Leasehold and Commonhold Reform

Jonathan Reynolds Excerpts

Wednesday 2nd October 2019 Westminster Hall

[Ms McVey]

Everybody here can agree that is wrong, but it is about the steps that we will have to take to get the situation under control. We are looking at help for existing leaseholders, many of whom face, as the hon. Gentleman says, onerous fees and charges, including the doubling of ground rent in some cases. The Housing, Communities and Local Government Committee and many existing leaseholders want the Government to legislate to amend those. We are deeply concerned about the difficulties that people are having with those charges, but we clearly have to look at how to unpick those contracts, which are set in law.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I am grateful to the Minister for her generosity in giving way and to the hon. Member for Worthing West (Sir Peter Bottomley) for securing the debate.

One thing I would beg the Minister for is a simple right-to-buy formula, perhaps based on the number of years remaining—a multiple of the ground rent, in some way—that could be applied nationwide. I know there will be a lot of complexities in that, but is it something she is looking at in those plans? It would be great to hear if she were.

[Ms McVey]

We are indeed looking at a much simpler model that people can understand and make sense of, and at how to make it easier, smoother and quicker to do.

We have also made sure that there is a voluntary way for the sector to come together to solve the problems of its own creation. The industry pledge is an important first step. It has been signed by more than 60 leading developers, freeholders and managing agents. We will work with them and keep a vigilant eye on how it is working. Through that pledge, freeholders have committed to identifying any lease that doubles more frequently than every 20 years and contacting the relevant leaseholders to offer to amend their lease where necessary. I acknowledge those developers that have signed the pledge not to insert such clauses into future leases and welcome that. The pledge is an important first step, but we need to keep our eye on it. We will continue to monitor how effective it is in supporting leaseholders and we will take further action where necessary.

Leasehold Reform

Jonathan Reynolds Excerpts

Thursday 11th July 2019 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for giving us another chance to debate this issue. I have spoken before on this issue many times, and I intend to keep doing so until we have some action, because I cannot stress enough just how big a problem it is in my area.

The hon. Member for Hendon (Dr Offord) rightly pointed out the impact on London because of the high proportion of flats sold here, but the figures helpfully provided by the Library show that in 2018, 16 of the top 20 constituencies for leasehold house sales were in the north-west, and staggeringly, 14 of those were in Greater Manchester. I know how bad this is in my constituency, and my constituency is not even on that list—what must that mean for those other places? The argument that there is some sort of price differential between freehold and leasehold, when the market is so concentrated in certain parts of the country, has nothing going for it whatsoever.

In a previous debate on this issue in Westminster Hall, I said:

“I am genuinely shocked by the stories I hear in my constituency and that we have heard in this debate. I am not a man prone to hyperbole, but I would go so far as to say that the only fair description of some of the practices we have heard about in this debate is legalised extortion. There is simply no relationship between the services being rendered and the costs charged for them.”—[Official Report, 21 December 2017; Vol. 633, c. 471WH.]

I stand by every word of that statement.

The problem in my constituency is with ground rents and service charges, and we need serious action on both. For example, residents of a block of flats in the Hattersley area of my constituency were quoted £32,000 just to paint the hallways—not to paint the flats, but just the communal hallways. Frankly, they could be painted with gold, and it should not come to £32,000. Another constituent was charged £180 just to ask what it would cost to buy the freehold—just for the inquiry and the quote that came back. Frequently, worse than that, people simply do not get a response or the information when they make an inquiry about buying the freehold. Often service charge bills are received with no information and no breakdown, sometimes even charging for works that predate a managing agent taking over. Those are just a fraction of the stories I could tell. I could use more than my five-minute allocation simply reading out examples.

Like colleagues who are present, I have made many of these points before. These are always good debates. There is a great deal of expertise, good will and consensus, but frankly, I have seen everyone in this Chamber today in previous debates. This is a group of people who really know the problems, but we need some action, because we are sick of making these points.

[Sir Peter Bottomley]

Does the hon. Gentleman agree that the best thing to do in England or England and Wales, with, I hope, the Law Commission’s support, is to pass a simple statutory instrument that provides for a table of information, so that instead of people having to ask and argue with surveyors, they can look at the table and see the number of years, the ground rent and so on?

[Jonathan Reynolds]

I have huge respect for the work that the hon. Gentleman has done on this issue, and I could not agree more.

There are five things that I would like to see happen. First, the sale of leasehold houses should be ended—that is obvious, and I think there is no disagreement about it. Ground rents should be capped at a percentage of the property value or an overall financial sum. The sum of £250 a year has been raised, and I would be more than happy with that. As the hon. Gentleman said, there should be a simple right-to-buy formula that is not bureaucratic, with additional administration or legal costs, but that can be used in every case to let people purchase their freehold. There should definitely be a crackdown on unfair terms and opaque service charges. Ultimately, we need to make it as simple as possible to let residents take over if they are in that flat situation. Some people will not want that, and there are some reputable people in the marketplace providing services in that situation, but the power should be with the residents to make those decisions.

I will conclude, because I know how many Members want to speak. I cannot stress enough how much people want to know when they will have a simple and straightforward way out of this. I want to make a point that was touched on earlier about the impact on investors. It is true to say that there is another side to this. We have heard about the bad deal that our constituents get, and those on the investor side who have bought the leasehold and freehold rights are clearly getting a very good deal out of it. I want to make two points on that. Colleagues will be aware that when I am not speaking from the Back Benches, I speak from the Dispatch Box for the Labour party’s shadow Treasury team as the shadow City Minister.

First, institutional investors—particularly those based in this country—have some of the best research and analytical functions of any businesses going. They assess all kinds of risk, including political risk, and I cannot understand how anyone would invest substantially in this area without knowing the political risk that has been raised frequently about the will of Parliament and our desire to see change in this area. Secondly, there are many precedents of this House legislating to limit unfair contract terms and conditions because the power balance and the relationship between both parties is not right. I simply cannot emphasise enough how much that applies in this case.

This is symptomatic of how our housing market does not work anywhere near how it should. I do not think that our land allocation system works. I do not think that the design of new homes works particularly well. I do not think that the power of developers is right in our system. I do not think that the affordability of homes is anywhere near correct, and I do not think that this leasehold system is fit for purpose at all. We can influence some of those things at a local level, and in my constituency we are trying to do that, but some things require parliamentary legislative action. This is one of them, as I think we all agree, so let us get on and do it.