Building Safety Bill

Debate between Matthew Pennycook and Rushanara Ali

Consideration of Lords amendments
Wednesday 20th April 2022 Commons Chamber

[Rushanara Ali]

On that point, does my hon. Friend agree that if the Government do not act to safeguard such blocks, the people who live in those kinds of accommodation will find it very difficult to be insured and to get mortgages? This is a short-sighted response, when the Government could address these issues in the round.

[Matthew Pennycook]

My hon. Friend is absolutely right, and it has been a consistent position of ours that we ensure that all leaseholders affected by the building safety crisis are protected irrespective of circumstance, including what height their building happens to be. For that reason, we will oppose Government amendment (a), tabled yesterday to Lords amendment 94, and seek to ensure that the Lords amendment remains unmodified.

I turn to the third issue we are considering this afternoon: enfranchised buildings. Under the Bill, enfranchised leaseholders will, in effect, be treated as freeholders when it comes to the costs of remediation. That cannot be right. Buildings that have exercised a right to collective enfranchisement, or those on commonhold land, may be few in number, but it has been the policy of successive Governments to encourage leaseholders to enfranchise and to promote the right to manage. Indeed, the Government have promised legislation in the next Session to make it easier and cheaper for leaseholders to buy the freehold of their building, yet the Government have put forward no solution whatever to the issue of enfranchised buildings in the Bill as it stands, and they are seemingly content, at least until this afternoon, to see such leaseholders completely excluded from the protections enjoyed by those in buildings that remain unenfranchised. We vehemently disagree with that position. It is imperative that such leaseholders are afforded the same protection as those who do not collectively own or manage their buildings. As Lord Young put it in the other place,

“it would be perverse if the legislation before us today put enfranchised leaseholders in a worse position than leaseholders who are not enfranchised”.—[Official Report, House of Lords, 29 March 2022; Vol. 820. c. 1509.]

It is essential that the service charge protections set out in schedule 8 to the Bill apply clearly to enfranchised buildings and buildings where the right to manage has been exercised, which is another reason why we cannot support Government amendment (a), tabled yesterday to Lords amendment 94, and why we will seek to divide the House on it. The Minister is right to say that pressing the amendment to a vote is not enough, and that at some point the Government will have to go further than simply accepting Lords amendment 94 or a version of it, because the Bill in its current form would not prevent resident-owned companies from making unlimited demands on leaseholders in their capacity as shareholders, to cover the costs that they would be unable to pass on via service charges if the Lords amendment, or a version of it, were to remain part of the Bill. So the Government will have to act.

I noted what the Minister said about a consultation, but I have to say that I agree entirely with my hon. Friend the Member for Sheffield Central (Paul Blomfield). It is too late in the day to consult on this matter. Four and a half years after Grenfell, the Bill needs to be amended to reflect and deal with this issue.

I turn to the fourth issue we are considering this afternoon, which is buildings held in trust. As it stands, buildings held in trust on behalf of a third-party investor, where the landlord is a professional depository or custodian regulated by the Financial Conduct Authority, or buildings owned on trust by what I can only describe as ground rent grazers—almost invariably based offshore—do not meet any of the association tests or the net wealth test in the Bill. Unless the Bill is revised to capture such trustee arrangements, they will escape the so-called waterfall system as set out in schedule 8, and the leaseholders will find themselves picking up a proportion of the costs of non-cladding remediation. The Minister is right to say that, in the other place, the Government accepted that the Bill needed to be so modified, and yesterday they tabled an amendment to Lords amendment 98 as a result.

Let me be clear that the inclusion of Lords amendment 98, as amended in the way the Government propose, would make for a better Bill than one that has no provision addressing the trustee loophole whatever. However, the Government amendment tabled yesterday afternoon has serious deficiencies, which are almost certainly the result—I make no charge against the officials involved—of the hurried timescale in which it has been drafted and tabled. Let me take the two most obvious problems with it. First, the Government amendment covers only partnerships or bodies corporate that are a beneficiary of a trust; private individuals are entirely excluded. That cannot be right, and they must be brought within the scope of these arrangements.

Secondly, the Government amendment makes no distinction whatever between types of trusts. A local authority pension fund, for example, will be liable under the waterfall system in precisely the same way as an offshore ground rent grazer. We believe that that is wrong and that the Government should think further about how they might better protect trusts where there is a clear public interest in doing so. We will not oppose Government amendments (a), (b) and (c) to Lords amendment 98, but I urge the Minister and his officials to go away and consider whether the flaws in the Government amendment as currently drafted can be rectified as the Bill progresses.