Leasehold Reform (Ground Rent) Bill [HL]

Debate between Lord Lennie and Baroness Grender

Committee stage
Wednesday 9th June 2021 Grand Committee

[Baroness Grender (LD)]

My Lords, developing adequate housing stock for an ageing population is a significant challenge for this and future Governments. The work of the noble Lord, Lord Best, and the publications by his APPG for Housing and Care for Older People have been essential reading in this area. While we recognise that what is now in the Bill is a compromise achieved following a total exemption for retirement homes in the original consultation, and in spite of the arguments of the noble Lord, Lord Best—whose expertise in this area is significant—when the Minister responds, I still want to understand where the essential difference lies between retirement and other leaseholders, in his or the Government’s opinion. If the straight answer is money required to be spent on common parts, surely a more honest and transparent way to do that is in either the original price or the service charges. However, I hear what the noble Lord, Lord Best, has said today and will study his explanation.

Given that ground rents appear to serve no purpose, as we have already discussed several times and at Second Reading, other than profit for the freeholder or security to borrow to develop more properties, why is this different when applied to retirement homes? I am sure that noble Lords are familiar with the Times investigation into this in November 2019, but it bears revisiting. It uses the example of one retirement property bought for £197,000, in 2009, from the FTSE 250 development company McCarthy & Stone, which was sold for only £26,000 six years later. By the time the flat owner died, she was paying the management company almost £8,000 a year.

The Times went on to say:

“Housebuilders such as McCarthy & Stone argue that without the money they make selling the freehold to management companies they could not afford to provide communal areas for their properties. Yet this is a poor excuse when there are far more transparent ways to raise revenue, such as simply selling their properties for a higher price.”


They often cover that in the service charge. The article continued:

“They insist, moreover, that the majority of their homes have increased in value.”


However, the Times then went on to find that

“one McCarthy & Stone property had lost £45,000 between 2015, when it was bought,”

and 2019. The same investigation found that, as with other leaseholders, elderly relatives are persuaded to use a solicitor who the developer has recommended, who turns out to be the very opposite of an advocate on behalf of the retiree. As the noble Lord, Lord Best, has explained, this group can often be exploited and manipulated.

For those reasons, we are minded to support the amendments in the names of the noble Lords, Lord Kennedy and Lord Lennie, but look forward to hearing the arguments in the closing stages of this debate.

[Lord Lennie (Lab) [V]]

My Lords, the welcome provisions of this Bill will not apply to retirement properties until at least April 2023, despite previous suggestions by the Government that these properties would be included. This is echoed by the contribution of the noble Baroness, Lady Grender. It represents a clear U-turn, without any explanation, and for this reason I have tabled Amendment 25 with my noble friend Lord Kennedy, intended to bring retirement properties in line with all other homes.

If the Government had placed the April 2023 date in the hope of creating a transition period, the Minister should explain to the Committee exactly why this is needed, when it has been accepted that no period is necessary for other properties, as part of this. Given that over 50,000 people in the UK live in retirement community units, I hope the Minister can explain what consultation has taken place with groups representing those residents and their families.

I am pleased that the noble Lord, Lord Best, who is deeply knowledgeable, has tabled an amendment to consider the application of this legislation to retirement homes where development has begun prior to commencement. I hope the Minister will offer an explanation of what steps the Government will take to support residents, which this clause relates to.

--- Later in debate ---

[Baroness Grender (LD)]

As in the earlier group, we support the principle of this amendment. I reiterate that the elegant drafting by the noble Lord, Lord Young of Cookham, in the earlier group is the drafting that we would prefer—and very much look forward to seeing on Report.

On Amendment 5, our concern would be about any kind of delay in this process, which would be driven by having to produce subsequent drafting of regulations for how the amounts would be calculated. Therefore, we would prefer the wording used by the noble Lord, Lord Young of Cookham.

I also take this opportunity, given that the Minister, in his summing up of the first group of amendments on trying to extend to existing leaseholders, made an argument about the proportion and percentage of pension funds that are currently invested in freehold property and the disruption that this might cause to pension funds, to ask him to elaborate on what kind of proportion that might affect, and what the balance is between the 4.5 million leaseholders who currently experience quite a significant negative impact in terms of ground rent in particular in the abuse of this system, and the pension fund system.

[Lord Lennie (Lab) [V]]

My Lords, this amendment returns the debate to the question of existing leaseholders and appears to allow existing leaseholders to pay a fee to exempt them from ground rent. As I said in the earlier group, ground rent arrangements are overwhelmingly balanced to benefit landlords and the system needs urgent reform for all involved.

I am grateful to the noble and learned Lord, Lord Mackay, for explaining that this was based on the Scots departing from the previous feudal system, but I am concerned that his amendment, if applied literally, could lead to landlords charging extortionate termination fees. None the less, I appreciate that he sees the need for reforming the system and I look forward to the Minister’s response.