Leasehold and Freehold Reform Bill

Lord Khan of Burnley Excerpts

2nd reading
Wednesday 27th March 2024 Lords Chamber

[Lord Khan of Burnley (Lab)]

My Lords, it is a pleasure to close this Second Reading debate on behalf of the Opposition, and I thank all noble Lords who have participated in it. The expertise, skills and knowledge on this subject in your Lordships’ House have been demonstrated in such an eloquent manner. I am sure that the Secretary of State, Mr Gove, will be delighted with the scrutiny his Bill is getting in this place.

I echo what so many others have said and add my own tribute to all the individuals and organisations which have campaigned for so long for reform in this area. It was interesting to hear the noble Baroness, Lady Thornhill, talk about her ancestral colleagues raising this issue in 1909, and my noble friend talking about leasehold being raised in the 19th century in this building. Without being subtle at all, I pay tribute to my Chief Whip, my noble friend Lord Kennedy, for his relentless and consistent efforts over a long period of time to educate our Benches, with his experience and expertise in the area.

As a number of noble Lords have pointed out, we have waited a long time for this Bill. It beggars belief that we are on to our fourth Prime Minister and we have had 10 Housing Ministers since the Government first proposed legislation on leasehold reform in 2017. We are pleased that the Bill will progress today. It will provide some limited relief to leaseholders. We welcome and support most measures in the Bill, including changes to the calculation of premiums payable for lease extensions or collective buying of the freehold, and the end of marriage value, as well as the introduction of 990-year extensions, ground rent reforms and freehold estate regulation.

The problem is that the leaseholders across the country expected so much more from the Government. We are clear that, in due course, as my noble friend has mentioned, Labour will have to finish the job and enact in full all the Law Commission’s recommendations on enfranchisement, the right to manage and commonhold. We are determined to do so.

I know the Minister is looking forward to responding to the many issues raised by noble Lords. We had a number of powerful contributions across the House. It is always refreshing to hear from the noble Lord, Lord Best, and, in relation to his property agents working group, it is a shame that his 2019 report has been largely ignored. The noble Lord is calling for a regulator, and has consistently done so, and the point was made that the industry has come out with this as one of its top requests.

The noble Lord, Lord Young of Cookham, and my noble friend Lady Andrews talked about uncertainty and lack of clarity. In her eloquent speech, my noble friend spoke about how the Bill deals with the problem but, although making some progress, it is a game of two halves; there is some good progress in certain areas, yet so much is missing, and I agree with that. She also shared personal stories and spoke passionately about the letters she received from leaseholders. I agree with my noble friend Lady Taylor of Stevenage, who said that this is a long way from what leaseholders want and have waited for. The Bill needs so much more substance added to it.

One of our key areas of concern is that there is so much material arriving throughout the passage of the Bill. As the noble Lord, Lord Stunell, mentioned, this is now becoming the norm and not an exception. How can that be effective for scrutiny, for noble Lords and Members in the other House to properly advise or amend?

I want to probe the Minister on some areas of concern which, at this stage, the Bill fails to cover. First, in 2021 the Law Commission provided the Government with updated recommendations on the archaic law of forfeiture, and yet, as many noble Lords mentioned, there is nothing in the Bill to end the unjust windfall gains exploited by freeholders. My noble friend Lady Twycross described freeholders’ behaviour as “mafia-like”, and the noble Lord, Lord Bailey of Paddington, said the way they operate is “gangster-like”.

The Secretary of State claimed that he wanted to

“squeeze every possible income stream that freeholders currently use”,—[Official Report, Commons, 11/12/23; col. 659.]

so why has this income stream been untouched? The Minister mentioned that she would be bringing the issue of forfeiture back to your Lordships’ House. This has happened too many times and it is another example of not being able to look at something from the outset. As mentioned by my noble friend Lord Kennedy, we will work with all noble Lords across the House to decide whether we can support what the Government bring back to end the forfeiture rule.

As previously mentioned by many noble Lords, Labour has committed to implementing in full the recommendations in the Law Commission’s three reports on leasehold. Why is it so difficult for the Government to do the same?

In 2021, the Government established the Commonhold Council to

“advise the government on the implementation of a reformed commonhold regime and bring forward solutions to prepare homeowners and the market”.

I understand that the council has not met for two years and, as has been discussed, there is no sign of commonhold in the Bill. Have the Government completely given up on this?

I re-emphasise that deferment rates used for calculating lease extension and freehold purchase premiums are missing from the Bill. These are crucial for determining the prices paid by leaseholders who want to buy out or extend their lease. Will the Minister bring forward more detail at the next stage of the Bill to set out the methodology for their calculation?

Almost every country in the world, apart from Britain, has either reformed or abolished this archaic, feudal model. I know the noble Lord, Lord Moylan, objects to “feudal”, but we are quoting the word that Secretary of State Michael Gove has been using. If the noble Lord looks at Hansard, the speech of the noble Lord, Lord Bailey, mentioned “feudal” more times than anybody else here.

There has long been cross-party consensus on the need to do something about this horrific situation, so why have the Government watered down their commitments to leaseholders of flats? This is a point that the noble Lords, Lord Stunell and Lord Young of Cookham, made about being on our own in not being able to deal with the situation.

Just what do the Government stand for on the Bill? It is remarkable that, in a recent interview with the Sunday Times, the Secretary of State went so far as to declare, without qualification, that he intended to abolish the leasehold system in its entirety. There have been all these extravagant promises, yet we have a Bill before us which is missing in detail, and the Secretary of State’s ambition nowhere to be seen.

Leaseholders have been badly let down. Having waited so long, and had their expectations raised so high, they are understandably disappointed at the limited Bill that we are considering today. This unambitious piece of legislation makes it clear that proponents of caution and restraint have won out over those who want to lay claim to a legacy of bold reform in this area. The Government’s poverty of ambition has real implications for leaseholders being routinely gouged by freeholders under the present system.

The scaled-back leasehold reform Bill as the Government have introduced it is a far cry from what successive Ministers have led leaseholders across the country to believe would be enacted by this Government in this Parliament. Leaseholders deserve a clear answer about the real reason why they have got just a limited Bill. We on these Benches are determined to overhaul leasehold to their lasting benefit and reinvigorate commonhold to such an extent that it will become the default and render leasehold obsolete.

We look forward to working with noble Lords across the House, as well as the Minister opposite, to do whatever we can to strengthen the Bill throughout its passage in your Lordships’ House and on to the statute book. We on these Benches want to make the existing Bill the most robust piece of legislation that we can make it, by rectifying its remaining flaws. Like many noble Lords across the House, I look forward to the Minister’s response detailing how she will fill the gaps over the remaining stages of the Bill. However, I remind noble Lords that if they do a word index of what has been discussed today, some of the key phrases coming out of today’s debate are as follows: “missing detail”, “insufficient”, “limited”, “lacking ambition”, “significant shortcoming”, “not properly thought through”, and “glaring omission”. I look forward to hearing from the Minister.