Leasehold and Freehold Reform Bill (Tenth sitting)

Debate between Barry Gardiner and Rachel Maclean

Tuesday 30th January 2024 Public Bill Committees

[Rachel Maclean]

I want to make a brief remark in sympathy with the shadow Minister’s policy objectives. I will not be supporting his new clause, but I have had extensive discussions with the Minister, who knows that I feel strongly that we should have a pathway to commonhold in the future.

Commonhold is a system that works well. Commonhold, or a version of it, works extremely well in almost every other major developed country in the world. We are quite unique in the UK—for some bizarre reason—in having this leasehold system, which is to the great regret of me and the leaseholders who live in such houses and flats. Unfortunately, something like 1.5 million people live in leasehold houses and something like 5 million people overall live in leasehold dwellings. It does not need to be that way.

In 2002, the former Labour Government did try to legislate in this regard, but a number of those measures were not enacted—we are going back into ancient history. Nobody really seems to know why it did not happen, but we now need to seize the opportunity. This Bill has been a long time in gestation; it has benefited from the contributions of many Ministers to get it to this point. I know that the Minister is listening to me, and I think it is important that we do not miss the opportunity, even at this late stage, to introduce some of the commonhold framework measures that the Department has been looking at in great detail. I hope that the Minister has listened, and he and his officials will take that point away.

[Barry Gardiner]

The hon. Lady is absolutely right to go back to the 2002 Act. In fact, I think in a speech on its Second Reading, I said that we would have to return to that Act in six or seven years’ time to amend the deficiencies in it. I am sad to say that here we are, 22 years later, still not having amended those deficiencies, and the Minister’s response, I am afraid, has indicated that we will not amend them again under this Bill. This is urgent, and leaseholders have been waiting for far too long for the remedy that my hon. Friend the Member for Greenwich and Woolwich has proposed. That is why I feel that it is vital that I support his new clause.

Question put, That the clause be read a Second time.

Leasehold and Freehold Reform Bill (Eighth sitting)

Debate between Barry Gardiner and Rachel Maclean

Committee stage
Thursday 25th January 2024 Public Bill Committees

[Barry Gardiner]

I am grateful to the Minister for what he has said, but the strongest protection would be to have it on the face of the Bill. Even when it was on the face of the 2002 Act, the Government never brought it into force. So this is not something we have not had previously. It is right there in legislation for a leaseholder to have access to this information, but we have never brought it in. What the Minister is suggesting is actually a regressive step, taking leaseholders further away by saying, “We’ll do it through secondary legislation now.”

I really do think it is important to have this on the face of the Bill. We know how Committees work. I know the Minister cannot accept the amendment now, but I would ask him to go away and come back on Report. If he comes back with his own amendment to achieve the objective, I will be delighted.

[Rachel Maclean (Redditch) (Con)]

Will the hon. Gentleman give way?

Leasehold and Freehold Reform Bill (Seventh sitting)

Debate between Barry Gardiner and Rachel Maclean

Committee stage
Thursday 25th January 2024 Public Bill Committees

[Lee Rowley]

I am grateful to the hon. Gentleman for raising that point. He articulates another example of good law being used in a way that is, in my view—without talking about individual incidents—both unintended and inappropriate. I am not a lawyer, and do not seek or have any desire to be one, but as I understand it, there is a concept of reasonableness within the legal domain based on an Act from a number of years ago. Hopefully that helps to answer part of his question, at least from a structural perspective. On the variable service charge side, without talking about individual instances, that kind of instance is a clear example of where those impacted would be able to go through the process of challenging it, which I think would be very sensible. If I were a leaseholder, I might be very tempted to do that, unless the charge could be justified in a different way. On the fixed service charge side, although I accept that there is the potential for these kinds of challenges, conceptually that needs to be balanced with the fact that when the contract was entered, an agreement was made to consent to that amount, for whatever reason—good or otherwise. That is why we are pursuing this. However, I take the hon. Gentleman’s broader point.

[Rachel Maclean]

This discussion goes to the heart of some practices and problems that leaseholders have experienced across the sector. On behalf of the many retirement leaseholders, mentioned by the shadow Minister, the hon. Member for Greenwich and Woolwich, I will make a point and ask for reassurance from the Minister.

What we are talking about with this amendment is different from the ground rent issue. Ground rent is a payment for nothing—nothing is being provided—whereas something is being provided for service charges. There is a service, so there is a need for a charge; that is perfectly legitimate. As Conservatives, we do not dispute the fact that there should be financial recompense for services. However, we find ourselves with a problem, the law of unintended consequences and the drivers of business models.

I would welcome if the Minister could touch on this in his response, but my fear is that if ground rents are removed and business models need to adjust to make recompense for that, the natural behaviour of unethical operators in the retirement sector and possibly elsewhere—some are unethical and do not think about the people who bought properties in good faith—will surely be to seek to load their charges, their profit and loss, back on to the service charge in some way. I am not close enough to existing contracts to know whether they will be able to do that with a fixed charge, so the discussion might be better suited to when we talk about the variable charge. The Minister can help me on that.

The broad point stands, however, in the case of someone dealing with the estate of a loved one, perhaps someone who has passed on, is in care, is suffering from dementia or otherwise does not have the capacity to deal with all this—the Minister will be familiar with such cases. They might be stuck with a property that they cannot sell, and that often applies in such cases when service charges are racking up in a way that is difficult for people to get a handle on—

[Barry Gardiner]

I agree with all the points that the hon. Lady is making. I wonder whether she is aware of the report by Hamptons last year, which said that service charges had increased by 50% over the past five years. That is an indication of just how much of the gouging she is talking about is going on. Furthermore, leaseholders paid a staggering £7.6 billion in service charges last year. Of course, much of that is for the proper renovation of the property, but it seems an extraordinary amount. In fact, 10 years ago, Which? estimated that leaseholders were being overcharged by £700 million.

[Rachel Maclean]

I thank the hon. Gentleman for bringing those figures to the attention of the Committee. I am familiar with them, as are others. [Interruption.] I do not wish to detain the Committee any longer—I can see the Whip making that plain to me. I will leave my remarks there, perhaps to continue at a later point, but the Minister may wish to respond in detail.

Leasehold and Freehold Reform Bill (Fifth sitting)

Debate between Barry Gardiner and Rachel Maclean

Committee stage
Tuesday 23rd January 2024 Public Bill Committees

[Rachel Maclean]

I rise briefly to add my support for some of the comments and, most importantly, for the ability of leaseholders to extend their leases. As we know, this is one of the most egregious features of the current system: people buy properties that they then find have short leases, after which they are whacked with massive charges coming out of the blue; they do not understand how those charges are calculated, and they end up having to pay them because they have no choice. They are completely over a barrel. I know that leaseholders will massively welcome this change, which is one of the most important parts of the whole Bill.

Having said that, it is vital that we understand when we will see the Government’s response on the ground rent consultation, as my hon. Friend the Member for North East Bedfordshire and the shadow spokesperson, the hon. Member for Greenwich and Woolwich, have said. It will, of course, affect the calculations.

I also want to raise with the Committee the number of people who have sat in front of me and asked, “When will you bring this forward? I don’t know whether to extend my lease now or wait another year or for another consultation”. It is a huge number of people. I want to make this point to everybody: if we get this right, it will affect a lot of people very beneficially.

[Barry Gardiner]

I am glad that co-operation is breaking out across the aisle. It seems that this change is one of the really big issues of the Bill. Looking through the Bill, yes, there was disappointment that it does not go far enough and there is no commonhold, but this is a real change. It is something that Members on both sides of the Committee have welcomed, and we heard evidence from our witnesses about just how important it is. It is strange, therefore, that we do not now see the meat of it in the Bill. I will not go so far as to say that it is more than strange, as my hon. Friend the Member for Greenwich and Woolwich suggested, but we do need it.

This provision will liberate a whole group of people who fear what we call the ground rent grazers. They are the ones—the freeholders—who have created a rentier structure over the past 15 years. It did not even exist 25 years ago. What people used to do 25 years ago, when the ground rent was payable, was write a cheque to the freeholder, and the freeholder would bin it. Then, three weeks later, the freeholder would send a lawyer’s letter to the tenant, saying that because they had not paid their ground rent on time, they were now being charged £625 for their legal fees in having to chase it, including the £25 ground rent. That is a bad practice that has evolved and the Government need to clamp down on it and get it sorted.

Leasehold and Freehold Reform Bill (Second sitting)

Debate between Barry Gardiner and Rachel Maclean

Committee stage
Tuesday 16th January 2024 Public Bill Committees

[Rachel Maclean]

Q Thank you for that clarification. As a follow-up, if any Government adopted a policy on commonhold such as has been talked about sometimes, but without doing the legal fixes, what would be the risk?

Professor Hopkins: The risk at the moment is that the legal regime that governs commonhold is too rigid. It does not apply effectively in larger, mixed-use developments, because they were not envisaged at the time. The risk is that you mandate a legal regime that does not work. You need a legal regime that works, which could then be mandated if that is what the Government chose to do.

[Barry Gardiner (Brent North) (Lab)]

Q First of all, let me thank you for the Law Commission’s work, which was extensive and hugely helpful. I am conscious that the recommendations on structural dependency rules have not been adopted by the Government in the drafting of the Bill. Even those leaseholders who are going to benefit from the uplift of 25% to 50% of the non-residential limit in the Bill may still be disqualified, because of the shared plant room in underground car parks and so on. Do you believe it would be preferable and helpful to introduce into the Bill at Committee stage some of the recommendations that you made on that?

Professor Hopkins: I do not think I would like to comment on whether specific amendments or recommendations could be introduced. They would have to be seen in the light of what they would do to the scheme that is in the Bill and how the provisions interrelate. That basic uplift from 25% to 50% is significant and will enable many more leaseholders to exercise their rights. There are perhaps things around the edges, but what is there is beneficial.

--- Later in debate ---

[Barry Gardiner]

Q It is the imbalance of power.

Halima Ali: Yes.

[Rachel Maclean]

Q Harry, can I just ask you a couple of things? On the forfeiture point, is it your view that there is absolutely nothing in the Bill to prevent the forfeiture issue?

Harry Scoffin: There are not specific provisions to improve the position on forfeiture. I would love it to be abolished, but if we have to have some form of mechanism that is still going to be called “forfeiture”, at least say that if it happens, the equity is returned to the departing leaseholder when the flat is sold and it is just the debt that the freeholder gets back. The idea that he gets a windfall is obscene. That has to go. At the moment, forfeiture can kick in at £350, so what some law firms are doing is, for a breach of lease, a 350-quid charge, so forfeiture already kicks in there. So bring that up. Some people have suggested £5,000. I would go even higher—£5,000 is the figure for personal bankruptcy proceedings—and bring it up to £10,000.

There will be these freeloading freeholders that will come before you today or on Thursday and say, “Well, if these leaseholders are not paying, the whole building is going to fall to rack and ruin. It’ll be like this country in the 1970s where the bins weren’t getting collected and bodies were piling up. You’ve got to keep the lights on in a block of flats.” What you say to them is, “Sue for a money judgment.”

Leasehold and Freehold Reform Bill (First sitting)

Debate between Barry Gardiner and Rachel Maclean

Committee stage
Tuesday 16th January 2024 Public Bill Committees

[Barry Gardiner]

Q So you would agree that it would be a good provision to insert into the Bill.

Mr Martin Boyd: It was a very good provision, yes.

[Rachel Maclean (Redditch) (Con)]

Q Mr Boyd, it is good to see you. You have talked about commonhold. Would you mind just being quite succinct and clear on your view about commonhold? There are proposals from various groups who are active in the sector to make it mandatory to sell all new leasehold flats as commonhold. Would that be a good idea, and if not, why not?

Mr Martin Boyd: I am proud to say that it was LKP that restarted the whole commonhold project in 2014. At the time, we were told, “The market doesn’t want commonhold.” The market very clearly told us that it did want commonhold; it was just that the legislation had problems in 2002. One of our trustees, who is now unfortunately no longer with us, was part of a very big commonhold project in Milton Keynes that had to be converted back to leasehold when they found problems with the law.

I think the Government have been making it very clear for several years that they accept that leasehold’s time is really over. I do not see any reason why we cannot move to a mandatory commonhold system quite quickly. What the developers had always said to us—I think they are possibly right—is that they worry that the Government might get the legislation wrong again, and they would therefore want a bedding-in period where they could test the market to ensure that commonhold was working, and they would agree to a sunset clause. They had fundamentally opposed that in 2002, and we managed to get them in 2014 to agree that, if commonhold could be shown to work, they would agree to a sunset clause that would say, “You cannot build leasehold properties after x date in the future.” I think that that is a viable system.

--- Later in debate ---

[Rachel Maclean]

Q I just want to clarify your understanding of something that Mr Gardiner said earlier. I might need to put this to the Minister later, but Mr Gardiner said that if the new provisions on ground rent go through and ground rent goes to peppercorn or zero—I might be misquoting him.

[Barry Gardiner]

You have been spot on so far.

[Rachel Maclean]

You mentioned that in the new Bill leaseholders will have to pay to get their ground rent to zero. Can you set out what that provision is? Where is that in the Bill?

Cath Williams: I don’t think we know. That was one of our questions. There is a process in the Bill about how a leaseholder can acquire the peppercorn ground rent, but who pays for that is not clear. I think that was raised before. I do not think leaseholders should pay, because it should not have been there in the first place.

Katie Kendrick: Or there should be a prescribed cost—“apply for your peppercorn now”—with a simple process. Otherwise it will be exploited, and lawyer will charge different amounts to convert. You can see what will happen, so it needs to be streamlined. Whatever we go for, it needs to be streamlined.

Cath Williams: And we need an online system that cuts out everybody in the middle, so that there is no confusion or discussion about what it should cost.

--- Later in debate ---

[Rachel Maclean]

Q Have you ever acted for freeholders against leaseholders? Have you ever found that the leaseholders have been egregious, rather than the other way round?

Amanda Gourlay: I believe I have acted for freeholders against leaseholders on occasion.

[Barry Gardiner]

Q You referenced the damages under proposed new section 25A of the Landlord and Tenant Act 1985, which “may not exceed £5,000”. The tribunal does not have to award £5,000; it is a ceiling, rather than a floor. Often a single leaseholder will go to the tribunal and get an award, but they are representative of problems that all the other leaseholders have. Rather than saying that damages under the proposed new section may not exceed £5,000, would it make sense to say that damages to each leaseholder may not exceed £5,000?

Amanda Gourlay: That would make sense, but damages are not an appropriate remedy in this particular situation. It is very rare that a leaseholder will suffer financial loss. It is more about encouraging good behaviour.

Leasehold and Freehold Reform Bill

Debate between Barry Gardiner and Rachel Maclean

2nd reading
Monday 11th December 2023 Commons Chamber

[Rachel Maclean]

That is an excellent suggestion from my hon. Friend the Father of the House, with which I strongly agree—as I do with everything he says about this issue.

Despite the theatrics we heard from the right hon. Member for Ashton-under-Lyne (Angela Rayner), who spoke for the Opposition, it is the Conservatives who are finally bringing in sweeping reforms. It is right that we note that Labour ducked the issue while they were in office. They could have fixed it then. They could have saved millions from misery—nearly 5 million homes, accounting for 20% of the entire housing market, are owned on a leasehold basis across the UK—but it appears they bowed to pressure from freeholders. We will never know why, but thankfully things will now change.

[Barry Gardiner]

The hon. Lady may not remember—but I do—that before the Commonhold and Leasehold Reform Act 2002 was passed, a great deal of pressure had been applied since 1999. At that stage, however, their lordships down at the other end of the building threatened to block all of Labour’s legislation if we insisted on putting through some of the measures that were ultimately taken out of that Bill. The hon. Lady is right; those measures should have been included. I lobbied and campaigned for them to be included, and made my speech in the House accordingly, but their lordships were in the majority—and, at the time, 66% of their lordships had declared in the Register of Interests that they derived most of their income from the management of land.

[Rachel Maclean]

I thank the hon. Member for the history lesson but, regardless, we are determined to fix this now.

Draft Building Safety (Leaseholder Protections etc.) (England) (Amendment) Regulations 2023

Debate between Barry Gardiner and Rachel Maclean

Monday 17th July 2023 General Committees

[The Minister of State, Department for Levelling Up, Housing and Communities (Rachel Maclean)]

I beg to move,

That the Committee has considered the draft Building Safety (Leaseholder Protections etc.) (England) (Amendment) Regulations 2023.

It is a pleasure to serve under your chairmanship, Mrs Murray. The draft regulations amend the existing leaseholder protection regulations made under the Building Safety Act 2022 to clarify and simplify some provisions in the light of experience and to address points made by the Joint Committee on Statutory Instruments and in the two stayed judicial review applications. I will start by providing some context and background to the draft regulations.

As hon. Members know, the Government introduced the leaseholder protections to protect many leaseholders from the cost of remedying historical safety defects in their building, either entirely or with liability firmly capped. The Joint Committee on Statutory Instruments reported the 2022 affirmative regulations for cases of suspected defective drafting and doubtful vires. Notwithstanding the Committee’s concerns, the Government were satisfied that no issues with the regulations would prevent the process from operating successfully.

My predecessor, my right hon. Friend the Member for Nuneaton (Mr Jones), committed to introduce changes if it became apparent that they were necessary. I therefore laid the regulations before us to address the issues that I have mentioned, and they were engaged in two rounds of correspondence with the Joint Committee, culminating in a memorandum of response set out in the appendix to the Joint Committee’s 44th report of the 2023 Session, published last Friday.

To summarise, the Joint Committee reported the regulations for one case of defective drafting in relation to a lack of consequence for failure to notify the landlord associated with the developer of their liability. The Government are grateful to the Joint Committee for its careful scrutiny of the regulations and have considered the issue carefully. As set out in the memorandum published by the Committee, the Government are satisfied that no issue with the regulations will prevent the process from operating successfully.

It is imperative that the regulations come into force before the summer recess so as to alleviate the issues facing named managers and landlords. We will of course monitor closely the progress of future cases and, if it becomes apparent that further changes are necessary, we will come back to Parliament with proposals.

The regulations can be considered in three parts. First, they address points made in the Joint Committee’s report of July 2022. They make it clear that to recover the remediation amount, L—the body responsible for managing the building—must issue a notice to the landlord with the liability to pay. The notice must include the prescribed information on both the amount to be recovered and the appeals process. The regulations clarify the powers of the first-tier tribunal in determining the outcome of an appeal: if the appeal is unsuccessful, the appellant has to pay the amount set out in the notice; if the appeal is successful, the appellant has to pay either nothing or an alternative amount determined by the tribunal.

The Joint Committee considered regulation 6(1) of SI 2022/859, which purports to allow a leaseholder voluntarily to provide a leaseholder deed of certificate to their landlord, to be ultra vires, so the draft regulations remove that provision. I should make it clear, however, that nothing prevents a leaseholder from providing a certificate to their landlord at a time of their choosing. The regulations clarify that the prescribed evidence is required as part of the leaseholder deed of certificate and that failure to provide a completed leaseholder deed of certificate and the required evidence will result in the lease being treated as if it were not a qualifying lease. The regulations also provide that “shared ownership lease” has the same meaning as that used in schedule 8 to the 2022 Act.

Secondly, the regulations address points made in the two stayed judicial review applications. They provide for named managers to recover the cost of relevant measures in relation to relevant defects from landlords in the same way as resident management companies and right-to-manage companies. They also provide for L to be able to recover notified amounts from landlords as a civil debt and for L to be able to pursue a remediation contribution order against the landlord to recover costs. The regulations also provide that a landlord who is associated with the developer must be notified of its liability to pay for relevant measures or relevant defects. However, nothing in the regulations prevents L from instead pursuing another liable landlord if, for example, they feel that funds are more likely to be recovered in that way.

Thirdly, the regulations deliver additional detail to clarify and simplify some of the provisions in the 2022 regulations. They enable Homes England—the Department’s delivery partner for remediation work outside London—to apply for a remediation order or a remediation contribution order. They provide that a landlord may apply to the first-tier tribunal for a 30-day extension to the appeal process, to give time for out-of-court engagement. They also provide that the landlord must update the landlord certificate to reflect a lease’s qualifying status within four weeks of receiving a leaseholder deed of certificate.

Finally, amendments are made to the 2022 regulations so that the current landlord does not need to provide certain evidence where they accept liability for a relevant defect, and the existing landlord certificate is replaced by the schedule to these regulations to reflect that. This change reduces the information-sharing requirement to that which is essential for a leaseholder and L to determine liability. The regulations also provide that current landlords must provide L with copies of the landlord and leaseholder certificates within a week of completion or receipt, to enable L to apportion costs in line with the 2022 regulations. Where the current landlord fails to comply, the regulations provide that their share of costs cannot be passed on to leaseholders.

[Barry Gardiner (Brent North) (Lab)]

The Minister will be aware that many landlords have sold or gone into liquidation and referred on, and the current landlord may now be in a very different jurisdiction and may often be difficult to get at. Has the Minister considered the effect of that on these regulations, and how the notifications and periods she has set out will impact on leaseholders if, as she has just said, it will be possible for the cost to be passed on to them in this situation?

[Rachel Maclean]

I thank the hon. Gentleman for his contribution. He will be aware that this is a very specific provision in the regulations, which serve the specific purpose of providing the detail needed to clarify and simplify some of the provisions in the existing leaseholder protection regulations.

To continue—

[Barry Gardiner]

Will the Minister give way again?

[Rachel Maclean]

No, I am not going to give way again, if that is okay, Mrs Murray.

The regulations also address concerns raised by the Joint Committee last July and the two stayed judicial review applications. That will enable landlords to complete a shortened landlord certificate and enable L to take civil action against non-compliant landlords.

I hope hon. Members will join me in supporting the draft regulations, which I commend to the Committee.