Leasehold Reform (Ground Rent) Bill [HL]

Lord Stunell Excerpts

Monday 24th May 2021 Lords Chamber

[Lord Stunell (LD) [V]]

My Lords, like other noble Lords, I welcome the Bill before us today. Although the scandalous problems currently facing leaseholders in homes covered in dangerous cladding materials will not be alleviated by it, as my noble friend Lady Pinnock so eloquently spelled out, and it will not in any way improve the lot of existing leaseholders faced with escalating ground rents and spurious charges for routine paperwork—as the noble Earl, Lord Lytton, so comprehensively set out—it will nevertheless be a small step forward, and I welcome it. It will, at least to an extent, provide protection in future for new leaseholders from predatory third-party owners and landlords, who are often in it solely for the steady cash flow and income—in fact, not a steady but an escalating cash flow and income. They have very little or no interest in providing even a notional service to those who pay the fees.

So far as it goes, so good. We shall look to move the Bill forward expeditiously—not least because, like other noble Lords, we want to see the Minister honour what he said in opening this debate: publishing the Government’s response to the Law Commission’s report, tabling the second further leasehold reform Bill as soon as possible, and then beginning to tackle some of those existing abuses and malpractices blighting the leasehold sector. But we will also look for some meaningful assurances from the Minister about the timetable for that further reform; I suspect that the answer the noble Lord, Lord Berkeley, will get is, “shortly”. But we need some assurance that real progress will be made—not just shortly, but pretty much immediately. We will also want to examine carefully the safeguards—or, rather, the lack of safeguards—in the Bill for leaseholders against unscrupulous landlords. They will be working hard to find loopholes to exploit in yet more imaginative and lucrative ways to restore their missing cash flow.

I think there is a bigger question for the Minister. If, as the Law Commission has shown and multiple sources of evidence attest, the current leasehold model is fundamentally unfair and inequitable, why is he merely tweaking it in this legislation and introducing a peppercorn rent to neutralise it, rather than going where the evidence leads and abolishing leasehold for new contracts altogether in favour of commonhold? I hope the Minister will explain why the Government are being so timid and cautious in the Bill.

What are the good parts of the Bill, and where could it achieve more even within its limited ambition? First, the proposal to end escalating leasehold charges is long overdue and very welcome, and with it an accompanying regime for monitoring and punishing recalcitrant landlords. For once, the Government propose to give the new power of enforcement to local councils, which is a welcome recognition of their role in the communities that they serve. But the Minister will be well aware—the noble Baroness, Lady Andrews, made this point as well—that local authority trading standards departments have been comprehensively de-fanged, not just by painful cash cuts but by a powerful deregulatory policy drive, coming out of central government departments, for light-touch enforcement of those regulations. That provides no incentive for the diligent use of their existing powers, let alone a commitment of limited resources to a new task. What assurance can the Minister give us today that new funding will come alongside the new powers? I suggest to him that the transfer of any fines which are levied to the budget of trading standards will fall very far short of the costs of investigation preceding that.

Of course, the Minister has a stock answer on funding: funding for any new burdens will be taken into account in the next local government settlement. But if a local council faces a deficit of millions in providing social care, £1,000 or £2,000 for trading standards provides no guarantee of improved capacity. What priority does the Minister attach to ensuring that rogue landlords are prevented from exploiting loopholes in the new arrangements once they see the ready sources of income that they are exploiting dry up?

That brings me to what the Bill does not do for new leaseholders. Here I draw on the briefing from the Building Societies Association and the Leasehold Knowledge Partnership in particular, and I thank them for their assistance. The Bill as drafted does not protect leaseholders from any of the many other imaginative charges that landlords sneak into leases. Unfair transfer fees on sales, grossly excessive charges for permission to improve the home, or imposed contractual duties to take out insurance with the landlord’s preferred provider—none of these will be captured in the Bill. In case a prospective purchaser was inclined to nitpick when presented with a leasehold contract to sign, a requirement to use the landlord’s nominated solicitor helps keep things firmly under his control. I suggest to the noble Lord, Lord Hammond of Runnymede, that that may be one reason why so many people sign those contracts. They are not necessarily getting the top level of advice that they should be, and which I am sure the noble Earl, Lord Lytton, would be providing them.

There is nothing to prevent an unscrupulous landlord continuing with all these highly profitable strategies with new leasehold tenancies in future, not to mention treating residential car parking places as “commercial” and so beyond the reach of the new restrictions altogether. Woe betide any leaseholder who falls into arrears with any of these imposed charges; their lease may be forfeited and their home lost. The Law Commission was clear that this practice is unfair and disproportionate, and yet such a term can and certainly will continue to appear in new leasehold contracts after this Bill becomes law if we do not amend it.

This is far from a complete list of serious omissions from the Bill as it stands, but it all points to a failure to comprehensively reform the sector and tackle well-known and easily preventable abuses. In Committee, my colleagues and I hope to obtain from the Minister some clear assurances and, if necessary, some amendments to the Bill, to ensure that, at least in respect of these matters, leaseholders are given the protection they deserve.