Leasehold and Freehold Reform Bill

Clive Betts Excerpts

2nd reading
Monday 11th December 2023 Commons Chamber

[Michael Gove]

I believe that it should be, and I encourage the hon. Lady’s constituents—as I am sure she has done—to be in touch with Martin Boyd’s Leasehold Advisory Service to be absolutely clear that they are getting the support they need.

[Mr Clive Betts (Sheffield South East) (Lab)]

It is a little disappointing that the Secretary of State did not refer to the Levelling Up, Housing and Communities Committee’s report of 2019. The Government, working with the APPG, have followed many of the report’s recommendations, but some of those recommendations —we will come to them later, with your permission, Mr Deputy Speaker—have not been included, so I will make just a couple of points.

The real challenge is, first, that freeholders who will not comply with any legislation, or will try to avoid it, do not reply to letters. I have exchanged information with the Minister for Housing, Planning and Building Safety on how to deal with Coppen Estates and what the penalties will be for non-compliance. Secondly, there are freeholders who seek to move the ownership of a property around in order to avoid the legislation. Why not give existing leaseholders the right of first refusal before any freehold is sold?

[Michael Gove]

I am very grateful to the hon. Gentleman and his Committee for all their work—it was discourteous of me, when running through the names of those to whom I am grateful, not to mention them. His broader point, about not just the operation of the freehold system but the way in which different aspects of the property market work, is a fair one. The use of opaque overseas entities and special purpose vehicles—the way in which ultimate beneficial ownership can be hidden—are all problems that require to be addressed. The Bill is pretty lengthy and substantial, and deals with many of the issues—I will go on to explain why we have taken the approach that we have—but there are other abuses within the property and land market system that require to be addressed, which we will address, and not just in this Parliament but after we are returned at the next general election.

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[Angela Rayner]

I absolutely agree with my hon. Friend. I am so pleased about the work he has been doing since he was elected to this place and the way in which he has been a real champion of his constituents, which they did not feel they had previously. He makes a really important point, and he is right to point out the huge problem of estate agent charges and fees. The steps the Government are taking to address the issue are welcome, of course, but we absolutely believe there is room to improve the measures in the Bill. The shadow Housing Minister, my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook), will look to do so in Committee.

[Mr Betts]

Following on from that point, when the Select Committee looked at this issue—it is a real problem—we said that whenever a property is sold, the purchaser or leaseholder, and in some cases the freeholder, should have a right at the beginning to see precisely what the agreement was between the local authority and the developer about where responsibility for ongoing maintenance of the estate and so forth rests. Many purchasers simply do not know who to go to and who is responsible. It would be helpful if that was set out very clearly at the beginning of the purchase.

[Angela Rayner]

I absolutely agree, and I congratulate my hon. Friend on his fabulous work in this area. Transparency is incredibly important because it is the first step towards getting accountability.

We spoke before about pets—we all love our pets—and the Secretary of State has rightly protected the reasonable right of tenants to keep pets, yet it is not clear whether he intends to extend that right to leaseholders. I have seen leases that contain an outright ban, so I hope he ensures that the Bill reflects that. It is just one example of the restrictions that terms in leases increasingly impose, but I could cite many more—for example, basic modifications or decorations to flats, or the right to conduct business from home. I know that some Government Members may not be keen on working from home, but it is quite another thing to say that someone could lose their home over it. They might be more sympathetic if I point out the impact on the self-employed, who are often banned from running their own business from their own home.

There are basic principles at stake for the Opposition, and I hope the whole House can agree that people’s rights to bring up a family, to care for a loved family pet, to own and run their own business, and to pay a fair price and receive what they have paid for are basic British rights and values. The incredible thing is that they are being denied to people in their very own homes—homes that they own. That is surely at the heart of today’s debate, because for leaseholders, their flat or house is not an investment; it is their home—a place to live, to grow up, to grow old, to raise a family, to get on in life and to be part of a community. A home is more than bricks and mortar; it is about security and having power over your own life.

As a leaseholder, someone may have ownership but not control. The dream of home ownership has already slipped away from far too many, but it is less of a dream and more of a nightmare for too many who now achieve it. From what the Secretary of State has said, there is some agreement between us on the problems those people face, but the contents of the Bill do not quite match up to his sentiments or the energy that he brings to the Dispatch Box. So I hope that in winding up, the Minister will not just tell us exactly how far the Bill addresses the problems raised today but accept that we can work together in later stages to go further.

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[Mr Clive Betts (Sheffield South East) (Lab)]

Generally, I welcome what is in the Bill, as does the Select Committee, based on our 2019 inquiry. It is what is not in the Bill that is disappointing—that is the difference. Let me go back to our report, which built on the work of the APPG—I congratulate the Father of the House, the hon. Member for Worthing West (Sir Peter Bottomley), and my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders), who is now a shadow Minister, on their work. That report led to the work of the Competition and Markets Authority on mis-selling and the Law Commission report.

I want to go through some of the Select Committee’s recommendations and what the Government have followed through on, which we welcome. I also want to look at the matters omitted from the legislation, which could easily be added in Committee if the Government want to. Leasehold flats are more complicated, and they will probably not be added to the Bill in Committee. The Select Committee accepts the complications, particularly where properties are part commercial, part residential. However, our report was four years ago, which is a long time for the Secretary of State to work up a scheme to deal with leasehold flats, but we are not there. In the meantime, I hope that he will commit to the Committee’s recommendation for a programme of education and information for leaseholders, to ensure a better understanding of what commonhold is all about. There is a lack of understanding and information, and if we are to move to commonhold for new properties and encourage leaseholders in existing properties to convert, that programme is needed.

The legislation deals primarily with leasehold houses. We welcome the commitment to no new leasehold houses—or we will when the clauses are added to the Bill. We understand that that is for Committee. We welcome the commitment to removing onerous ground rents. The Select Committee looked in detail at the argument about the European convention on human rights.

[Mr Kevan Jones]

Does my hon. Friend agree that the Bill does not address issues associated with the growth in leasehold houses over the last few years? Earlier, I mentioned Persimmon, which has left a lot of residents with leases that include not only their own properties but common areas. Traditionally, when my hon. Friend and I were in local government, those would have been taken over by a local authority.

[Mr Betts]

There are real issues with that, which I was going to address later, but I will do so now. It is important to strengthen the right to manage, both for leaseholders and for freeholders in these estates who own the freehold of their house but not of the communal areas. I said earlier that in all property purchases where common areas remain in private ownership, there should be, at the point of purchase, a clear understanding of the agreement between the local authority and the developer about who is responsible for those common areas. In many circumstances it is simply opaque. Often, purchasers do not know who is responsible and are sent on a wild goose chase to find out once they have bought their property.

Returning to onerous ground rents, the Select Committee took counsel’s opinion, which was quite interesting, and made recommendations in paragraphs 114 to 116 of our report. There were two clear arguments why removing onerous ground rents from leases retrospectively was completely compatible with the European convention on human rights. The first, which most of us may not have thought about, is that controlling or changing rent is not confiscation of property but control of its use, so it does not conflict with the article on removing people’s property rights. Secondly, the convention includes a justification where the proposal has a wider beneficial impact on society, which can be offset against any impact on the property owner. Counsel’s opinion was that it was therefore perfectly justifiable under the European convention to remove onerous ground rents on existing properties.

[Barry Gardiner (Brent North) (Lab)]

My hon. Friend will remember that when the Labour Government overturned the case of Custins v. Hearts of Oak in 1967, they used exactly those grounds to justify doing so.

[Mr Betts]

I do remember that far back. Many will not remember the Labour Government’s ’67 reforms, but they were quite important on those grounds—absolutely.

Other good aspects of the Bill include its reducing the price of enfranchisement and trying to make it simpler. Now, I am not sure that it makes it simpler; it is still a bit complicated. In the end, it partly depends on the capitalisation rates that the Government introduce, which will determine the price. But a lot of my constituents who are leaseholders live in houses, and they often face enormous barriers to carry through the enfranchisement process. I have referred to Coppen Estates in my constituency, which is notorious for simply not replying to letters. I once got it to reply to a recorded letter at the third time of asking. Normally, it ignores everything. That is just its way of trying to hang on to its ground rents and its income from leases. How will we deal with those sorts of individuals and companies, and the fact that they transfer ownership around from one company to another?

Why is there no right of first refusal for leaseholders in the Bill? I was pleased that, some years ago, Sheffield Council agreed that when it sold freeholds, the right of first refusal would go to the leaseholder. That would be a simple reform, and I hope the Secretary of State will consider it. The improvement of the enfranchisement process to make it simpler and reduce the cost is right, but I would like further improvements to ensure that it will work.

I welcome the standardisation of service charges. One big complaint to the Committee was that leaseholders often simply do not know what they are paying and why. They cannot work out which services are supposed to be provided and which are not. That is an important step forward.

On commission fees, we heard about the £150 to change a doorbell and the £3,000 to put up a conservatory—complete rip-offs. There is no justification for them in houses in particular, and very little justification in flats. I am pleased that freeholders will now have to provide a schedule of rates that will be charged. We called for a cap on rates, which might have taken reform a little further, but at least there now has to be clarity and transparency. I also welcome the clause that means leaseholders will not end up paying for the legal and other costs of freeholders where there is any conflict or dispute.

A number of other measures have been omitted from the Bill, but they could be included very easily. The Secretary of State mentioned forfeiture. If leasehold is a feudal tenure, then forfeiture is prehistoric—it really is. If a leaseholder in a very small way fails to comply with an element of their lease, they could have the property taken off them. That is just unacceptable and unjustifiable. The Secretary of State was right in what he said. Forfeiture is not necessarily something that gets used, but the threat of its being used puts the onus on leaseholders to “behave” or do what the freeholder wants them to do. The removal of that with a simple clause would be really welcome.

[Sir Peter Bottomley]

I should have included the hon. Gentleman and the Select Committee in my thanks, and I do so belatedly. On forfeiture, we could ban it completely, although there may be times when it is necessary to have an order to sell a property to pay debts. The limit should be raised from £350 to a significant figure such as £5,000, and any remaining equity should go back to the person who owned the lease and not be pocketed by the freeholder.

[Mr Betts]

The Father of the House makes a very reasonable point. My point is simply that forfeiture is currently a blanket possibility that can apply to any breach of a lease, however minor, and non-payment of a very small amount could cost the leaseholder the total of the value of their property. That is what we have to stop.

Why do freeholders not have to join a redress scheme? The Committee called for them to be included in the redress schemes. The Secretary of State is bringing in a number of redress schemes and ombudsmen extensions, so why can freeholders not be included?

One of the big issues raised with us, where again there is a lack of transparency, is that many leaseholders have to pay into a reserve fund—a sinking fund—for their property. Can we not have some protection for those funds formally written into law? Currently, many leaseholders have no idea what the money is being spent on. There is no obligation on the freeholder to explain it and certainly no protection that funds have to be used for the purpose for which they are paid.

On mis-selling, one of the big complaints we heard when we met leaseholders—this related to houses in particular; Persimmon Homes has been mentioned, but there were other developers too—was the fact that they were being sold a leasehold as though it was the same as a freehold. The solicitors were compliant in that, because they had been recommended by the developer. Often, a bonus was thrown in: “We’ll give you new carpets in the living room if you use that solicitor.” The Competition and Markets Authority investigated at our request and said there was mis-selling, but so far nothing has been done about it. The Government have done absolutely nothing to rectify that injustice. Can we not see something on that again? I do not think that there is any great conflict across the House, or between anyone who has been involved in this matter. It is wrong—absolutely wrong. Solicitors should not be induced in this way to provide conveyancing to a purchaser, when the developer is recommending that solicitor. It simply is not right and it needs addressing.

My final point is one that we raised on the private rented reforms that the Government will hopefully pursue —and hopefully this year coming, rather than waiting any longer with regard to section 21. We have called repeatedly for a housing court. I know the Secretary of State will explain again why he does not want to do that, but I think we ought to keep asking. There are so many issues in the housing field that need a specialism, and need quick decisions and quick resolution. A housing court would be one way of doing that and of trying to improve the process.

[Stella Creasy]

One thing I think so many leaseholders find frustrating with our current court system and the first-tier tribunals is that they do not set a precedent, so even if we identify something with a freeholder who may have multiple thousands of properties, every single individual has to go through the process if they were not a party to the original case. Does my hon. Friend agree that a specialist housing court could at least have precedent built in?

[Mr Betts]

That is an extremely good point. I do not think the Select Committee actually made that point, but it adds to its recommendations in a very thoughtful and helpful way.

There are a lot of issues, and I am sure we will not resolve all of them in today’s debate, but they need to be addressed in Committee. There are reforms to the proposed legislation that could be made, most of them quite easily. The bigger issue of leasehold flats is for another day, but it ought to be kept on the agenda. I welcome what is in the Bill, which could be the basis for a much-improved piece of legislation. Perhaps we will see an improved Bill come back to us on report.

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[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

It is a pleasure to wind up the debate after so many useful, thoughtful and detailed contributions. In that spirit, I want to spend a little time going through some of those details. Before doing so, I wish to thank, as so many others have, all the campaigners and all those who have spent so much time working in this area for so many years.

I thank my hon. Friend the Member for Worthing West (Sir Peter Bottomley), the hon. Member for Sheffield South East (Mr Betts), my hon. Friend the Member for Redditch (Rachel Maclean), the right hon. Member for East Ham (Sir Stephen Timms), my hon. Friend the Member for Dartford (Gareth Johnson), the hon. Member for Battersea (Marsha De Cordova), my hon. Friend the Member for Harrow East (Bob Blackman), the hon. Member for North Shropshire (Helen Morgan), my right hon. Friend the Member for Aldridge-Brownhills (Wendy Morton), the hon. Member for Brentford and Isleworth (Ruth Cadbury), my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken), the hon. Member for City of Chester (Samantha Dixon), my hon. Friend the Member for North Norfolk (Duncan Baker), the hon. Member for Walthamstow (Stella Creasy), the hon. Member for Liverpool, West Derby (Ian Byrne), and all those who intervened for the helpful comments they provided.

I welcome the general and broad support for the actions that are being taken in the Bill. I also welcome the consensus in the House on the need for reform, which I know, as was highlighted several times, has been some time coming. I hope right hon. and hon. Members will recognise that this is a complicated and intricate area, which is observable not least from the many examples given in the debate. We now have in front of us a good proposition for making progress.

Our focus in the Bill is on being able to make practical progress—to make the Bill as practically useful as it can be—and then to have the greatest impact that it can have. Some, including hon. Members tonight, have said that it does not go far enough; others have said that we should return to first principles and seek to build the whole system again. I am sure that those hon. Members will make their case in Committee if they are part of it, and on Report and in subsequent stages. The Government seek to have a proposition on which can be built; one that is practical, achievable and makes a difference. The art of politics is about being able to make progress, and we think that the Bill will make a significant difference to people’s lives.

Let me turn to some comments made in the debate. I pay tribute to the long-standing work of the Father of the House, my hon. Friend the Member for Worthing West. He raised a number of points, which we will go through in more detail in Committee, but I want to highlight his point on building safety with regard to sub-11 metre properties. A number of Members made similar comments. We have a process in place, so if colleagues have concerns about fire remediation issues in sub-11 metre properties, they should ensure that they get the appropriate fire assessments needed in all buildings. If substantial works are needed to those properties, they can be raised with the Department, which has committed at this Dispatch Box and has executed commitments to look into those issues in more detail.

I pay tribute to the work of the Select Committee, chaired by my constituency neighbour, the hon. Member for Sheffield South East. I particularly enjoy our interactions on this issue because it gives me, like him, the opportunity repeatedly to say as a constituency MP how outraged I am about Coppen Estates’s consistent failure to respond. That is a hallmark of a small cohort of actors in this area, which consistently and flagrantly ignore reality and their ability to make a difference to our residents’ lives. Coppen Estates is a good example of such actors, but there are many others.

[Mr Betts]

I thank the Minister for responding to that point. Will he look at strengthening the Bill to stop companies like Coppen Estates avoiding the legislation? Strengthening the legislation is fine, and so is changing the way that enfranchisement fees are calculated so that people get a better deal, but in the end, the freeholder has to respond, which Coppen Estates refuses to do. My constituents in the Flockton estate in Sheffield have tried and failed for years to get a response. How will the legislation be strengthened to ensure that such companies respond?

[Lee Rowley]

I am very happy to look at specific issues in Committee. As the Secretary of State highlighted in his opening speech, if there are areas where we can improve the Bill, we will be happy to do so. I cannot make promises, but we are happy to look at them. The hon. Gentleman’s constituents in Sheffield, my constituents in Dronfield and constituents all across the country have similar issues to those with Coppen Estates, so I hope we will be able to make progress.

The hon. Gentleman, the hon. Member for Battersea and others rightly talked about leaseholders not knowing what they are paying for. A few weeks ago, I had the privilege of taking part in a two-hour discussion with one of the better estate managers about an issue in my constituency in Hunloke Grove. They were willing to go into detail, talk about the issues, work through and be transparent on their fees in a way that so many other managing agents are not. The importance of that came home to me in that discussion.

My hon. Friend the Member for Redditch should rightly take all the credit for where we are today. I am surfing on all her work over many months to get the Bill ready. She deserves a huge amount of credit for that. She was an exceptional Housing Minister and has made some extremely constructive comments today, which we will look at along with the similar comments from my hon. Friend the Member for North Norfolk. I can confirm that our intention is that there will be sufficient time to be clear on ground rents. As my hon. Friend the Member for Redditch rightly said, it is so important that we secure a property-owning democracy for the next generation.

I thank the right hon. Member for East Ham for making a series of important points, which I am happy to look at. The Government are happy to see whether they are possible. He made a specific point about asbestos, which we will take away and review with the detail it deserves. I look forward to the visit to Barrier Point, which I wanted to make following his correspondence. It is important that, on building safety, we look at not just the overall macro picture but individual circumstances, to see whether we can learn anything.

I am also grateful to the right hon. Member for giving me this opportunity to make the point about insurance from the Dispatch Box. I am as keen as him to see progress on insurance. I have met representatives of the insurance sector on a very regular basis in the year that I have been in post. I hope that they will hold to their intentions. They have told us that they will launch the scheme, and we are keen to see it. The Secretary of State’s further meeting this week will, I hope, enable progress.

My hon. Friend the Member for Dartford made extremely important points on estate management. He has continually articulated the challenges on a regular basis, and has been a champion on this matter. He rightly speaks of the outrages he has seen in his constituency. It is important that we respond to that as best we can.

I am grateful to my hon. Friend the Member for Harrow East for highlighting a number of the important changes that are coming. He is right that our objective is to squeeze out the bad practice in the sector. There are honourable people out there and there are honourable ways in which it is done, but where bad practice occurs it gives the entire sector a bad name. We will legislate and regulate to remove it in a proportionate way.

My hon. Friend also highlighted an example of a property that has not yet made progress on remediation, and similar examples were given by the hon. Members for Brentford and Isleworth and for Walthamstow and my hon. Friend the Member for Cities of London and Westminster. We can see significant progress. We have only recently produced a new detailed set of data covering all the funds that are open on building safety. I hope hon. Members will see the progress that has been made, but we recognise that there is more to do. The hon. Member for Walthamstow is absolutely right that there are a number of names that pop up repeatedly—for example Y&Y Management and E&M. There are many others and they should be on notice that they need to change their practices, because they are not acceptable.

Leasehold and Freehold Reform Bill

Clive Betts Excerpts

Report stage
Tuesday 27th February 2024 Commons Chamber

[Lee Rowley]

I am grateful to the hon. Lady for outlining that issue; I know she has raised it in this place before. As she indicates, this is a complex area of law, but I am happy to talk with her separately on that matter in the coming weeks, if it is helpful.

How are we doing this? We are giving leaseholders more security over the future of their homes by increasing the standard lease extension term to 990 years, by making it cheaper and easier for leaseholders to buy their freehold, and by tackling unfair charges, exploitative practices and poor management. In doing so, we are overturning centuries of iniquity.

The Bill will also give leaseholders the control they deserve over the buildings they live in. At present, management companies are too often unaccountable to those who pay for them, meaning that they are able to charge excessive fees for poor-quality service. The Bill gives more leaseholders the opportunity to manage the buildings themselves, so that works get done properly and they have more of a say.

[Mr Clive Betts (Sheffield South East) (Lab)]

The Minister might anticipate the question I am going to ask, because I have asked it before. It is fine giving leaseholders easier ways to buy their freehold, until we come across companies such as Coppen Estates, which we have debated before. It just does not reply to letters. I think that we are now on our third recorded delivery letter to the company about the residents on the Flockton estate, who have just been sent enhanced bills for their ground rent charges, with no justification. They face threats if they do not comply. Where in the Bill is there any measure to make sure that Coppen Estates and the like respond properly in future or face consequences if they do not?

[Lee Rowley]

I am grateful to the hon. Gentleman. As he knows, we have debated the iniquities of Coppen Estates extensively, and I repeat that it is treating my constituents in a way that is inappropriate, in the same way that it is doing with his constituents over the border. Given that we are extending the opportunity for charges to go to tribunal, I hope that the hon. Gentleman’s constituents in Flockton will be able to go to tribunal and hold that company or other companies to account, should that be helpful.

Through the reforms, we will scrap the presumption that leaseholders must pay their freeholder’s legal costs, even when they win at tribunal, correcting another historical and unfair imbalance. Someone would not be expected to pay legal costs if they were successful in their claim in other cases, so leaseholders should not be treated any differently.

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[Lee Rowley]

The right hon. Gentleman is absolutely right, which is why I hope that measures such as new clause 51 go some way towards making it crystal clear that there is no way to get around this, and towards providing clarity to those who seek to buy a new property.

New clause 52 will require a statement on the front of all new leases declaring that it is a permitted lease and is not a long residential lease of a house. Should a developer make a dishonest declaration to His Majesty’s Land Registry, the homeowner may be able to exercise the redress right contained in new clause 54, which will allow them to acquire the freehold from the developer free of charge.

Under new clause 53, if a lease does not include the prescribed statements, His Majesty’s Land Registry will have the power to restrict the resale of the property until the right information and declarations have been provided.

[Mr Betts]

The Minister is talking about the information on houses. Will it also apply to flats so that, before anyone buys a property, it must be explained to them that they are buying a lease and what that entails? I tabled new clause 38, which says that everyone buying a lease should be presented with a copy of the Government’s “How to Lease” document. Everyone in this situation should be given independent advice.

[Lee Rowley]

I am focusing on homes, and we have been emphatic and clear that the sale of leasehold homes will be precluded other than in exceptional circumstances. I am happy to talk to the hon. Gentleman both later in the debate and outside the Chamber about whether further consumer protections for those purchasing a flat may be proportionate and reasonable.

New clause 54 grants homeowners who have been mis-sold a new lease of a house the right to acquire the freehold from the landlord, as well as any superior leasehold interest in the property, for zero cost. New clauses 55 and 56 set out protections and reasonable limitations on this requirement, and new clause 57 provides for the Secretary of State to make regulations setting out further details on how redress can be obtained.

We understand that granting homeowners the right to redress alone may not be enough to prevent bad actors from attempting to breach the ban on the sale of leases on houses, which is why we are introducing a system of financial penalties where there is a breach. These penalties will start at £500 for a minor breach, rising to £30,000 for the most serious breaches. To enforce this system of fines, as set out in new clause 58, we are asking all local weights and measures authorities to play a part where they see infractions in their area. We will also set out how they need to work through new clause 60.

The chief responsibility for investigating and taking action will lie with the lead enforcement authority. Through new clause 61, the Secretary of State will have the power to appoint the right authority to fulfil this important role, while new clause 62 details the duties. By amending the Consumer Rights Act 2015, clauses 63 and 64 also vest the appropriate investigatory and enforcement powers essential for both the lead authority and local authorities to carry out the job.

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[Mr Betts]

It is five years since we produced the Select Committee report on leasehold reform. It came after long years of campaigning by the all-party parliamentary group on leasehold and commonhold reform, and I particularly commend the efforts of the Father of the House, the hon. Member for Worthing West (Sir Peter Bottomley), who has just spoken; my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders); and our good friend Jim Fitzpatrick, who is no longer in this House, but who certainly made a major contribution to that. To be fair to the Government, it is good that we have made progress on many of the items in the Select Committee report. The caveat, of course, is that we probably have not gone as far as we would have wanted or as quickly as we would have expected.

When the Committee met, I remember going into a room with about 100 leaseholders from all over the country—the hon. Member for Harrow East (Bob Blackman), who was in his place a few minutes ago, was there as well—and hearing horror stories of people being ripped off in the sale of leasehold homes by developers. They were told that there was no difference between a leasehold property and a freehold property. They were told that by the solicitors who worked for them, because the solicitors were recommended by the developers. That was together with the free carpets in the living room that came as a bribe—that is what it was. Leaseholders were not aware that they would have to pay £300 to get a doorbell fitted if they wanted one because they had to get permission, or £3,000 for a conservatory, or whatever fees the freeholder chose.

Leaseholders were told that they could, within a couple of years, buy the freehold at a fixed price from the same developer. The problem, of course, was that by the time a leaseholder came to inquire about purchasing the freehold, the freehold had been sold to another party. There are lots of examples of that, which is why I have an amendment—new clause 39—that I want to push to a vote, although I hope the Minister will accept it. It is a simple amendment to say that before the sale of a freehold, the right of first refusal has to go to the existing leaseholder. That right already exists for leaseholders in flats, but not for leaseholders in houses. Why is that? That really cannot be justified or even explained.

Will the Minister accept just that one simple amendment? It would give leaseholders that right, and stop freeholders —we know that this happens—who want to evade the legislation, including the improvements the Government are bringing in, passing a property around from one organisation to a subsidiary to a third party, with a view to evading the legislation, so that leaseholders never know where to go to get the relevant freeholder to agree to the sale.

[Matt Rodda]

My hon. Friend is making an excellent speech. Does he agree that part of the problem is that some of the freeholders are based overseas, and it is extremely difficult for leaseholders to track them down? This is an ongoing issue that I hope the Government will look into.

[Mr Betts]

Absolutely. I hope the Minister will have a look at the whole issue of freeholders who will not respond. That certainly applies to many who are overseas, with whom it is very difficult to get in touch.

I will not press new clause 40 to the vote, but the purpose of it is to say to the Minister that the default answer cannot be that the leaseholder can always go to a tribunal. Most leaseholders are simply ordinary residents trying to get on with their lives, who think it ought to be fairly easy to put in a request, get a calculation done and buy their freehold. They are not ready for these organisations, with all their lawyers and surveyors, that want to evade this and try to hide away, in some cases overseas, so that they cannot be contacted.

Can the Minister look at that issue? I know he is aware of it, because we share the same problem with Coppen Estates. There are others that are based overseas, but this one is based in a semi-boarded-up shopfront with a letterbox that never seems to be opened. That is the sort of company we are dealing with. They are small organisations that make a living out of charging ground rents from leaseholders, who cannot exercise their enfranchisement because of the attitude and evasion of the freeholders concerned. I hope that the Minister will have another look at that issue.

The other amendments I have tabled are about having professional qualifications and some form of regulation of property managers. The Government have legislated to say that the managers of social housing will need professional qualifications in future, but what is the difference between a manager of social housing and a property manager of leasehold blocks? In some ways, there may be greater complications in trying to manage a multitude of different leaseholders than people who have secure tenancies in a council or housing association block of flats. What is the difference?

Why will the Government not recognise that there are some good property managers who are well qualified, experienced and can be held to account, but others who are not like that? Indeed, some are put in place for that purpose: they are cheap, they do not have experience or qualifications, and they provide another way of avoiding the restrictions and rules that are rightly put on the management of property. They do not bother with proper service charge information or a proper list of charges for permission fees. I accept that the Government have tried to improve that, but in the end such improvements will only work if the individual or organisation managing the property does so in a proper way. Will the Minister look at those issues? What is the rationale? Why is there resistance to ensuring that people doing a serious and important job as property managers are qualified to do it and properly held to account through regulation?

[George Eustice (Camborne and Redruth) (Con)]

Let me begin by declaring my interest as an adviser to the HSPG group, which among other things is a registered provider of social housing.

I rise to speak to new clause 68, which is based on a specific challenge that I have encountered in my constituency and that affects residents in more than 70 homes spread across three locations in the town of Hayle and the village of Mount Hawke. The experience of those cases exposes a potential gap in the Bill and in policy on the issue of shared ownership. The Bill deals at some length with standard leasehold agreements and the problems of extortionate ground rents, as well as with some of the issues around service charges and management companies with which we are familiar. However, in the early 2000s some agreements were put together that were technically leasehold agreements but that masqueraded as shared ownership agreements, even though those shared ownership agreements do not comply with the standards of modern shared ownership agreements.

The agreements I have encountered contain a number of defects, and I would like the Minister’s view on them. The first is that the freehold on those homes is not held by a registered provider. It was initially owned by the developer who built the sites, but it has changed hands twice. In a way that is familiar to many Members, the freehold has ended up in the hands of an offshore investment vehicle based in the British Virgin Islands, and with a company called Rockwell, which has not been easy for residents to deal with over the years.

The second major defect in the agreements is that there is no provision for staircasing or enfranchisement of the leaseholder’s share of the property. Residents typically own between 58% and 72% of their property, but their stake is fixed and cannot be extended. There is no right to extend under the agreement. The agreements are under a 990-year lease and there is no ability to extend that, although I appreciate it is a long-term lease.

The third defect is that even if residents could enfranchise and extend or staircase their ownership within the agreement, a section 106 covenant means that the properties must be sold to a local connection with a significant discount on market value. The way that has been worded in the agreement means that it is simply not worth the while of residents to increase their share, since there would be no value to the increased share that they would have.

Finally, there was something described as ground rent, although in practice a big chunk of that was effectively a rent on the shared ownership portion. The ground rent was initially around £20 per week, but that was linked to the retail price index on an escalating model. It has now got close to £2,000 per year for those residents, and it is still increasing rapidly.

All of those defects in that leasehold tenure arrangement or shared ownership arrangement—indeed, it appears to be neither one nor the other—mean that all of the properties have been judged unmortgageable by lenders, and that means the residents are trapped. They cannot sell their properties because no one can get a mortgage to buy them. These are people in my constituency who had a local connection. Typically, they are on modest incomes. These agreements and these homes were sold to them as a way to get a foot on the housing ladder, and for those residents it has transpired to be a complete nightmare.

I will say a word about planning and pay tribute to Penwith District Council, as it was then, and Cornwall Council. Planning was granted between 2004 and 2006, and the local planning authorities did their due diligence. They could see that this shared ownership model was defective, and they refused planning permission on all three sites on that basis. The Minister might ask how these homes were then built and sold under the arrangement, but I suspect he can predict the answer, which is that they were approved at appeal by the Planning Inspectorate, an agency within his own Department. The situation that my constituents face has been caused principally by a chronic failure of due diligence by the Planning Inspectorate, as is often the case with such issues.

In conclusion, my new clause 68 seeks to address a gap in the Bill and to give the Government the opportunity to atone for the mistakes of the Planning Inspectorate. It deals explicitly with shared ownership agreements and would create a statutory right to staircase ownership and put a cap on the rent of the freeholders’ portion of the home. I do not intend to press new clause 28 to a Division this evening, but I hope that the Government will consider the matter closely. I would like to meet the Minister or the Secretary of State and share with them and their officials a copy of the shared ownership agreement that my constituents are suffering under so much, with a view to seeing whether the Government might consider further changes at later stages of the Bill’s consideration to address a gap in it. Given that the Planning Inspectorate has been somewhat culpable in creating this problem for my constituents, I hope that the Government will seek to do that.

I support the general thrust of the Bill in all its attempts to deal with management charges, service charges and ground rents, but I hope that the Minister will agree to meet me to discuss some of these remaining issues.