Leasehold and Freehold Reform Bill

Lord Thurlow Excerpts

Committee stage
Monday 22nd April 2024 Lords Chamber

[The Lord Bishop of Derby]

My Lords, I will speak in support of my right reverend friend the Bishop of Manchester, who is unable to be in his place today and who has asked me to speak to his opposition that Clause 28 stand part of the Bill. This is linked to a similar stand-part debate, in the name of my right reverend friend, relating to Clause 47, to be debated later in Committee.

I declare my interest as a beneficiary, as is my diocese, of the Church Commissioners. I thank the Minister for her engagement with the charities affected by the legislation so far: the Church Commissioners, John Lyon’s Charity, Portal Trust, Campden Charities, Merchant Taylors’ Boone’s Charity, Dulwich Estate and the London Diocesan Fund. I hope she will continue to engage with my right reverend friend to find an amicable solution.

The Church Commissioners for England are the freeholders of the Hyde Park Estate. If we are looking back a long way, the Church can look back longer than most. The Church has had a long relationship with that part of London, starting in 1550 when the Bishop of London was granted the manor. The first leases were granted in 1795, and the Ecclesiastical Commissioners became responsible for the estate in 1868. Like the other charities mentioned, the Church Commissioners have long relationships with their estate. The money generated from the estate beyond the local is used for the betterment of the whole of our society, by the levelling up of communities and the lowest income parishes across the country, including in the diocese of Derby.

Like the other charity freeholders of large estates, the Church Commissioners manage the whole area, focusing not only on the residential properties themselves but on the whole environment, for those who live in, work on and visit the area. Their freehold ownership includes approximately 100 commercial units on the estate, where independent cafés, specialist boutiques and restaurants are mixed alongside amenities for local residents. This by no means affects the Church Commissioners alone; other large freeholders across London and beyond use their mixed freeholdings to ensure that areas have what local residents need, such as a dry cleaners, a pub, a hardware store—I could go on.

I thank the Minister for her letter to my right reverend friend the Bishop of Manchester, received today. However, concerns remain that Clause 28 threatens the ability of freeholders in large estate areas to ensure mixed areas that have all the amenities that people need. If the threshold for collective enfranchisement and the right to manage claims is lowered so that more mixed blocks can initiate a claim, there is a risk of the degeneration of these areas. There is no guarantee that newly enfranchised blocks will have the wherewithal or even the desire to maintain the make-up of the estate area. Leaseholders may not even live permanently in the area, may be foreign-owned companies or may have no active stake in the community. What need would these companies or corporations have to ensure the maintenance of a community? My right reverend friend the Bishop of Manchester said at Second Reading of this Bill that:

“We would lose all the shops that really matter to those who live perhaps not just in that block, but”—[Official Report, 27/3/24; col. 737.]


in the locality.

The amendment of the noble Lord, Lord Thurlow, which would mean that right to manage and collective enfranchisement rule changes would apply only where 50% of the leaseholders are permanent residents in a block, would certainly be a step in the right direction. At least there would be a guarantee that those managing mixed blocks would have an active stake in maintaining community resources, including shops. Could the Minister tell us whether the Government could make proposals to ensure that great estate areas, such as the Hyde Park Estate and others, are not adversely affected? Nobody wants to see local shops, amenities and community hubs closing as an unintended consequence of the Bill.

[Lord Thurlow (CB)]

My Lords, I turn to my Amendment 18 in this group. I begin by declaring my interests as both the owner of two buy-to-let investment flats and the occupier of a flat, all on leases. I stand to benefit under the Bill in both situations, which is quite patently wrong.

I thank the right reverend Prelate the Bishop of Derby for articulating my amendment with greater ability than I can. I want to turn specifically to mixed-use buildings and the proposal to move from a 25% threshold for enfranchisement to 50%, and build on the comments of the noble Lord, Lord Sandhurst. Mine is a straightforward proposal: simply that lessees who are not occupiers living there as their primary residence should not benefit from the great wealth transfer that is going to take place through the enfranchisement process. It cannot be an intended consequence of the Bill.

My amendment requires that at least 50% of leaseholders should satisfy the residence occupancy condition for any collective enfranchisement to apply. I remind the Committee that I am thinking of mixed-use buildings. A very complex management expertise is required in looking after mixed-use buildings; the skills are not the same for commercial property as for residential property, and the scope for mistakes and delay is huge. The potential to improve and curate an environment through single ownership of an expansive area has been very clearly described. To expect such behaviour to continue responsibly is almost impossible under the Bill as it stands.

We have also heard that, in London and the south-east, some 50% of tenants are not residents but foreign nationals living elsewhere, with ownership registered abroad. Are they taxpayers? This group often do not want to be identified. They shroud their property in ownership interests in offshore companies, as we have heard. They are very slow to respond, doing so from time to time, let alone to offer up money when required. If the Government do not agree that 50% of leaseholders in a block should be permanent residents, can I have an informed estimate on how many billions of pounds is expected to be paid in compensation to this cohort of wealthy foreign nationals, should they pursue this new enfranchisement entitlement?

[Lord Truscott (Non-Afl)]

My Lords, I declare an interest as a long-standing leaseholder of some 30 years. I have been a leaseholder in apartment blocks in London, Kent and Somerset, and a right-to-manage director in two apartment blocks.

I support His Majesty’s Government’s Clause 28, which seeks to raise the non- residential limit on collective enfranchisement claims from 25% to 50%, as mentioned by the noble Baroness, Lady Taylor of Stevenage. I consequentially oppose the proposal of the right reverend Prelate the Bishop of Manchester and the noble Lord, Lord Moylan, to vote against Clause 28.

Your Lordships have heard how giving more say to leaseholders in mixed blocks of residential and commercial units would be a bad idea and negatively impact on investment and the effective running of these blocks. It has been said that reform would only help some foreign leaseholders and investors and would result in fewer homes being built. That is far from the case. I have lived in two blocks of mixed developments: one was controlled by a residents’ right-to-manage company, with a NatWest bank in the basement, and another contained a number of commercial units and was 100% controlled by the freeholder. I can say categorically that the right-to-manage block was run better and with cheaper service charges. The freeholder-run block exploited the residents, cross-subsidising the commercial units at their expense and giving them no effective say over how the block was run. I point out to the noble Earl, Lord Lytton, that the difference was that the RTM block was actually run by the residents, who were managing their own money, whereas the freeholder block was run by a managing company and the freeholders were profligate with the use of residents’ cash.

Let us be frank: maintaining the 25% cap is about the freeholders retaining control and not about fairness or efficiency. If anyone lives or invests in a flat in a block, they should have a say over how it is run. For that reason, I oppose the amendments in the names of the noble Lords, Lord Thurlow and Lord Sandhurst, which would restrict enfranchisement and further strengthen the position of freeholders by limiting the number of leaseholders who can vote on and manage their own blocks of residents. RTM directors are perfectly capable of managing mixed blocks of developments.