Leasehold Reform (Ground Rent) Bill [Lords]

Debate between Matt Rodda and Justin Madders

2nd reading
Monday 29th November 2021 Commons Chamber

[Justin Madders (Ellesmere Port and Neston) (Lab)]

Let me first put it on record that, alongside the hon. Members for Worthing West (Sir Peter Bottomley) and for St Albans (Daisy Cooper), l am a co-chair of the all-party parliamentary group on leasehold and commonhold reform. The group is assisted by the Leasehold Knowledge Partnership, which has been campaigning for many years for the kind of reform that we are debating today.

We might have expected the Bill to be a cause for celebration, and indeed any legislation that puts another nail in the coffin of leasehold is to be welcomed, but we are left with a feeling that it is a rather modest measure. Given that it took four years for us to reach this point, it seems that we are making glacial progress. Perhaps four years is not much in comparison with 1,000 years of leasehold, but for those who are still trapped in unsellable or seriously devalued homes because of the leases they signed, progress is not being made quickly enough.

I am not generally a fan of market-based solutions—the market is responsible for most of the egregious injustices that we have seen in leasehold—but, to a significant extent, the market has already moved away from imposing ground rents for most houses, not because those who concocted the leasehold scandal have had a prick of conscience but because a spotlight has been shone on the devastating consequences of their sharp practice. In that respect, I pay tribute to the fantastic work of the National Leasehold Campaign, which has done more than just about anyone to bring the unfairness of leasehold to the public’s attention. It is an irony that those campaigners do not stand to benefit from the Bill because, as has been pointed out already, it does nothing to tackle the existing problems. That said, however, their influence has already benefited my constituents and many others.

A new Redrow estate not far from where I live originally had properties being sold on a leasehold basis. After some pretty determined campaigning from the National Leasehold Campaign, Redrow decided to stop the sale of homes in the second phase as leasehold, but unfortunately not before several hundred people had already bought their homes as leasehold. To be fair to Redrow, I should add that it did then offer them the opportunity to purchase the freehold after two years, although it was a little unfortunate, to say the least, when it subsequently lowered the purchase price for the freehold again, creating another unfairness. While I give Redrow credit for stepping back and weaning itself off the leasehold drug, that should not obscure the fact that all this could have been avoided had it not sold the properties as leasehold in the first place. That takes me back to the basic concern that remains with the Bill, which is that it enshrines in law a two-tier system of home ownership when really we should be ending it altogether.

Very few new houses are now being sold as leasehold, but around 1.5 million houses will remain leasehold after this Bill becomes law. Is there a risk that choking off income streams from those who see other people’s homes as an investment will cause them to turn their attention to redoubling their efforts to squeeze as much as they can out of the existing properties? A number of Members have already mentioned that, and I will return to it later.

Turning to the details of the Bill, I know that a lot of consideration has been given to how we define a ground rent. That debate is instructive, because how can a payment for which nothing is received in return be considered a proper legal payment? The short answer is that it cannot, and I believe that that is another reason to abolish leasehold altogether. The reality is that ground rent is a legal fiction and a method of maintaining control and securing an income for which the recipient is required to do precisely nothing.

It is therefore disappointing that lease extensions for houses are exempt from the Bill, because there is significant concern that freeholders will put in massive multipliers when offering informal lease extensions, just to make the premium look lower and more attractive. They would then make their money back through allowing the ground rents to continue. Let us not forget that both parties do not have equal bargaining power. This all just adds weight to the argument that what we have here is a minor change that will help people in the future, when what we really need to do is to deal with the injustices of the present, and the best way to do that is of course to abolish leasehold altogether.

As I said earlier, we also need to keep an eye on whether those who have been involved in the systematic deception and mis-selling change their sights to deal with the new environment that the Bill represents. They have not gone away, those offshore accounts, those trust funds and those private equity investors who see people’s homes as an opportunity to cream off the cash long after the people living in them think that they have bought them. In particular, we have to keep a close eye on estate management companies, because that is one area in which charges could easily be inflated to more than cover the loss of a ground rent.

[Matt Rodda]

My hon. Friend is making an important speech and he has hit on a number of central issues, particularly when dealing with his own legal experience of these dysfunctional markets where on the one hand we have developers with enormous financial power and legal resources and on the other we have humble first-time buyers. Does he agree that there needs to be a rebalancing, with far greater protection for first-time buyers and ordinary householders, and with a much greater attempt by the Government to hold these large developers to account?

[Justin Madders]

My hon. Friend makes an interesting point. There is clearly an imbalance. We have already talked about how some enthusiastic first-time buyers who just want to get into their new homes put their trust in the people who have been assigned to deliver the legal niceties such as putting a value on the property and doing the conveyancing. They put their trust in those people, and sometimes that trust is betrayed through the egregious injustices that we have talked about.