market confidence. So dealing with unnecessary delays is also extremely welcome. However, I do need to point out some procedural shortcomings here. There is an overwhelming case for remedies, so it is utterly extraordinary to me that the department should have chosen to conduct its consultation via SurveyMonkey. The department then found it necessary, on analysis, to allocate a significant proportion of the responses to a category entitled “General comments that did not answer the question”. Undaunted, but finding there some muddle in responses on leaseholders’ payments for various things, it then resorted to regression analysis to resolve the confusion. I suggest that this is not an appropriate way to conduct consultation on such an important matter, and I feel that in this instance it damages the credibility of the process.

The Government also make the point that leaseholders see no benefit from the ground rent they pay—but it is ostensibly for the use of the shared bits they do not own outright. The same could be said of any rent under any lease—or, for that matter, many taxes—so I regard that argument as potentially disingenuous and unhelpful.

I acknowledge that this is the first part of a two-part approach, but I believe that from the consultation there was a clear expectation that other evils would swiftly be dealt with, such as unjustified charges for rent collection, the fees for consent, unfair rent charge situations and more—all of them abuses at the expense of leasehold and freehold homeowners. There was no reason to delay tackling at least some of these, and it is a disappointment that we have an indeterminate wait for action in some of these areas, which has already been mentioned. I am not sure why the whole process needs to be so convoluted and multistage. The means chosen to achieve the Bill’s ends are complex, and complexity leads to loopholes, avoidance and unintended consequences. A part-reform is always hazardous, and this should be a more coherent and thoroughgoing package.

Between muddle and confusion stalks another character, known as dishonesty. Those with a pre-disposition towards fleecing homeowners are not guided by ethical or moral considerations, and there is no knowing what they may dream up next. This might also explain why the Law Commission’s consultation produced minimal responses on intermediate interest—those lying between the freehold and the long leasehold. To me, it is obvious why: sharp practitioners tend to keep their own counsel and their powder dry.

A preference for keeping things simple prompts me to ask why, more generally, there could not be a statutory redefinition of “quiet enjoyment”, a covenant for which is embedded in every leasehold either expressly or by statutory implication. What is there not to like in specifying that this means no unfair, unjustifiable, oppressive, opaque or deceitful activities?

I now turn to some areas where the Bill may have gone more seriously awry. First, as was pointed by the British Property Federation and the noble Lord, Lord Hammond, the Bill would prevent the granting of any residential long lease at a rack rent. It also makes some complex provisions for mixed-use exemptions, but I am far from clear that these and the meaning of “significant contribution” would actually work or be free from challenge. I expect market sentiment to be negative. This may be unintentional but, if not, I ask the Minister to explain it.

Secondly, the timeframe for providing lease information is tight—potentially unreasonably so. I will leave the point at that.

Thirdly, the proposal to render ground rents under long lease as valueless is not a free bet. In any large and complex building in which individual flat owners have ownership over a small portion only and no direct contractual relationship with each other, there is a need to govern how the common parts—the fabric of the building, its services, its uses and the environment in which it sits—are organised. This and the conduct of the respective interest holders vis-à-vis each other and the building they occupy do not happen by accident but by the legal construct of a lease and the enforceability of governance.

If long leaseholds are the time-honoured, legally understood and principal means for procuring occupation and title in a physically subdivided building, they will continue to be a feature for many years to come. It therefore matters that they function effectively and command confidence and that both tenures be made fit for purpose, with freeholders who are motivated, competent, of substance and, above all, engaged. This measure does not consolidate this parallel need, which I fear is sadly out of scope. As I have observed in separate correspondence with the noble Baroness, Lady Grender, and others—I look forward to her speech later—if you think a greedy landlord is a nadir, you have not encountered a clueless, ineffective or inactive one.

The Bill would reduce the freehold rental value in future long leasehold tenure to nil. I may have missed it, but I do not see that the Bill mandates what happens to the truncated rump of freehold interest and the remaining important functions attached to it. What is to stop cost recovery and these being the vehicle for the very same unfair practices we all want to prevent, or to stop these freeholds falling into the hands of unscrupulous entities, perhaps becoming of negative worth or being bankrupt, with significant implications for leaseholders? We are not necessarily dealing with decent people in the ownership of these assets, so to my mind the remaining freehold should be parked permanently in a safe and competent pair of hands. I invite the Minister to explain why he does not feel that this can happen.

There is also the risk of a wider message getting about that residential long leasehold is intrinsically bad. That is untrue, and in so far as it may be intended to accelerate lacklustre commonhold or support some political platform, there is a need to be very careful that market sentiment does not downvalue wholesale—the investments of more than 3 million homeowners, many of whom are already under severe stress due to fire safety matters. I cannot overstate the importance of this.

Should commonhold take off—I wish the work of the Commonhold Council well—it will likely be many years before it is the main form of apartment tenure. Running two systems is inherently problematic for market confidence, and I did not detect from its briefing that UK Finance, the sectoral voice, views this differently. The Law Commission refers to the divergent interests of freeholder and leaseholder. Insurers, building managers, safety regulators and even fellow leaseholders often have divergent interests, yet come together for specific reasons of mutual convenience and necessity. Commonhold may improve this but it will not make these issues disappear altogether.

I end by thanking all the bodies that sent me briefings, as well as the Minister and his staff for responding to my queries and offering to arrange a meeting. I hope that, with good will and understanding, we can improve this Bill.

Fire Safety Bill

Earl of Lytton Excerpts

Consideration of Commons amendments
Wednesday 28th April 2021 Lords Chamber

[Baroness Pinnock (LD) [V]]

My Lords, I remind the House of my interests as a vice-president of the Local Government Association and a member of Kirklees Council.

Throughout the course of this Bill, I have said that I support its contents and purpose. I cannot support the unintended consequences that will have a devastating impact on individual leaseholders and a very damaging effect on the housing market. Those are the reasons for my asking again for the Government to take responsibility for the consequences of this Bill, which despite the Minister’s best efforts has been totally underwhelming so far. Promises have been made by the Government and not kept.

The Government’s response to date is to provide grant funding of £5 billion while knowing that the total cost is estimated at £16 billion. The grant includes only blocks over 18 metres and only removes the flammable cladding. For those in lower blocks, there is the prospect of paying up to £50 per month for years to come.

Conveniently, the Government fail to take into account the non-cladding issues that are a result of construction failure of immense proportions. These non-cladding issues are the ones that will finally push individuals over the edge. Meanwhile, those who have literally built this catastrophe walk away with their billions of profit. The Government have a duty to protect their citizens—it is their prime duty—yet here we are today with perhaps a million of our fellow citizens being thrown to the ravages of financial bankruptcy, and the Government wash their hands and look the other way.

The Government will argue that the Bill is a vital response to the Grenfell tragedy. It is so vital that it has taken four years to get to the statute book. The Bill’s purpose is to include external walls, doors and balconies in the fire safety order of 2005, so that action is taken to protect people from another Grenfell tragedy. However, a Bill is not now needed to force action to remove cladding; that is happening. It is not needed to get fire alarms put in; that is happening. Those who own the buildings, and those who are leaseholders and tenants, already know that action has to be taken to make their buildings safe. It is no longer urgently necessary to get legislation to force the issue and it is no longer possible to force construction firms to take the necessary action; there is not capacity to do so. If, though, the Bill does fall, this provides a breathing space for the Government to develop a package of further measures that will protect the interests of leaseholders and save them from penury.

The amendment in my name seeks to achieve that breathing space. It is based on the original one in the name of the right reverend Prelate the Bishop of St Albans and has been adjusted to include the various very valid points that have been made during the passage of the Bill. We must all recognise that passing this Bill will not magic away the crisis that individual leaseholders are facing. It will not remedy the construction scandal. It will not provide stability for a foundering housing market. It will be the beginning of a scandal of individual bankruptcies, homelessness, intense stress and mental illness. It will become a public scandal and I for one will at least have on my conscience that I have done all in my power to prevent it. Leaseholders have done everything right and nothing wrong. Liberal Democrats will stand by them. I give notice that I wish to test the opinion of the House on the amendment in my name.

[The Earl of Lytton (CB) [V]]

My Lords, as we seem to be in the last chance saloon, I will try not to repeat myself too much, but declare my interests as both a property professional and a vice-president of the LGA. As I said yesterday, the House seems to be presented by the Government with a choice. On the one hand is the evident desirability of implementing fire safety measures in pursuance of the valuable recommendations in the report by Dame Judith Hackitt into the Grenfell tragedy, plus a partial solution to some of the effects of cladding replacement on a limited class of taller buildings, as we have heard. On the other is what I am afraid I must describe as the effective hanging out to dry of hundreds of thousands, if not millions, of other home owners. It should not be a question of either/or in dealing with a growing and pressing social and economic disaster. I too support improved fire safety, but not on the basis of creating further untold, and probably unquantified, problems.

Yesterday, the Minister endeavoured to persuade us by saying that this brief and simple Bill merely clarified the Regulatory Reform (Fire Safety) Order 2005. I am afraid to say that, on my own rereading of that, he is plainly mistaken. This Bill amends the scope of the fire safety order by inserting an exception to paragraph 1a, referring in turn to two newly inserted paragraphs, 1A and 1B, that substantially expand the scope of the order. The fact that anything was attached to the named elements means the Bill has far wider implications than might be supposed. So I am afraid to say that the Minister’s assertion really did it for me. I felt it was misleading and what my late father would have described as an exercise in intellectual sharp practice. My distinct impression is that I am being taken for some sort of fool. The indisputable fact that must be regarded as plain is that this Bill makes the changes that by direct chain of causation have created the issues and caused the results that the noble Baroness, Lady Pinnock, and the noble Lord, Lord Kennedy, seek to resolve.

Another issue appears to be one of definition. The Government are concerned that any scheme that might be put in place could be used to avoid regular maintenance and routine upgrades. The amendment of the noble Baroness, Lady Pinnock, in particular, seeks to address that. In my experience there may be grey areas, but I do not have any difficulty in my work in distinguishing repairs and the like, or like-for-like replacements, from those items that are improvements. Nor do most leaseholders and property owners.

Let us be clear—and here I take a cue from the noble Lord, Lord Kennedy, for a bit of historical background—that it was on the watch of a Conservative Government that the 1984 Building Act brought in the approved inspector regime and the effective privatisation of the regulatory oversight of construction quality, previously exercised by local authority building control. Despite indicators of shortcomings and shortcutting, this process continued, without adequate checks on who was doing the inspection of the works, or how good the oversight was in practice. It is on the basis of the subsequent 37 years of construction and its legacy of known and unknown deficiencies, scattered randomly about the nation’s housing stock, that modern housebuilding, construction warranties, lending and home ownership have been founded.

If the Government consider that they need to take steps to protect the valiant and much-abused postmasters from system failure, how can they, with it any cogency or conscience, make a distinction concerning a far greater number of home owners who are affected at least as severely? So, while I note that the Minister in the other place this afternoon sought to point the finger at the unelected Lords blocking the democratic decision of the Commons, I simply say that the exercise of raw political power vis-à-vis the party whip to procure a majority in the Lobby does not endow the Government with a moral superiority, or indeed the social advancement of justice and ethical treatment of citizens. I note the reasons for rejecting our amendments, which simply translate as “too difficult”. I suspect not half as difficult as picking up the bits after this has rolled itself out.

At one point I believed the Government had it hand to corral all the potential damage, but I believe they have not done so. It would not concern me if this Bill fell, so unreasonable do I believe its true effects to be, and so lacking is the willingness of the Government to deal with it. What it has proposed will roll out far too slowly: eight months to do the highest-risk buildings, and how much longer to deal with the far greater number in future stages? What about capacity in terms of manpower, training and so on?

I took note of the comments from the noble Lord, Lord Cormack, but I find that sitting on my hands, signifying my acceptance of the Government’s position here, does not sit comfortably with my conscience—knowing, as I do from professional experience, just what harm the Bill is likely to do, alongside its undoubted good.

I suspect that the Bill will ultimately pass into law, even if the Parliament Act has to be invoked—but I am afraid I cannot agree to it as it stands. I fear that Lobby fatigue may mean that this is the end of the matter for now. Either way, I shall return to this subject in the new Session—as, doubtless, will the noble Lord, Lord Kennedy, and the noble Baroness, Lady Pinnock. Meanwhile, I have absolutely no hesitation in supporting the thrust of the amendments—any one of them, whichever might gain approval. And I hope I will sleep with my conscience clear as a result.

[The Deputy Speaker (Lord Lexden) (Con)]

My Lords, the following Members in the Chamber have indicated that they wish to speak: the noble Baroness, Lady Fox of Buckley, the right reverend Prelate the Bishop of Rochester and the noble Lord, Lord Newby. I call first the noble Baroness, Lady Fox.

Fire Safety Bill

Earl of Lytton Excerpts

Consideration of Commons amendments
Tuesday 27th April 2021 Lords Chamber

[The Lord Bishop of St Albans]

Well, my Lords, here we are again. I do not want to detain your Lordships’ House for too long, because everything has been said several times already, but I want to make a few comments, if I may.

I, too, want the Bill to pass. I pay tribute to Her Majesty’s Government and the money they have already found and put on the table, which is very significant. But since we last gathered here, the sheer scale of the crisis, which is in its very early stages, is slowly beginning to unfold before us and become ever clearer. I believe that is why the majority in the other place declines each time an amendment goes back, because those long-serving, seasoned campaigners in the other place realise what is going on. The stories are coming out absolutely relentlessly, and new research is being published.

At a few minutes to four this afternoon, I received an email from someone who works in Parliament. I will call her Claire; that is not her real name, but she will know who she is, because she emailed me at 3.56 pm and asked if I will speak up. She said, “Will you speak up for the leaseholders again and table an amendment? I bought a flat under the shared ownership scheme. I own a 25% share, yet I am liable for 100% of the costs. I am already paying an additional amount each month, and I know this amount will soon increase as further remediation work takes place. I simply cannot afford to pay for the remediation works, nor should I have to. The stress of this situation is becoming intolerable. My mental and physical health are approaching a state of collapse”. “Will you speak up?”, she said. I have not met her yet—I hope she will say hello to me one day, perhaps when she guesses who I am or sees me around the place. This is someone who we bump into, who works in this place and who serves us.

It is not just the many individuals. Since we last came to this provision, research by the Prudential Regulation Authority, which is assessing the building scandal, has said that it poses a systemic risk to the UK financial sector. Some of the work done since then is finding a huge number of flats and homes which are simply unsellable. For example, it has been reported that

“a one-bedroom flat at Leftbank, in Manchester, failed to sell despite being listed for half the £330,000 its owner had paid in 2017”.

What Members in the other place are realising is that, slowly, this will roll out, and it will mean that many people on whom this Bill relies to be able somehow to stump up the money to repair the buildings will not have that money. The buildings will not be repaired, because some of these people will have to walk away, probably very unwillingly.

We have not only those individual stories but some really worrying assessments coming out of the housing and financial market in our country. Some 3 million people, as we heard from the noble Baroness, Lady Pinnock, are affected. As we are paying tribute to fire and rescue officers, I have three emails from fire and rescue officers who were personally affected by this cladding. These are the people involved, along with nurses, police, teachers, care workers and many others—the House knows the sort of people we are talking about.

I believe that the intent of these amendments is the same: to accept that we have a very difficult problem and really want to see some sort of brokered agreement, whereby developers, cladding manufacturers, freeholders and leaseholders make their fair contribution. We realise that everybody will have to do that, but feel that there need to be protections for leaseholders and tenants over these coming months, before the government scheme comes in. I am minded to support this Motion if the noble Lord, Lord Kennedy, brings it to a Division, but I continue to hope and plead that Her Majesty’s Government will be able either to come up with a compromise or make some sort of formal undertaking on what the building safety Bill will offer, so that we can all get behind it and get this really important Bill through.

[The Earl of Lytton (CB) [V]]

My Lords, I declare my professional involvement with construction and property matters and that I am a vice-president of the LGA. We should be in no doubt that the Government have triggered an issue that is destined to cause significant damage, loss and distress to many leaseholders and tenants. My comments will be aimed at Motions A1 and A2 in the names, respectively, of the noble Lord, Lord Kennedy, and the noble Baroness, Lady Pinnock. I commend them on their persistence and diligence.

I also commend the Government on committing their £5.1 billion to this matter, but the reality is that money alone is not the answer. It requires a plan that is co-ordinated, structured and comprehensive; to be honest, it was needed the day before yesterday and certainly not at some unspecified time in the future. The Government cannot, in all conscience, have been unaware that a situation would likely arise where a significant sector of property might be affected by the expansion of the fire safety regime, nor deaf to the observations of just about every informed observer, from, I believe, the Bank of England downwards, warning of the need for action.

Fire Safety Bill

Earl of Lytton Excerpts

Tuesday 20th April 2021 Lords Chamber

[The Deputy Speaker (Lord Russell of Liverpool) (CB)]

My Lords, if Motions A1 and A3 were both agreed to, A3 would replace A1.

[The Earl of Lytton (CB) [V]]

My Lords, it is a privilege to follow the right reverend Prelate the Bishop of St Albans and to speak to Motion A2 in my name. I refer to my vice-presidency of the LGA and my professional involvement with property and construction over many years. I thank the Minister for keeping his door open for discussion; that has been enormously helpful. This amendment is an attempt to find a way out of what I see as an impasse, which, if not dealt with, may cause unquantifiable financial loss, bankruptcy and hardship—as referred to by the right reverend Prelate.

I am indebted to my local fire and rescue service in West Sussex and to the National Fire Chiefs Council, for briefing me on the task ahead of them. I am sure we all agree that they do a fantastic job in keeping us all safe and dealing with risks in a fair and proportionate manner. I am also indebted to Members in another place who have convinced me that the issues I seek to address cannot simply be brushed aside. This is not a challenge to the essential principles of the Bill, which I entirely agree are critical in the light of the Grenfell Tower tragedy.

The problem arises because although the Bill is short and apparently inoffensive, and from a fire safety standpoint is the necessary reaction of any Government to a post-Grenfell inquiry, its means of implementation have much broader and effectively retroactive results. In amending the existing fire safety order’s scope, it extends to any building comprising two or more residential units. It relates not just to cladding but, ultimately, to a much wider range of fire safety issues and to buildings not previously subject to that safety regime.

Noble Lords should bear in mind that there are two lead organisations here: the local authority through its housing functions in respect of houses in multiple occupation and student blocks, and the fire and rescue services, particularly for higher-risk and taller buildings.

Every time there is a fire in a flatted building, it adds to the malaise. When, in the wake of the Grenfell fire, a four-storey block in Worcester Park was destroyed in September 2019, it became clear to me that no Government can risk specifying a cut-off point of safe versus unsafe buildings, and I acknowledge that. So as matters stand, many relatively low-rise buildings, where risks are considered fewer and without a clear threshold, will, for a time, be caught by this long enough to cause serious problems for a significant number of tenants and leaseholders. It is this unconstrained exposure to uncertainty and risk, and the reaction of the markets to it, that has created the problems that we now encounter.

Crucially, there is a significant gap between now and the time when the first 12,000 over-18-metre buildings in England will have been checked, a process which is estimated to be completed by December this year. Then there will be a further period, lasting until some 68,000 further buildings in the 11 to 18 metre height range have been dealt with. During this period, the issue of proportionality and risk will be left to the febrile mortgage and insurance market. I have no doubt that fire safety inspectors will take a fairly strict approach, and indeed would expect them to, at any rate until further guidance is available—which guidance itself might be an outcome of the analysis of the first tranche of inspections of the highest-risk buildings. That delay occurs before one gets to the design and specification of the remediation works by those who might have to satisfy their own professional indemnity conditions, followed then by tendering and ultimately remediation.

The right reverend Prelate and the noble Baroness, Lady Pinnock, in her amendment, endeavour to protect the tenant and leaseholder from the effects of the Bill by saying that they shall not bear the financial burden. I am compelled to express the view that this needs to be taken further: if, as a result, the building owner as freeholder is made liable for something that they in turn cannot afford or cannot be made responsible for, beyond the assets of whatever corporate ownership vehicle holds the freehold or other superior interest, then the liquidation of the holding company and the vesting of the negative-value asset in the hands of insolvency practitioners will do little to get the building remediated. To that extent, the responsible person under the Bill might be a man of straw, and that I see as a weakness in what the Government propose.

To deal with this, one needs a scheme, and the Government have commendably said that they will introduce one to fund remediation, but this suffers from several limitations. First, it applies only to cladding. Secondly, it does not cover all buildings with claddings—even less the other fire safety issues that the Bill might also trigger. Thirdly, I very much doubt that the sum allocated is enough. That said, I am extremely grateful for the government commitment to making £5 billion in funding available, as the Minister has explained.

Apart from properties becoming unsalable, uninsurable and unsuitable for mortgage lending, in some cases they might well be so risky as to be declared unsafe for occupation, pending remediation works. Displaced occupiers will be wondering what it is in the principle of safety and proportionality in relation to their own home, given the nightmare imposition of unimaginable costs and liabilities, that justifies rendering them homeless in addition. Of course, it might well not come to that, and it is my purpose to encourage the Government to ensure that there is a scheme to make certain that it does not. The full extent of the problems may still be yet to come, but I strongly suspect that many of the responsible persons are holding on until this Bill receives Royal Assent before proceeding further.

No Government can simply look on and say that it is not an issue of a very serious kind when people have been seriously threatened in their own homes by negative equity, bankruptcy and worse. With an entire market section being blighted, action is essential. By the same token, no agency apart from government has the power to procure a change, which ultimately must be by some form of consensus, but which requires regulatory and other powers—or the threat of them—and a degree of arm-twisting involving some very powerful players. There are too many interests and moving parts here, and neither constructors, owners, leaseholders, tenants, insurers or mortgagees can procure effective solutions on their own. It is a systemic failure, in which it is right for the Government to intervene. Indeed, taking these hard decisions is why we have government intervention at all.

By the same token, if there is to be a government safety net of a type that is effective, no leaseholder can simply expect the taxpayer to foot the Bill for all and every fire-safety shortcoming. This is where, particularly in relation to the amendment in the name of the noble Baroness, Lady Pinnock, I differ from that approach. I do not suggest that any of this gets construction warrantee providers, approved inspectors, designers, constructors, housebuilders or building managers off the hook. It will take time to establish liabilities; it is time that those finding themselves in financial fetters do not have at their disposal. That is the problem. Absolutism by government on the one hand and by leaseholders alike will not get the necessary work done or erase the terrible personal tragedies that I fear will result.

The deal is this: for a monthly sum which should be affordable, even if most unwelcome, the capital cost of remediation could be amortised via a loan, funds for early inspection and remediation raised, and works put in hand as soon as possible. This might also fund short-term interim safety measures. The long-term bond so created would, I believe, be saleable. The important thing for affected flat owners is that they could not be charged until a scheme was in place, but the scheme has to be driven initially by government, and that is what this amendment is about.

The current government scheme seems to be based on rolling things out in due course. I appreciate the Minister’s point that he does not wish the Government to be unduly pressurised or under the cosh on this, but the need to get this safety net into place right now is overwhelming. By the end of this coming summer, impossibly large bills are most certainly likely to have dropped onto doormats, prohibition notices and evacuation orders may be in place, and bankruptcies may have grown to a national scandal. I hope that we avoid this, but I for one cannot simply stand by and let that happen unchallenged or by default. I realise that it goes against what some have been asking for, but what is better: to know that you are innocent but that your home remains unsalable and you risk being put in an impossible financial position or rendered homeless, or to know that there is at least some means of funding the remediation so that, in any event, at least some benefit is salvaged out of this debacle?

I know that it also goes against the grain of government to interfere with private legal arrangements and liabilities, but the circumstances are truly exceptional, and the scope of the works is relatively specific. The alternative is a high level of sector-wide economic damage and individual financial destruction.

I know that the Minister is not minded to accept any of the arguments that I have put forward, or my solutions. I make it clear that I do not intend to press this Motion. It is my wish to get further explanations from the Minister. My questions are these. If not this amendment and scheme, then what? If not in this Bill, which triggers it, or even in the building safety Bill, then how? If not now, with the ill-effects so apparent and very likely worse to come, when? Further, if not by government, by whom and by which agency?

If, as I suggest, the objection to broadening things comes from HM Treasury, I ask whether the Government have considered the political and economic enormity of the outcomes if this problem is not addressed now. To that end, could the House be advised what impact assessment has been made of the wholesale value of write-offs and the risk of sectoral market collapse? Lastly, if the Minister feels my concerns are misplaced and things are not as bad as I have suggested they might be, surely then the risk of exposure for the taxpayer is of itself a stopgap, a confidence-building measure, rather than a serious run on the Exchequer.

Non-Domestic Rating (Public Lavatories) Bill

Earl of Lytton Excerpts

Report stage & Lords Hansard
Wednesday 17th March 2021 Lords Chamber

[The Earl of Lytton (CB) [V]]

My Lords, I warmly commend the four noble Baronesses who have put their names to Amendments 3 and 6. In speaking to this group, I declare my professional involvement with non-domestic rating as a vice-president of the Local Government Association and as head of the National Association of Local Councils, and through my involvement with rural tourism and public access generally. So I hope noble Lords will forgive me for having a slightly dry, technical assessment of this approach.

It is right that, in the light of mass closures of public lavatories up and down the country, we should have a better idea of the provision and what is happening in terms of trends. I do not have the figures to hand, but my expectation as a chartered surveyor would be that in the context of the overall cost of the facility of heating, lighting, water supply, cleaning, building repairs, insurance and maintenance, the business rate element of a public lavatory would not be a tremendously significant factor. However, I stand to be corrected. Maybe a superior facility would indeed attract a willing payment per use at economically viable levels. Certainly, some municipalities are starting to buck the trend, and I am very pleased to note that Wales is leading the way—a point made so eloquently by the noble Baroness, Lady Randerson.

The measure demanded here would obviously involve devoting some government resources to the review referred to. The distribution of Changing Places facilities is known, if I apprehend correctly from the British Toilet Association’s information. However, those run by other organisations—parishes, municipalities, venue and beauty spot managers, stately homes, royal parks, shopping centres and so on—is information not necessarily collected in one place. Though the dispersed knowledge must be held somewhere, it is not comprehensibly in the rating lists, for instance, which only record those separately in assessment. However, I do think that there is a collective will to close this information gap if the Government were so minded to tap into it.

As we have heard, public lavatories are clearly part of essential infrastructure. The old, the young, those with medical conditions, and the fit and healthy, all need access to decent lavatory accommodation. Manifestly, there are gaps in provision, because I am certain that we are all, like the noble Baroness, Lady Thomas, aware of unsuitable areas being used for informal toilet purposes. This is a personal hygiene and general public health issue, potentially damaging to the general environment, and must be addressed.

Regarding Amendment 4, I applaud and support the noble Lord, Lord Greaves, in advocating the role of parish and town councils. Many parish councils would willingly take on public lavatories, but as we have heard, are no more able to raise the money to run them than the principle authorities who may run them now. Even in transferring responsibility to parish councils, as happens, it is commonplace for the financial provisions not to form part of the transfer. This adds to the problem, and the essential funds for this essential infrastructure are therefore not ring-fenced. This is part of the process of attrition.

Beyond that, it is a matter of economic consequence for optimising the use of destinations to which the public may resort, and the public enjoyment of urban and rural space for shopping, recreation and so on. I find it tragic to hear, as we just have, of people who dare not venture far from home because of distance from suitable facilities or certainty of any provision whatsoever. I am mindful of the gross indignity that such an absence of facilities can create. These issues are very important. I am less certain that they are necessarily a matter for the Bill, given its long title, but having been accepted as amendments, I assume that they are in scope. Accordingly, I accept the general thrust of these, and look forward with interest to the Minister’s comments.

[The Deputy Speaker (Lord Russell of Liverpool) (CB)]

The noble Baroness, Lady Jones of Moulsecoomb, has withdrawn from this group, so I call Baroness Pinnock.