Leasehold Reform

Lord Beamish Excerpts

Tuesday 23rd May 2023 Commons Chamber

[Mr Kevan Jones (North Durham) (Lab)]

For most people, buying a house is the single largest investment that they make in their lives. Not only does it provide a home for them and their family, but it is also probably the biggest financial commitment that they have to meet each month. Anyone who has bought a new home knows how stressful and bewildering the process can be, particularly for first-time buyers. The mixture of stress and excitement of owning a new home means that many rely on advice from an array of advisors, including estate agents, lawyers, high-pressure salesmen and developers.

Often, when people are buying a house, they do not look at the issue of freehold and leasehold. They think that leasehold is cheaper, so they think that they will put that all off until the day they can afford to buy the lease. Many are not aware of the feudal nature of the property system in this country. Not only is the system outdated and unfair, but it has been made worse in recent years by the pure greed—it is greed, frankly—of certain house builders and property developers. The number of houses sold as leasehold has more than doubled between 1995 and 2015. The Minister mentioned that the figure has recently gone down. I wonder whether that is because of the scandal to which the Father of the House has just referred.

[Sir Greg Knight (East Yorkshire) (Con)]

I am most grateful to the right hon. Gentleman for giving way. He is making a number of very good points. In the light of what he has just said, does he agree that it is essential that anyone taking on an estate in land, whether it be a leasehold or freehold, receives the best possible legal advice before they sign on the dotted line, so that they know precisely what commitments they are taking on? Are not some of these problems related to the fact that that advice is not particularly good?

[Mr Jones]

I will cover that in more detail later, but it was a point that was raised by my right hon. Friend the Member for Alyn and Deeside (Mark Tami). The right hon. Gentleman is right: the one thing that needs outlawing is a developer or an estate agent being able to refer a person to a solicitor who is supposed to be “acting in their best interests”. That should not happen. The legal advice should be completely independent. There is an unhealthy relationship between those people. It is okay saying that we should blame the individual buying the property, but they are often first-time buyers who do not understand the process.

The issue of flats has already been raised. I accept that we deal with flats in a particular way, but there is a perfectly simple system that is not leasehold. What we have seen over the past few years is houses being sold under leasehold arrangements. That is because certain developers have seen it as a way of maximising their profits. They do it in two ways. The first is by passing the charges on to the owners, when traditionally they should have been paid by the developer—I will come on to examples of that in my own constituency in a minute. The second, which was referred to earlier, is the monetarisation of the actual leases, which are not only being sold to individual companies, but, in some case, being put into baskets of leases. It can be bewildering for a person to find out who owns their lease from year to year.

The other scandal, which was raised by my hon. Friend the Member for Wigan (Lisa Nandy), is around minor alterations. We are not talking about the wholesale redevelopment of a property, but, perhaps, a porch being moved or even a Sky dish being added, which have to be charged. It is no wonder that investors have got on to this. They know that the way that these leases have been constructed can mean a profitable business for them. They are not buying out of altruism; they are buying because they know that they can make money, and the people who are suffering are those who bought the leases.

I have already mentioned the issue of legal advice. Clearly, it is an issue that needs to be looked at. In many cases, if a person goes to some major housing developers, they will be told, “These are our recommended solicitors.” I am sorry, but that should be outlawed. The solicitor should be there to represent the buyer’s best interests. As the right hon. Member for East Yorkshire (Sir Greg Knight) has just said, the solicitor should be there saying, “No, don’t sign that, because it is not in your best interests.”

I know that Members will cite many examples in this debate, but I wish to raise just three in my own constituency. Members will not be surprised to hear that they involve a notorious company, Persimmon Homes, which is terrible at dealing with customers. It has made more than £1 billion of profit every year for the past five years, mainly funded by the Government’s Help to Buy scheme. The Government have done nothing to stop Persimmon’s sharp practices. Between 2012 and 2020, Persimmon built Roseberry Park in my constituency. Traditionally, when an estate is finished, the verges and common areas are passed over to the council, once they have been brought up to adoptable standards. But, lo and behold, on this site, they have not. Those areas are part of the lease, which means that the leaseholders have to take responsibility for the maintenance charges, which then go up and up. If buyers are asked whether they knew about this, they say, no, they did not, which gets back to the point about legal advice made by the right hon. Member for East Yorkshire—should they have signed this when they are taking on open-ended commitments. The site was finished in 2020, but the roads have still not been brought up to adoptable standards. It is anything to save money for Persimmon.

The other case involves Urpeth Grange. It is a small development site of 47 houses on a larger estate. Developers refused to pay the 15 years’ maintenance on an area of land and a play area and have passed it on to a management company, which is then owned by the leaseholders. Part of the planning permission was to have a play area. Well, if it is a play area, it should have been brought up to standard and passed on to the local authority, but, no, that did not happen. Even though everyone can use this play area, it is still the responsibility of the leaseholders. These sharp practices by Persimmon have been used to make more profit, and they are funded by the Government’s Help to Buy scheme.

[Andy Carter (Warrington South) (Con)]

The right hon. Gentleman will be aware that the Competition and Markets Authority investigated the practices of Persimmon Homes and reached a settlement with the company. However, it seems to me, and I think he is saying the same, that there are still so many issues that are outstanding with house builders such as Persimmon Homes that either the CMA should go back in there and address those issues, or we should have some form of housing court where we can get those issues resolved, so that individual homeowners are not footing the bill in areas where they should not be.

[Mr Jones]

I totally agree with the hon. Gentleman, and I agreed with the Select Committee’s recommendations on those homes.

Murray Park is another development, built in 2011 by Bowey Homes, which went into administration. In 2015, the freeholds were sold to a company called Adriatic Land 3 Ltd, which started charging ground rent. It came to light later that, due to a conveyancing error, Adriatic Land 3 had not bought 11 of the leases on the properties, and with Bowey Homes having gone bust, they were passed to the Duchy of Lancaster.

I would like the Minister’s help here, because the way the Duchy is dealing with the situation is frankly scandalous. Despite the error coming to light in 2011 and people wanting to buy the leases, they are being told that they have to pay £11,000 individually for valuations. Moreover, because there are only 80 years left on the leases, the marriage value applies. They are left unable to sell their property and, for some of them, their mortgage providers are questioning the situation.

The Duchy is being legalistic and obstructive in the way it wants to solve the problem. Those individuals found themselves in this position through no fault of their own, and when they got the valuation to try to get the cost of the leases, the comparisons used were in Leeds and York. I must say there is a big difference between York and Leeds, and Stanley in my constituency. If the Government could give any help in making representations to the Duchy, I would appreciate it.

As has been said, reform was promised. I do not know why the delays are ongoing, because this situation is blighting many people’s lives. They are hard-working, decent people who in many cases have saved and worked very hard to own their own house, who are proud of what they have achieved, but who have basically been left, in some cases, with assets they cannot sell or the fear that somehow the asset will never be there to be passed on to their loved ones.

I urge the Government to act quickly on leasehold reform. They cannot make the excuse that there is no Government time, because we have had very little business over the last few months. If it is not in the next King’s Speech, it will be one of the top priorities for a Labour Government to deliver in their first term.

--- Later in debate ---

[Ashley Dalton (West Lancashire) (Lab)]

Thank you, Mr Deputy Speaker, for the opportunity to speak in this extremely important debate on a topic has a real impact on our constituents. Leaseholders have been crying out for reform for years, and the Government make promises but seem unwilling to act.

It is simply wrong that the system denies people the right to decide the future of their own home. Being stuck with high service charges while faults and leaks fail to get fixed, and a lack of transparency over what leaseholders are actually paying for, is a familiar story. As mentioned by the shadow Secretary of State, my hon. Friend the Member for Wigan (Lisa Nandy), with the exception of England and Wales, every country in the world has repealed or reformed the archaic leasehold model. There is cross-party consensus in this place that the current system simply does not work, so why are this Government sitting on their hands while the people out there pay the price?

[Mr Kevan Jones]

Does my hon. Friend agree that it is worse than that? The Government are not just sitting on their hands; they have raised expectations. Some of the comments from the Secretary of State in particular have led people to think that things are going to change quickly, when quite clearly they are not.

[Ashley Dalton]

I absolutely agree. It is an outrage that these promises give people hope, yet they turn into nothing. This is yet another example of the Government not matching the ambition of the British people.

I am sorry to say that the bad news just keeps on coming for leaseholders. As much as the Leasehold Reform (Ground Rent) Act 2022 made meaningful progress in all but abolishing ground rents for leaseholders of newly purchased new builds, reform for existing leaseholders has been kicked into the long grass. The UK housing market risks becoming a two-tier system for leasehold properties. There are 4.8 million existing leasehold properties and, unless reform comes quickly for those homeowners, new build leasehold properties will be seen by prospective buyers as more desirable since they are not subject to the same ground rent charges. That may well benefit developers, but leaves existing leaseholders stuck with unsellable homes and that has an impact on the entire market. An existing leaseholder unable to sell their property is unable to go and buy another, possibly freehold, property. The entire market is stagnating.

The Government keep promising that reform is just around the corner—if leaseholders just keep supporting the Government at another general election, they will really mean it this time and sort the problem out. The reality is that they have had 13 years to clean up this feudal model of home ownership, but they show no signs of doing it soon. We are talking about people’s lives. We cannot lose sight of the real consequences for people. As the Government continue to tease reform, some leaseholders who want to extend their leases dare not because they know there is no guarantee that the Government will follow through on their promise of further reform. Every day that the Government delay acting could cost leaseholders more when they do come to extend, pushing them closer to the cliff edge of marriage value having to be paid to extend a lease.

Britain is in the midst of a housing crisis: private renting costs are out of control; the disastrous Tory mini-Budget made it harder for millions to get a mortgage; and the leasehold model is clearly broken. The Government may have run out of ideas, but Labour would not only reform the broken leasehold system, but tackle the supply side of the housing crisis, building new homes and making them more attainable for potential buyers. While this Government make promises, Labour has a plan to deliver. Polling in recent months shows the public trust Labour more than the Tory party with the economy. With this Government’s failure to act on leaseholders and Labour’s plans to reform the system and support house building, the message is clear: Labour is also the party of home ownership.

There has been consensus across the House about the need to tackle the feudal leasehold system and tackle the exploitative practices that it enables, so what is the hold-up? Why are the Government all talk and no action? Will they please just get on with it?

--- Later in debate ---

[Rachel Maclean]

Perhaps hon. Members would like to listen to the remarks I am about to make, because I am sure I will answer their questions.

The hon. Member for Wigan (Lisa Nandy), when she opened the debate, said that it will “take some time to phase out this archaic system.” She said—these were the words from the Opposition Front Bencher—that Labour recognises how complex this is. I think it is right to draw the House’s attention to the Labour party’s record when it was in office. I am holding a document from 1995 in which Labour promised to outlaw the feudal leasehold system, but it did nothing while it was in office. Labour has left it to the Conservative Government to fix these issues.

As hon. Members will know, in January, my right hon. Friend the Secretary of State set out his intention to bring the “outdated and feudal” leasehold system to an end. To deliver that intention, and in line with our manifesto commitments, we have embarked on a significant programme of reform to give people real control over their homes and their lives. [Interruption.] It is entirely wrong to say, as Members are chuntering from sedentary positions instead of actually listening to what is being said, that no action is being taken. Perhaps they would like to pay attention.

[Mr Kevan Jones]

On a point of order, Madam Deputy Speaker. I might be old-fashioned, but I thought that when Ministers came to the Chamber to reply, they had to reply to the debate. The Minister has thanked Members from her own Benches who have spoken, but detailed questions were asked by Members from across the House. All we are getting is a speech written by civil servants, not a response to the debate, and she is quite clearly refusing to take any interventions from my hon. Friends.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I thank the right hon. Gentleman for his point of order. Obviously I am not responsible for the Minister’s speech, but I am sure she will be referring to the contributions made by others during her winding-up speech—she is perhaps coming to that now.

I am also checking to make sure that the other Minister, the hon. Member for North East Derbyshire (Lee Rowley), will be coming back to the Chamber. I am not sure that he gave apologies for not being here for the wind-ups, but we are just checking.