Leasehold and Commonhold Reform

Chi Onwurah Excerpts

Thursday 21st December 2017 Westminster Hall

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

Last but—least as well! It is a pleasure to serve last under your chairmanship, Mr Bone.

The hon. Member for Worthing West (Sir Peter Bottomley) asked not to be thanked, but I do thank him for securing the debate, and I also thank my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick). I have always found the all-party parliamentary group to be a great help when I have tried to pursue the various leasehold issues that my constituents have raised with me.

Many of those issues have already been raised by colleagues. The advantage of speaking late in the debate is that I will not need to rehearse them further. Unforeseen service charges, ground rents increased and even doubled, leaseholders unable to make modifications or sell their homes—the common factor in such problems is the state of confusion, chaos and inconsistency in which the law leaves leaseholders.

In my constituency, residents at The Rise, a development in the west end of Newcastle, have struggled to receive firm or consistent information about how they may purchase the freeholds of their homes. The cost, timeframe and process for doing so is not standardised and is left entirely at the whim of the freeholder. As in similar stories we have already heard, that has caused considerable anxiety, which I am sure everyone in the Chamber recognises.

The area on which I wish to focus has not been mentioned, though it was alluded to by the hon. Member for Worthing West—it is what we should call the charity loophole. I have raised the subject in an Adjournment debate, but the situation is so grotesque that I feel it is incumbent on me to set it out again in this debate. The charity loophole under the 1967 housing legislation is causing huge financial and emotional distress for many of my constituents who own leasehold property in the St Thomas area of Newcastle. They have worked all their lives, invested in property, as they have been encouraged to do, and now face their greatest asset becoming their greatest liability.

I should declare an interest. The landlord of my constituency home in Newcastle, which is funded by the taxpayer, is potentially affected by the situation I am about to outline. Howard Philips and Phyll Buchanan purchased their leasehold house on the open market in 1998. No caveats were raised by the conveyancing solicitors at the time or by the solicitors who handled their remortgage in 2003. They are now in their late 70s and feel that the time has come to move on:

“The house is not suitable for our old age. The cost of maintaining these Victorian Grade II listed houses is substantial and will be a burden for the remaining years on the lease. We cannot easily manage the six flights of stairs or afford to maintain the property”.

I should add that the houses are beautiful and in one of the most desirable areas of Newcastle. They cannot downsize, however, because they cannot sell their property. Their lease has less than 70 years remaining and no mortgage company would advance a loan unless the lease was extended. They cannot extend their lease because the charity that owns the freehold, the St Mary Magdalene and Holy Jesus Trust, refuses to do so.

The trust was formed for the benefit of the freemen of Newcastle, their wives and children, and is now a considerable property owner in Newcastle. It owns the freehold of the St Thomas area of Newcastle as well as numerous properties in that and other areas of the city. There is also an intermediate lessee and managing agent, Home Group, which is a housing association. In refusing to extend the leasehold, the trust is causing misery to leaseholders and forcing some into financial distress. For example, Michael Armstrong said:

“We are a low income family with three children and had planned to pay off our mortgage by selling the house and downsizing once our children had grown up and left the family home.

Due to the fact that we cannot extend our leasehold, or buy the freehold from MMT, we are basically trapped in a very worrying and insecure situation and face the real possibility of losing our family home.”

As time is short, I will not discuss all the many different examples, but I will touch on the complex combination of circumstances that has caused the situation. The specific legal issues relate to the 1967 legislation as modified by section 172 of the Housing Act 1985, which states that if a charity owns a freehold, it is not obliged to sell or extend the lease of houses on its land.

My constituents cannot extend their lease and they cannot buy the freehold. In Mr Philips’s words,

“we are devastated to find that our house is unsalable and our nest-egg is worthless because the charity”—

this is a charity, a benevolent charity—

“that owns the freehold is refusing to extend our lease.”

As we know, under this Government social housing tenants have a right to buy after only two years, but my constituents are not even allowed to extend their lease. How can that be acceptable? As Mr Philips says:

“Every day we have to face this nightmare and it is taking a toll on our health.”

Some might argue that the houses should never have been sold to their tenants, given the complexities of the charitable leasehold system and the need for social housing in Newcastle and elsewhere, but the houses were sold and bought—what faces us now is an issue of social justice. The life’s work of those people is tied up in their property, and control of it is being withheld from them by impersonal, bureaucratic forces beyond their control.

Since the Adjournment debate there has been some progress. The Minister has offered to meet me and, as we have heard, today the Secretary of State for Communities and Local Government announced measures to curb abuse of leasehold. That is welcome and a relief to my constituents. Phyll told me today that her first reaction to the Government’s proposals was

“relief that an end to our nightmare might be in sight”.

She also requests that the Minister

“finds solutions to help those of us currently trapped in unsellable homes”,

including

“a transparent and affordable way of buying our freeholds”.

That is a wish that many in the Chamber would echo.

Listening to the debate, I found it hard to believe that we are in the United Kingdom in 2017 and yet have such confusion about property rights in property. This morning during Digital, Culture, Media and Sport questions I raised the issue of property rights in data, such as the data Facebook shares, uses and takes from us. That is confusing, but property rights in property—in a property-owning democracy with a well-established legal system—should not be. One would hope that property rights in property were clear for my constituents at least, so that they did not have to spend their time worrying about how or whether they will be able to remain in their home.

I look forward to the Minister’s response. I would be grateful if he reaffirmed that the charity loophole is in the scope of the Government’s reforms and will not be left for the Law Commission’s review of leasehold law. I wish him, everyone else present and everyone in the House a very merry Christmas. Can he offer my constituents some Christmas relief so that they can enjoy their turkey or whatever in their homes, content that they will be able to realise the benefits of their property?

--- Later in debate ---

[Alok Sharma]

If the right hon. Gentleman bears with me, I will come on to that.

As I said, we will be working with the Law Commission. A number of Members raised the issue of freeholds being sold on to investment companies. Our view is very clear: where houses are sold on unfair terms, we have asked developers to be proactive and arrange for the leasehold contract to be put on a fair footing. The right hon. Member for Knowsley (Mr Howarth), who is not in his place, asked whether there should be a requirement for developers not to sell on the freehold at this point. I am sure that developers will be listening intently to the tone of this debate and understanding precisely how Parliament feels about this matter.

We will, of course, want to ensure that there is appropriate support for existing leaseholders with onerous ground rents, and we will work with the ombudsman and trading standards to provide comprehensive information on the various routes to redress. However, that is not enough. We also want to see developers and investors going further with their compensation schemes. I want to see that support extended to all those with onerous ground rents, including second-hand buyers.

A number of Members, including the hon. Member for North Tyneside (Mary Glindon), mentioned Help to Buy. Given the Government’s position on leasehold, we do not think it is appropriate for the Help to Buy equity loan scheme to support the sale of leasehold houses. We cannot impose a new requirement on developers under existing contracts, but we expect them to work with us to take forward that change ahead of legislation. The Secretary of State has today written to all developers to ask them to stop using Help to Buy equity loans for the purchase of leasehold houses, to encourage them to take early steps to limit ground rents and to ask those that have customers with onerous ground rents to provide the necessary redress as soon as possible. Both the Secretary of State and I will be keeping a very close eye on progress in that area.

I am very grateful to the hon. Member for Ellesmere Port and Neston for proposing a Bill on leasehold reform, and for the considerable efforts that he and other colleagues have made to put it on the agenda. This is a highly complex area, covering multiple Acts of Parliament, which is why we will be working closely with the Law Commission as part of its 13th programme of law reform, announced last week. We want to ensure that we prioritise making the process of buying a freehold easier, and to support existing leasehold house owners, and we will seek to bring forward solutions by the summer recess of 2018.

[Chi Onwurah]

Will the Minister to clarify whether the proposals that will be brought forward by the summer will address the charity loophole?

[Alok Sharma]

As the hon. Lady knows, we are meeting in the new year to discuss the issue of the charity loophole and specifically her case. My officials are in touch with the charity, and I would be very happy at that point to discuss the details. Of course, if she wants to feed some suggestions into the work that we are doing more widely with the Law Commission, I would be very happy to receive them from her.