Renters (Reform) Bill

Lord Etherton Excerpts

2nd reading
Wednesday 15th May 2024 Lords Chamber

[Lord Etherton (CB)]

My Lords, I declare at the outset that, although I do not own any property in the private rented sector, my husband owns a number of such properties. I am grateful to the Minister and the Bill team for engaging with me on some of the issues that I will raise in this debate.

Like others, I warmly welcome the Bill’s additional protection for tenants. But, in judging the overall merits of the Bill, it is necessary to have regard to the state of the PRS and the possibility of unintended consequences. In that respect, I will elaborate to some extent on the description of the PRS given by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Best.

Paragraph 8 of the Explanatory Notes states that

“4.6 million households (c 11 million people) … rent from a private landlord”,

representing 19% of the entire housing market. According to a DLUHC publication in June 2022, it appears that this includes some

“1.3 million households with children and”

nearly 400,000 households with people over 65. The crucial importance of the PRS is highlighted by the fact that there is a shortage of about 1 million homes. In excess of one in five households in England—and one in four in London—rely on the PRS for accommodation.

Who are the landlords of the PRS housing? According to figures given by the Department for Communities and Local Government in 2010, 89% of landlords in England were private individuals, and 98% of these owned fewer than 10 properties. In 2019, the successor housing department indicated that 45% of private landlords, representing 21% of tenancies, owned a single property—the noble Baroness, Lady Warwick of Undercliffe, alluded to that—and a further 38% of landlords, representing 31% of tenancies, owned between two and four rental properties. What does that show? First, the PRS plays an absolutely crucial role in the provision of accommodation; secondly, the overwhelming majority of landlords in the PRS are private individuals; and, thirdly, nearly 50% of them own a single property for let and some 83% own four or fewer properties for let.

All this is important background for the Bill. It demonstrates the need for an extremely careful balance between, on the one hand, protecting tenants in the PRS from bad landlords and giving them appropriate redress in the case of landlords’ defaults, and, on the other hand, not imposing on the many small investor landlords standards and obligations that drive them from the sector. Does the Bill achieve that balance? I ask the Minister what steps have been taken by the department to obtain data on the possible number of private landlords who are likely to leave the market because of fears arising from the Bill. In the absence of such data, I consider that in some respects the Bill does not achieve the right balance and runs a high risk of driving many small investors from the sector. I will focus briefly on four areas.

First, local housing authorities are given powers in some cases to impose a fine on a landlord of up to £30,000. Those are cases where the local authority is satisfied beyond reasonable doubt that the landlord has committed an offence under the Bill, and instead of prosecuting the landlord, the local housing authority can impose such a fine. The reality is that, because of financial constraints, the local housing authority will usually wish to impose the fine itself rather than pursue the matter by way of prosecution in the criminal courts.

I do not consider that it is appropriate for a local authority official to act as judge and jury in relation to a criminal offence, enabling the local housing authority to impose a fine of as much as £30,000 on small investors in the PRS. I have no objection to the court deciding on whatever fine it wishes, but it is not appropriate for a local authority employee to impose fines of this size. For them to do so will result in litigation as to whether the criminal standard of proof has been satisfied and whether the amount of the fine is appropriate. It will lead to a lack of consistency across the country in the amount of fine for any particular infringement. I suggest that, if an offence has been committed and the local housing authority is not willing to limit the fine to £5,000, it should be left to the court to decide whether an offence has been committed and what is the appropriate remedy. It must be remembered that the rental return on many of these rented properties, particularly those owned by a single investor, is relatively modest. Even a small fine will push the investment into an unprofitable one.

Secondly, the standard of proof that is required in the case of a fine by a local housing authority under the Bill is inconsistent. For example, in some places— I will not elaborate today—the local housing authority may impose a financial penalty of up to £5,000, whether or not an offence has been committed, provided the authority is satisfied beyond reasonable doubt of the matters constituting the offence. In other cases, one in particular, it can impose a penalty of up to £5,000 if satisfied on a balance of probabilities that the landlord has breached certain provisions in the Act. There is no obvious reason for such differing standards of proof for the same £5,000 level of fine.

Also, the standard of proof should always be beyond reasonable doubt. Anything less than that, which depends upon probabilities assessed by a local authority employee, will undoubtedly give rise to dispute and appeals.

Fourthly and finally, in relation to two offences under the Bill, the landlord can be liable only if his or her mental state is one of knowledge or recklessness as to the relevant facts. The mental state of recklessness in criminal law is an extremely difficult one and has given rise to case law. It is something less than intention but more blameworthy than carelessness. In broad terms, recklessness will arise if the accused consciously—that is, looking at the matter subjectively—takes an unjustified risk. Such difficult concepts should play no part in this legislation, which will mostly affect landlords who own one or at most relatively few homes. It certainly should not be left to a local authority which wishes to impose a fine of up to £30,000 to reach its own conclusion on the application of recklessness in criminal law. The only state of mind which should be capable of giving rise to an offence under the Bill is intention—actual knowledge or an actual intention of the landlord to do the matters comprising the ingredients of the offence. This is clear, easy to understand and fair. At the end of the day, that is the test of good legislation.

Non-Domestic Rating Bill

Lord Etherton Excerpts

2nd reading
Monday 19th June 2023 Lords Chamber

[Lord Etherton (CB)]

My Lords, I declare my interest as the owner of investment retail property in the high street. I am extremely grateful to the Minister for her clear and illuminating introduction to the Bill, and to the noble Lord, Lord Shipley, and the noble Earl, Lord Lytton, who have covered a wide range of the issues. Many of us, including myself, have spoken about this issue of business rates in the context of the Levelling-up and Regeneration Bill, so I will keep my comments very brief.

As the Minister has outlined, there are good provisions in this Bill. A reduction of time between revaluations from five years to three is a good move. Indexing non-domestic rating multipliers to the consumer prices index rather than RPI is obviously welcome. Introducing rates reliefs for improvements to property and heat networks is also desirable, and allowing the Treasury to give businesses the immediate benefit of rates reductions while maintaining transitional relief for rates increases is good. Undoubtedly, a great number of positive things have come from the Bill.

However, as noble Lords have pointed out, there are significant flaws and omissions, and I want to deal with them briefly. First, I take up the question of the obligation to notify the VOA of any changes affecting a property’s retail value. This is separate from the annual return, and its effect is to extend a reporting obligation to businesses that currently pay no business rates due to reliefs. They will have to send information to the VOA—a purely bureaucratic exercise that will not result in any increase in the business rates receipts. It is, for them, just a bureaucratic headache, and they will have to do this within 60 days of the change or face a penalty. I question whether this is an appropriate obligation for the people I have mentioned, who pay no business rates and would not pay any, despite the change I have indicated. It has been suggested that an additional 700,000 businesses may have to send such information, pursuant to that duty to notify.

So far as the material change of circumstances is concerned, I agree with both noble Lords who have spoken before me. I can see no good reason why legislation or other public body advice that may impact on rateable value should not be taken into account as a material change of circumstance. The Minister referred to vaping, but many other circumstances could indeed have an impact on rateable values through legislation. We cannot predict this, but simply banning outright any possibility of that sort of change through legislation having an impact on rateable values seems to me to be quite wrong. One suggestion from one of the people who briefed us was that changes in the laws relating to energy protection certificates might have an impact.

The next matter is annual revaluations. I would certainly support the suggestion of the noble Lord, Lord Shipley, that, if we cannot have annual revaluations, we should at least go for two-yearly revaluations in the interim. Getting as near as you can to the actual date in respect of valuation and payment is obviously of great value to everybody, and particularly to businesses operating through retail trade.

I also support both noble Lords’ view that consideration should be given to changing the antecedent valuation date, which is normally two years before the list is applied. Property values are already two years out of date before the first rates bill is set according to the valuation appeal. That antecedent valuation date should be set at one year, as in Scotland, as has been referred to, to bring valuations as close to current market conditions as possible.

I think the noble Earl, Lord Lytton, mentioned that limiting the new improvement relief to 12 months does not seem to make much sense. It will certainly do little to encourage long-term investment. There should be a permanent abolition of downwards transitional phasing but we do not currently find that in the Bill.

At the end of the day, the point I want to emphasise is that the problem here is, quite simply, that business rates are too high. The background for this discussion is that the Centre for Retail Research has found that more than 17,000 shops closed in 2022 and more than 5% of retail staff—150,000—lost their jobs last year through insolvencies and store closures, and there is no doubt that a major contributing factor to that is the business rates system in England. The current rates have been referred to; the standard multiplier for 2023-24 is 51.2p in the pound. We can contrast that with the uniform business rate multiplier of 34p at its introduction in 1990. Again, I agree with the noble Lord, Lord Shipley, that the 49.9p in the pound business multiplier for small businesses is too high.

In both the Conservative Party’s 2019 election manifesto and the December 2019 Queen’s Speech, there was a commitment to

“protecting your high street and community from excessive tax hikes and keeping town centres vibrant”

and to make sure that the business rates revaluations and valuations achieved that. The Levelling-up and Regeneration Bill focuses on failing high streets and town centres, and there is no doubt that to a large extent that is due to one of the only overheads that retailers cannot negotiate away or down—the rates.

The failure to reduce the uniform business rates significantly is all the more surprising bearing in mind the Office for Budget Responsibility’s forecasting that income from business rates will rise to nearly £36 billion by 2027-28 from its current level of £28.5 billion. We must do something much more dramatic about this than we currently find in the Bill.

Levelling-up and Regeneration Bill

Lord Etherton Excerpts

Committee stage
Monday 22nd May 2023 Lords Chamber

I am aware that the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton, have amendments in this group, and I am very interested to hear what they have to say. I think I have probably spoken for long enough, so I beg to move.

[Lord Etherton (CB)]

My Lords, I draw attention to my amendment, co-signed by the noble Lord, Lord Thurlow—and I am very grateful to him for doing so. The amendment is to Clause 178(4).

Clause 178 is dealing with the vacancy condition, which is one of the conditions for permitting letting or rental auctions by local authorities. My question is probing, to do with certainty. Clause 178 (4) mentions

“Occupation by … a trespasser, or … a person living in premises that are not designed or adapted for residential use”,


but goes on to say that

“this is not to count for the purposes of this section”.

Since the section deals with both what is occupied and what is not to count as occupation, it is unclear what that means. I ask the Minister to make it clear.

I think the intention must be that where a trespasser is in occupation or there is

“a person living in premises that are not designed or adapted for residential use”,

the premises are not to be treated as unoccupied for the purposes of Clause 178(1). That is my understanding. If that is incorrect and it is intended that they should be treated as unoccupied, the amendment provides that if a landlord has taken possession proceedings, they are not to be treated as unoccupied. It is really a question of clarity as to what Clause 178(4) is meant to do here. If the Minister can give a clear explanation from the Dispatch Box, that would help me and may be the end of the matter.

[Lord Thurlow (CB)]

My Lords, I am grateful to the noble and learned Lord, Lord Etherton, for identifying what I believe to be an unintended consequence in connection with the proposed forced auctions of high street property. I am pleased to add my name in support of Amendment 418.

Following many years of practice as a chartered surveyor, specifically in the commercial property market, I am well aware that one of the most difficult challenges that landlords of vacant property can face is that of the unauthorised or illegal occupation of their premises. Securing legal and legitimate possession from an occupier who refuses to leave is expensive and time-consuming and can easily—and unfairly—add to the long list of bad landlord stories.

If that unauthorised occupation involves residential property, the problems of cost and delay can increase significantly. I appreciate that the clause we are referring to does not refer to residential occupation, but commercial shops are frequently let to sole traders who use an upper floor storage space informally as residential accommodation. It is outside the terms of the lease, but it may remain a fact, so it is worth pointing out that residential occupation comes into this amendment.

Amendment 418 is designed to protect a landlord from enforcement by the local authority of the auction process when they are already doing their very best to secure vacant possession. They are trying to get rid of an unauthorised occupier. Without this possession, it becomes impossible to let the property. Who would conceive of signing a lease for a shop as a tenant with an illegal trader already in place? Surely it is wrong to penalise the landlord who is keen to let their property but is unable to do so. While legal action is under way, that landlord receives no rent and is probably paying interest on a commercial mortgage. They are likely in breach of their rental income covenants with the bank, so may be verging on defaulting on that loan, and are likely employing costly solicitors to pursue legal action for recovery of their property. Yet, by this Bill, they could be accused of keeping a property vacant.

The clock should not start on the period defined as “lying vacant” until the property is vacant and is in the landlord’s gift to be let to a tenant. I do not believe that it is the Government’s intention to auction off commercial premises that are the subject of legal action to recover possession, so I ask the Minister to ensure that, while legal proceedings are under way to secure possession, the landlord does not inadvertently fall into the trap of effective confiscation by the authorities.

This amendment is not a matter of policy or principle. It does not dispute the intention of Clause 178. It is simply a practical matter that, unamended, will lead to confusion and conflict between vested interests, which, I am sure, is unintended.

--- Later in debate ---

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I apologise that I have not been in Committee in recent sessions; I had amendments on housing. I have discovered that, as a non-affiliated Peer, it is difficult to organise the division of labour when there are so many hefty Bills going through the House.

I have a particular interest in a couple of groups of amendments being discussed today. High streets and businesses are a core levelling-up issue for so many people outside of London. The decline of the high street can illustrate viscerally the feeling of being neglected and left behind. Boarded-up shops and closing community resources such as banks and pubs can be demoralising, making it feel like the heart of a community is being ripped out. Amendments 433 and 434 from the noble Baroness, Lady Hayman, are important in this regard; she summed up in a compelling way why this is an important group.

A number of the amendments refer to consultations, which are very important. I was interested in the comments of the noble Lord, Lord Thurlow, the noble and learned Lord, Lord Etherton, and the noble Earl, Lord Lytton, regarding incentives. They show that we cannot simply declare a commitment to reviving the high street; it is a bit more complicated than that, to say the least.

I want to raise the dilemma that arises when government policies with different priorities, in completely different areas from this Bill, inadvertently make matters worse for high streets. I will reflect on and support Amendment 432, from the noble Baroness, Lady Taylor of Stevenage, on assessing the impact of pedestrianisation.

Pedestrianisation can intuitively seem like a good idea for high streets—a positive contributor to a community atmosphere, with increased footfall and increased likelihood of people popping into premises and so on. But stop and consider Naz Choudhury who, for many years, ran the successful Temple Bar, a halal Lebanese grill and Indian food restaurant in Oxford, which permanently closed recently. Why did it close? Mr Choudhury blames a certain form of enforced pedestrianisation in the council-imposed low-traffic neighbourhoods, specifically car restrictions in the Cowley Road area of east Oxford. Mr Choudhury says:

“The council’s decision to put these bollards up along Cowley Road was the main reason people don’t want to travel here anymore”.


Obviously, that is a subjective view, but there are a lot of controversies surrounding the Government’s active travel policies, which emphasise cycling and walking over driving. Businesses are saying that policies such as LTNs are having a negative impact on them. In Haringey, where I live, many shop owners say that LTNs are causing them to lose business.

The controversy around LTNs in Cowley Road in Oxford even hit the national newspaper headlines, largely because of opposition by Clinton Pugh, who is the father of the brilliant “Little Women” actress Florence Pugh. Clinton Pugh said:

“The council have literally strangled the life out of the Cowley Road and it is having a very negative effect on businesses.”


Mr Pugh, who is the owner of two or three cafés and restaurants on the road, even put up a banner accusing Oxford of censorship, quoting Orwell’s Nineteen Eighty-Four. Rather than talking to or listening to him, the council’s response was to threaten to fine him for not getting planning consent for the banner.

Beyond the celebrity stories, a serious point for this group of amendments on the high street is to note that policies such as LTNs, which I am sure are very well intentioned, can create a type of pedestrianisation that is bad for business. Too often, councils just will not listen to the complaints or look at the evidence. Cowley Road traders became so exasperated that they produced their own business impact survey of the effects of traffic-reducing measures. It revealed that at least eight shops had closed where LTNs are located; that 153 shops had been directly or indirectly affected through a loss of customers and logistical problems with deliveries to businesses and customers; and that business owners reported a decrease in turnover of 30% in some instances, with some claiming 50%. A letting agent said that the tradespeople they use had increased their call-out fee from £45 to £65 due to the time it takes to get around in a van, the extra fuel used and so on. Hospitality businesses are particularly affected. A staff member at a specialist supermarket, which people travel a long way to get to, noted:

“We don’t sell many large bags of rice now because they’re too heavy to take on the bus”.


Something that looks like “Let’s get everyone walking or on the bus, and it will all be lovely and pedestrianised” is actually destroying businesses and having a bad effect on consumers, who cannot get what they want to buy. We can see parallels between pedestrianisation and the removal of free—or any—parking spaces in town. This is a double blow to both shoppers and SMEs alike, again in the name of anti-car, active travel policies.

Oxford traders say:

“We’ve been asking for an independent business impact assessment to be carried out but the council have ignored us, so we had to do our own”.


If we are to have a levelling-up discussion, Amendment 432 would be a sensible way to sort out the pros and cons of pedestrianisation in local areas. In other words, you cannot have top-down policies that undo any possibility of local residents or businesses having a proper say. LTNs illustrate that.

[Lord Etherton (CB)]

My Lords, I apologise to the Committee: I should have disclosed before I spoke that I have an interest as the owner of high street retail premises.

[Baroness Thornhill (LD)]

My Lords, there is so much that can be said regarding high streets that is very well evidenced, and in fact there is consensus about what does and does not work. Our concern on these Benches is that the various measures in the Bill, even when combined—it is important to see that—probably do not go far enough or are bold enough to really level up or regenerate. However, this is not Second Reading. I am pleased to speak positively to this part of the Bill and to this group of improving and strengthening amendments, which have been well described in appropriate detail by their proposers, particularly the noble Baroness, Lady Hayman of Ullock, as has already been mentioned.

I have to confess to becoming mildly excited about the prospect of local government being able to oblige landlords to rent out persistently vacant high street premises through the rental auctions process. As the elected Mayor of Watford, I inherited a high street shamefully branded in a tabloid headline as “Ibiza on acid”, and where the national crime survey showed one of our town centre side streets as one of the worst crime hotspots in the country several years running. Yes, more bad headlines, but more importantly it was backed up by local people’s opinions, experiences and—never to be forgotten—their perceptions. There was much work to be done, and it took years.

Thus I have bitter experiences of first, and most importantly, trying to track down the landlords of vacant premises—in other words, those who have real legal responsibilities and can actually do something and not just pass the buck. It was rarely straightforward, and any improvement that the Government can make to ease that part of the process would be very welcome and undoubtedly strengthen this policy.

For us, the formation of a business improvement district was critical to eventual success, and one hopes that they continue to be supported. In fact, it was the BID team which was able to do much of the footwork that is going to be needed of continuously monitoring vacant units and all the other premises on the high street. Given the skills and capacity issues in local councils that have been mentioned, this is definitely going to further stretch resources, particularly in district councils. Will the Minister reassure us that the Government have plans to target these issues?

On further investigation, we found that there was often a wide range of reasons why properties were empty, many of them legitimate and often complex and challenging. Amendment 426 in the name of the noble Earl, Lord Lytton, essentially speaks to that dilemma. He may be surprised to learn that I can empathise. I say to him that any good council would and should seek to work with a landlord in the circumstances outlined in his amendment and help and support the landlord in getting the premises re-let. But I recognise that this is not always the case and despair when I hear case studies such as that from the noble Baroness, Lady Fox, of when things have clearly gone awry and councils have not listened. I do not believe in being prescriptive about it because I could stand here and tell noble Lords how pedestrianisation revitalised our high street. My instincts are always to say, “Let councils decide what suits their circumstances”, but in the full knowledge that sometimes they mess it up.

What was key was the partnership approach—agents, landlords, businesses, the council and the community working collaboratively to get things to a point where a compulsory rental auction would not be necessary. That would be a measure of its success. But all too often we found that the landlord was not the kind of one described by the noble Earl but a pension group or similar investor with a wide range of holdings and for which a couple of shops in Watford High Street were small beer. For a wide range of commercial reasons it did not “suit their circumstances at the moment” to re-let. I sincerely hope that these are the landlords that this legislation will drive to the table.

The word “community” in my list of partners is important. Amendments 417 and 437 emphasise the involvement of the community, which is the heart of any place, as we know—the hub for getting together to enjoy a wide range of activities and events. In short, it is hard to imagine that a local plan would be found sound if it did not involve a policy for the high street and significantly involve the local community in its formation. Can the Minister confirm this?

Levelling-up and Regeneration Bill

Lord Etherton Excerpts

Committee stage
Thursday 18th May 2023 Lords Chamber

I hope that the Minister agrees that this is an opportunity to ensure that the new IL regime has a strong, positive impact in securing more, and definitely not less, urgently needed social housing. I commend these important amendments.

[Lord Etherton (CB)]

My Lords, I will speak to my Amendments 332, 333 and 341. I am extremely grateful to the noble Lord, Lord Thurlow, for co-signing them. I entirely agree with much that the noble Lord, Lord Best, said. A whole variety of the amendments in this group are aimed at the same principle: how best to increase decent and affordable housing, particularly social rented housing, for those who so badly need it.

Amendments 332 and 333 concern the setting of infrastructure levy rates under new Section 204G of the Planning Act 2008, to be inserted by Schedule 11 to the Bill. Currently under that provision the only requirement in setting the infrastructure levy rates is to have regard to the desirability of ensuring that the level of affordable housing funded and the level of funding provided by developers is not less than before. That is simply not good enough.

As we all know, there is a critical shortage of affordable social housing. The Minister acknowledged this, most recently when answering a Question in the House on 25 April concerning the National Housing Federation’s report, Overcrowding in England, published on 19 April, particularly its finding that one in six children lives in overcrowded conditions. Shelter has reported that over 1 million households are waiting for social homes, and that last year 29,000 social homes were sold or demolished and fewer than 7,000 were built. It also says that there are now 1.4 million fewer households in England in social housing than there were in 1980. These are shocking facts and statistics.

Amendment 332 provides, as noble Lords will see from the Marshalled List:

“A charging authority must prepare and publish a Strategic Housing and Market Assessment specifying what affordable housing is needed within the area of the charging authority … The charging authority must publish a new Strategic Housing and Market Assessment every three years”.


Amendment 333 provides:

“A charging authority must set rates of IL at a level which, in conjunction with the exercise of such other powers as it possesses, is likely to provide not less than the amount of affordable housing specified in its Strategic Housing and Market Assessment over a three year period”.


The Bill would then continue as it currently does, ensuring that there is no lesser level of funding than before. I have specified a period of three years but would be very happy to discuss with the Minister and others whether that would be appropriate.

It would then be necessary to amend new Section 204N, which requires the charging authority to apply the infrastructure levy in funding

“the provision, improvement, replacement, operation or maintenance of infrastructure”,

which is a term defined to include a wide variety of things, from schools and medical facilities to open spaces and the mitigation of climate change. Those are all very worthy causes, but affordable housing is only seventh out of the 10 matters in the definition of “infrastructure”. There is no provision for prioritising one type of infrastructure over another, while the greatest need is plainly for decent and affordable social housing. To have the right and ability to live in a decent home is one of the most basic human rights. Giving priority to the need for affordable housing—more particularly, affordable social housing—is the purpose of Amendment 341, which would introduce into new Section 204N a cross-reference to new Section 204G as we propose that section should be amended.

[Lord Thurlow (CB)]

My Lords, I add my voice to Amendments 332, 333 and 341 from the noble and learned Lord, Lord Etherton, concerning affordable housing, which lies at the root of the Government’s responsibility to their citizens. As we have just heard, it is the duty of government to provide safety and security to its citizens and a roof over their heads. That responsibility includes, at the very top of the list, the needs of the homeless. It is important to remind ourselves that the definition of homeless here includes many of the most vulnerable in our population. They are citizens too, but current circumstances may cause them to question that.

Successive Governments have repeatedly failed to replace council houses sold into the private sector, and this reducing inventory of low-cost housing, however defined, continues against a background of increasing homelessness and need. The Government must somehow finance more affordable housing. These amendments, taken together, will assist in that objective.

Building Safety Bill

Lord Etherton Excerpts

2nd reading
Wednesday 2nd February 2022 Lords Chamber

[Lord Etherton (CB)]

My Lords, I also warmly welcome this Bill and the Minister’s introductory words. I am also very grateful to the right reverend Prelate the Bishop of Winchester for his thoughtful comments.

I support the call by many, including the Law Society, for the Government to identify sufficient funding to cover the full cost of cladding remediation to ensure that no leaseholder faces the prospect of picking up the bill themselves, regardless of block height. However, I am concentrating on a situation in which that has not yet happened: a situation that was alluded to by the noble Lord, Lord Young of Cookham. It is probably going to take years for this situation to be resolved, either by payment of compensation to have remediation work carried out or by compelling developers to carry out the remediation work themselves. In the meantime, there is an obviously liability that needs to be addressed by someone on whom it will fall.

In this period of time, when there is still work to be done, and at a cost, the relations between the landlord and the tenant are governed by the terms of their lease. In cases of leases of less than seven years, there is no problem, because the landlord cannot recover the costs of repair and maintenance from the tenant. In the case of leases of more than seven years, there will almost inevitably be obligations on the landlord to repair common parts, including the exterior, but expenses will be recoverable, in whole or in part, by way of a service charge payable by the tenant. That situation is, unless something else comes into play, as I said, likely to continue for a considerable period of time.

My comments are really directed to the position of the landlord in relation to these service charges, and against the background that many small, residential, tenanted blocks of flats are owned not by large, profitable property companies but by private individuals. They are not necessarily wealthy but may have wanted some additional income—people who have bought to let or invested their personal pension in a residential block. There may be a situation in which all or some of the tenants have bought the freehold, or indeed the common parts may be held by way of commonhold.

The issue of how these costs in relation to remediation are to be addressed in this interim period—if I can call it that—is found in Part 5 of the Bill. The effect of Part 5 is to provide for amendments to be made to the Landlord and Tenant Act 1985. I am concerned with the provisions that require the landlord to, among other things,

“take reasonable steps to ascertain whether monies may be obtained from a third party in connection with the undertaking of the remediation works and, if so, to obtain monies from the third party”.

That is a mandatory requirement, not one dependent on discretion.

New Clause 20D(3), to be inserted into the 1985 Act, says:

“In subsection (2)(b) the reference to obtaining monies from a third party includes obtaining monies … pursuant to a claim made against … a developer … or … a person involved in carrying out works in relation to the building.”


A further new subsection provides that if there is a “failure to comply” with that obligation,

“a tenant may make an application for an order that all or any of remediation costs are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by … the tenant”.

Part 5 envisages that in this interim period the landlord is under a requirement to, among other things, take steps to see whether there is a claim and to pursue it. If the landlord—whether a he, a she or an it—fails to do so, there can be an application to the court for an order that the service charge is abated in consequence. As I see it, the difficulty with this is that it will cause the most enormous amount of dispute. Who is to say how much a landlord of the type I have described should properly spend on a claim?

Everybody is agreed—I certainly agree—that it would be quite wrong to expect leaseholders to undertake costly and complex litigation. This sort of dispute in relation to defective building work is among the most expensive, long-drawn-out and complex of all litigation—there is a special court designed to deal with it, the Technology and Construction Court.

Equally, it seems quite wrong for the landlords I have described—the private landlords, not the large companies—to have to involve themselves in exactly the same type of litigation. Indeed, I expect that, were they to do so, the tenants might well say, “I’m not going to pay because you should never have spent so much money on it”. You are left with a dilemma in which steps must be taken by the landlord in relation to potential third-party claims, but there is no indication at all of what would be reasonable. How much money should be spent? For how long should the claim just be advised upon? How long should it continue?

There is a provision that:

“The Secretary of State may issue guidance about the taking of steps under subsection (2),”


which I have referred to,

“and may revise or withdraw any issued guidance … proof of compliance with any applicable guidance may be relied on as tending to establish that there was no such failure.”

I urge the Minister and the department to consider very carefully indeed whether it is appropriate to require all landlords to take those steps as a mandatory matter in view of all the costs and the absolutely inevitable dispute between tenants and landlords in relation to who is to bear those costs as reasonable service charge costs.

One solution might be to provide in the guidance, if not in the Bill, that the amount to be spent will be reasonable if it is limited to, let us say, a proportion of the annual rents. There must be some kind of qualification to prevent yet more disputes and more distress.

Leasehold Reform (Ground Rent) Bill [HL]

Lord Etherton Excerpts

Report stage
Tuesday 20th July 2021 Lords Chamber

I thank the noble Earl, Lord Lytton, for raising this issue, which I am of course happy to continue discussing. I hope, therefore, that he will not move Amendment 39 at this stage. I also ask that the noble Earl does not move his Amendment 5, and that the noble and learned Lord, Lord Etherton, does not move his Amendment 3.

[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.

Mortgages: EWS1 Form

Lord Etherton Excerpts

Tuesday 29th June 2021 Lords Chamber

[Lord Greenhalgh (Con)]

My Lords, we recognise that there is a problem and we are taking the steps required to ensure that where an EWS1 form is requested, it is easier to get the professional to carry it out, but also encouraging the banks to look at other documentation as an alternative—a proxy—to show that the buildings are safe. It is important that we go ahead and identify those buildings whose external wall systems require remediation.

[Lord Etherton (CB) [V]]

In November last year, the Government issued a statement recognising that the number of fire engineers qualified to provide these certificates, at 300 people, was woefully inadequate. They said that they would provide finance to fund 2,000 further qualified people within six months and ensure adequate sources of professional indemnity insurance. How many additional people have been funded by the Government to provide the certificate required, and precisely what further insurance has now been, or will be, made available in the market or elsewhere for these other people?

[Lord Greenhalgh (Con)]

My Lords, that is quite right: we have committed to a £700,000 funding scheme to train up to 2,000 surveyors. That has already begun, and I will write to the noble Lord with the precise number that have been trained up to this point. We have also announced a bespoke insurance model to ensure that professionals have access to professional indemnity insurance cover. Details will be published in due course.