Leasehold Reform (Ground Rent) Bill [HL]

Baroness Grender Excerpts

Monday 24th May 2021 Lords Chamber

[Baroness Grender (LD)]

My Lords, as many noble Lords have said, this Bill is most welcome. I thank the Minister for the meeting that he held with me last week, but I think all of us would recognise that this is a first tentative dip of the toe into the vast lake that is leasehold reform. We all hope and are impatient to see the full-blown dive, and we want it to come soon.

It was five years ago that the Leasehold Knowledge Partnership warned the Government of the pending ground rent and leasehold scandals; that was before the tragedy of Grenfell and before the pandemic of the past year, cited as the reason for the latest delay. I believe that we should pay particular attention to its recommendations regarding this Bill; it wants this Bill as a first small step. We must beware the powerful lobby of freeholders and investors who will try to widen the Bill then find loopholes to change it; we should pay attention to the Leasehold Knowledge Partnership’s recommendations with great care.

It has taken too long; the timetable outlined by the noble Baroness, Lady Ritchie of Downpatrick, was helpful with respect to the history of this. This Leasehold Reform (Ground Rent) Bill cannot come soon enough for the leaseholders of tomorrow. As many noble Lords have mentioned, this of course leaves the question of what happens next to the 4.5 million current leaseholders who have been treated as commodities or income streams to be sold to the highest bidder in a feudal system—as brilliantly explained by the noble Lord, Lord Blencathra—in what I will describe as “the peppercorn peroration”. The system, reinvented by wealthy Victorian landowners, is almost unique in the world, in which third-party ground rent investors or landlords often sit in direct conflict with the interests and needs of the leaseholders—the families and individuals who have bust a gut to own a home but, sadly and tragically, been screwed by the small print.

The noble Baroness, Lady Bowles, shared one example of charges of £1,000 per property on a 250-unit site with five-year reviews, while the noble Baroness, Lady Wheatcroft, shared an example of service charges. On Friday, on BBC Radio Four’s “You and Yours”, a lady called Jane Hewland, who bought in 2006, described how she started with service charges of £12,000, which are now £30,000 per annum. I appreciate that, for Boris Johnson, this is an annual takeaway bill, but it is the equivalent of an annual salary for a health worker. The noble Baroness, Lady Pinnock, also described an extraordinary figure that rose from £5,000 to £16,000 on a £170,000 flat in London.

Ever since the attempt in 2002 so ably described by the noble Lord, Lord Best—I am sure I am not the only Peer in this House who is reassured that he has got something wrong, given that he is such an expert in this area—to encourage more commonhold, it has been clear that, in this so-called free market, the people who are not free are the leaseholders themselves. Indeed, government incentives, subsidies and ideology have pushed people into home ownership with unclear leases and hidden charges. Little wonder that the Leasehold Advisory Service, a Government-funded body, has found that 57% of leasehold purchasers have regretted becoming owners—or alleged owners, because of course they have soon discovered that they are not. As one leaseholder said to me last week, “With the fire safety costs and the additional charges for leaseholders, England is the very opposite of a free-market home-owning economy”. Jane Hewland put it this way: “You own nothing, you control nothing and going to court means you end up paying all the charges”.

I therefore support the strong words of my noble friend Lady Pinnock and the noble Earl, Lord Lytton. Alongside my noble friend, I will continue to test every sinew of each law coming through this place to ensure that leaseholders—who, as she always says, did nothing wrong and everything right—get a fair deal when it comes to cladding and the fire safety issue. As she also says, clearly we are dealing with highly unethical freeholders. I also welcome the reform of the regulation of property agents suggested by the noble Lord, Lord Best, and look forward to hearing the Minister’s response on that issue.

I place on record my thanks to the Leasehold Knowledge Partnership, the National Leasehold Campaign and the Building Societies Association for their briefings on the Bill. It is clear from the charities that fight for the rights of leaseholders that this legislation is welcome, albeit a small step. The particular advantage that we in the Lords have is that across parties and with the Government we can sometimes, in Committee and in more informal discussions, have useful conversations that will rule out loopholes and tighten some of the language. This was particularly successful for the then Tenant Fees Bill under the strong leadership of the noble Lord, Lord Bourne, and I hope we can repeat that exercise with this issue so that the fears of the noble Lord, Lord Young of Cookham, about three days of Committee may not come to pass and we can find some easier ground.

We need this legislation soon so that we can get to the main Bill with greater reforms. It is a good first step to strip out of the market the ability for a third party to acquire a freehold and levy charges, so Clauses 3 and 4, which make the permitted rent a peppercorn rent, have our support, although I look forward to hearing the Minister’s answer to the excellent question from my noble friend Lord Stunell and the noble Baroness, Lady Andrews: in the face of all the evidence, why are we settling for this? That said, it is also welcome that there will be no administration fees for the cost of collecting that peppercorn rent. This is an achingly slow process. When it was changed in Australia in the 1960s, it took decades for the inherently unfair system of leasehold to be removed.

In Clause 5, we will look at whether there are some unintended exceptions of shared ownership, and will watch to ensure that a developer cannot use this clause to circumvent the original intention of the law.

In Clause 8, what support will local government have to enforce these changes? I particularly note the comments of the noble Baroness, Lady Jones of Moulsecoomb, and my noble friend Lord Stunell. Will the Minister perhaps consider some pump-priming to get enforcement started? He will already be aware of the current abysmal failure to register rogue landlords, so what can be done to improve enforcement and resource it in the first stage? After all, it is a bit of a chicken-and-egg situation.

That takes me on to some of the things that are missing from the Bill. In his opening remarks, the Minister confirmed that informal lease extensions can continue and can be chosen to include a ground rent for the remaining period instead of a larger up-front sum. There is significant concern that freeholders will put in massive multipliers when offering informal lease extensions just to make the premium look more attractive and lower. In other words, in the period running up to the introduction of this Act, what kind of dodgy deals are going to be done to extend leases where the consumer will come a cropper?

The current, almost barbaric, system of forfeiture for a level of arrears that bears little relation to the overall value of the property is, as my noble friend Lady Bowles said, the only system under which total forfeiture of an asset is allowed when the debt may be only a small part. I look forward to hearing from the Government that there are further reforms on this in the pipeline, particularly following the Law Commission’s recommendations. I wonder whether we should try to put this into primary legislation.

I also look forward to further news regarding the CMA’s enforcement action, particularly against Countryside and Taylor Wimpey for their use of terms that double the ground rent every 10 or 15 years. It is suggested that this breaks consumer protection law. Can the Minister clarify whether it is the Government’s intention to tackle this issue in primary legislation or to wait for the courts if the CMA’s action fails?

We also all wait with some interest and impatience to hear the results of the deliberations of the Commonhold Council set up by the Government and chaired by the Minister. Frankly, as we have heard from almost every speaker, until that thorny issue is concluded, until we end a system almost unique in the world and until we follow in the footsteps of Australia, Scotland, Canada, New Zealand and the USA—to name but a few—the claim that these are the most significant reforms will at least be on hold.

I stress the words of the noble Earl, Lord Lytton, and my noble friend Lady Pinnock, who asked about the unintended consequences of a two-tier system in the market where long leaseholds end up having a bad press and cannot be sold on by the people who own them.

Also missing from the Bill are unfair terms and conditions, unfair estate charges, the imposition of unfair insurance, as described by my noble friend Lord Stunell, redress schemes and commission fees. These are all things we will want to examine in Committee, as well as some of the late changes in transparency of reporting, which Opposition Peers successfully introduced in the final stages of the then Tenant Fees Bill. Therefore, we will look for opportunities to have, for example, a register of reasonable charges, enabling consumers to understand fair pricing and challenge unreasonable costs.

Like the noble Baroness, Lady Andrews, and the noble Lords, Lord Bourne and Lord Young of Cookham, we will also want to explore further how clear the definition of rent is. The Explanatory Notes say that the Act will capture any payment under a lease that does not impose an obligation on the landlord to provide a service but, in modern leases and case law, rent may have a broader meaning. I thank the Law Society for its briefing and concerns on this issue; I also thank Liam Spender of the LKP for his helpful blog on this matter. I look forward to the Minister’s clarification of the use of “assured shorthold tenancies” as described by the noble Lord, Lord Hammond of Runnymede.

This week, Jane Hewland, who I mentioned earlier and who was on “You and Yours”, will receive a bill of around £30,000. She has a flat with no facilities and no garden, and has had no explanation and no warning in advance. For her, and for millions of future leaseholders like her, we need to get on with this Bill and get to the main issue of the current 4.5 million leaseholders as soon as possible. Yes, these are baby steps, or piglet steps for the purposes of the noble Lord, Lord Blencathra, but I look forward to them being fully grown—and soon, please.