Leasehold Reform

Clive Betts Excerpts

Tuesday 23rd May 2023 Commons Chamber

[Lisa Nandy]

I agree; if we could just do what we have been promising for a long time, the reality for my hon. Friend’s constituents would be transformed from one of insecurity and anxiety to one of security and the foundation of a decent life. They are lucky to have her as their Member of Parliament to fight on their behalf.

It was in 2002 that the Labour Government introduced commonhold. There were voices even then—some of them in the Chamber today—who urged us to go further and end the injustice altogether. In the decades since, there has been growing recognition on all sides of the House that action is long overdue. In 2017, the Government said that they would legislate to prohibit the creation of new residential long leases on houses, whether newly built or existing freehold houses, other than in exceptional circumstances. That commitment was repeated in the 2019 manifesto and by the former Secretary of State, the right hon. Member for Newark (Robert Jenrick), yet leaseholders were left waiting.

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

We have had a further commitment from the Government along similar lines. In response to a Select Committee report in 2019, the Government said:

“The Government agrees with the Committee that, other than in exceptional circumstances, there is no good reason for houses to be sold on a leasehold basis.”

Four years later, thousands more properties have been sold on an unacceptable basis, and the tenants, effectively, of those properties who have been left to pay exceptional costs are not able to get out of the lease without very high charges.

[Lisa Nandy]

I pay tribute to my hon. Friend for the work that his Committee has done on this issue over a long period of time. As he said, there is no reason that this should continue except for a lack of political will to do what we have all acknowledged is the right thing.

Into this absurd scenario steps the current Secretary of State. I know that the right hon. Gentleman has the right intentions—indeed, his record has been clear. On 9 June last year, he told this place:

“it is absolutely right that we end the absurd, feudal system of leasehold, which restricts people’s rights in a way that is indefensible in the 21st century.”—[Official Report, 9 June 2022; Vol. 715, c. 978.]

On 30 January this year, he said in response to a question I posed to him:

“Finally, the hon. Lady asked if we will maintain our commitment to abolish the feudal system of leasehold. We absolutely will. We will bring forward legislation shortly.”—[Official Report, 30 January 2023; Vol. 727, c. 49.]

Now, we are told that the Secretary of State was being too maximalist. We have had grumbling from Government Back Benchers that the Secretary of State is being too socialist. Downing Street has stepped in, plans are being rowed back and he is not even able to set foot in the Chamber today. It is a bit of a mess, isn’t it?

In just a few months, the Government’s whole housing policy has completely unravelled. As my hon. Friend the Member for Hornsey and Wood Green (Catherine West) said, they crashed the economy and sent mortgages through the roof. They caved in to their own Back Benchers and, in one stroke, ensured that their own housing targets were not worth the paper they were written on. That led to dozens of councils reducing or halting altogether their house building plans, and a collapse in the projected number of houses built in coming years, in the middle of a housing crisis. The Home Builders Federation warned earlier this year that new housing supply in England would soon fall to its lowest level since the second world war.

While the Government are locked in internal battles on making basic improvements for renters, their Levelling-up and Regeneration Bill—their flagship legislation that was supposed to reform an archaic planning system—is stuck in the House of Lords, where it is commonly referred to as the Christmas tree Bill, as it has so many amendments attached to it. It does make us wonder what is actually the point of this Government.

The Secretary of State was clear that he would abolish leasehold. No one thought that it would be done overnight. The Law Commission report sets out a clear road map on enfranchisement, commonhold and the right to manage. The major leasehold groups have always recognised that it would take some time to phase out this archaic system, and so have we, but there is no excuse for inaction on the manifesto commitment to end the sale of new private leasehold houses, or for delaying the start of the process of phasing out existing leasehold and making commonhold the default of the future, as my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook) has often said.

--- Later in debate ---

[Lee Rowley]

I will give way in a moment, but will make a bit of progress first. There is broad agreement across the House, and beyond, that the situation needs to change to make home ownership fairer, easier and cheaper. That is why the Government have already taken significant steps to better protect leaseholders from unreasonable costs, and why we are committed to going further and bringing forward further leasehold reforms to strengthen transparency and accountability.

[Mr Betts]

I am pleased that the Government have good intentions, but the Select Committee’s 2019 report had 52 recommendations. The Government accepted many of them completely and said they wanted to move towards accepting others and work out how that could be done. Since 2019, which was before the last general election, what have the Government actually done? Would the Minister confirm that all they have done in practice is to bring in measures to ensure that peppercorn ground rents are charged on new leasehold houses? That is the only thing they have done, out of all the recommendations they agreed to accept four years ago.

[Lee Rowley]

I am grateful to my neighbour, the hon. Member for Sheffield South East (Mr Betts). He pre-empts a part of my speech that I will come to in a moment.

The hon. Member for Wigan indicated that we have debated the subject many times in this Chamber. That is true and there will be lots of opportunities to do that again, because we have committed to make it easier and cheaper for leaseholders to extend their lease or to buy their freehold. We will bring forward legislation to ban new residential long leases on houses. While there are still issues, I am pleased to see that the market has already responded, with only 1.4% of houses in England now being built as leasehold, compared with nearly 15% previously.

--- Later in debate ---

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

The Minister has spoken of a lot of support and commitment to doing something at some stage in the future. Why is it taking so long? The Select Committee was pleased with the Government’s response to our 2019 report. We do not always get a positive response to our reports from the Government, so we welcomed their commitment to doing so many things, without caveat, including their commitment to consider further reforms in due course.

I give credit to the all-party parliamentary group on leasehold and commonhold reform. The Father of the House—the hon. Member for Worthing West (Sir Peter Bottomley)—and my hon. Friends the Members for Ellesmere Port and Neston (Justin Madders) and for Weaver Vale (Mike Amesbury) have done a lot of work to build on that over the years, as has the Select Committee.

Why is leasehold reform taking so long? Yes, it is complicated to legislate on this issue, but in the meantime it is extremely complicated for leaseholders who face so many obstacles, particularly in buying the freehold of their property. Not only is it complicated; it is also expensive. Look at what could have been done. We could have banned leasehold for new houses. That legislation would not have been complicated, and the Government committed to doing it in response to the Select Committee’s report. Four years later, why are we still waiting?

The Select Committee also got Government agreement on further restrictions on ground rents for new properties, which was done, but why do we not have simple legislation on service charges, onerous permission rights and other conditions? The Law Commission, the APPG, the Select Committee and others have done enough work to inform the Government on how to go about this. Why has there been no progress on any of these issues?

Enfranchisement is a frustration for so many leaseholders who are trying to buy their property. The Minister mentioned Coppen Estates, which is in my constituency too. I cannot get a response from the company on behalf of my constituents until I write at least two recorded-delivery letters to a post box in a grotty property somewhere—that is how it operates. Coppen Estates does not respond, because it keeps receiving the ground rents in the meantime. Why have such companies not been legislated against so that people can buy their freehold without having to wait months, or in some cases years? I am currently dealing with dozens of constituents on the Flockton estate, none of whom has had any response from their freeholder. This is simply unacceptable, and it could have been dealt with.

Concerns have been raised with the Select Committee about the European convention on human rights and the right to private property. Very experienced counsel came before the Committee to explain how this could be done in the public interest. I do not believe the complications are so difficult that the Government cannot fix them. Why have they not legislated to give the leaseholders of houses the same right of first refusal as leaseholders of flats? That would be simple legislation. Four years later, why has it not happened? Numerous leaseholders have come to me to say they did not know that their freehold had been sold to another company—it was sold without their knowledge. Why does that happen? Legislation on a right of first refusal could have been introduced very easily.

I accept that flats are more complicated, and that the agreement of current leaseholders would be needed if we wanted to move towards a commonhold system, but the process should be simplified. The process, and commonhold itself, should be made easier. The Government have accepted the need to do that, but they have made no progress at all on commonhold in the past four years. Some cases, such as retirement properties and mixed-use properties, may be more challenging, but commonhold should be the default tenure for new properties. Why have the Government not legislated on that?

In response to our report, the Government accepted that service charges for flats should be regularised. Why do we not have legislation in place on the right to challenge onerous permission rights and other charges? We suggested the idea of a housing court, and the Government suggested bringing in a new homes ombudsman, which they are doing. A housing court could have enabled leaseholders to simply challenge any unfair practices. The current arrangements are far too complicated and expensive for people to undertake themselves.

The Select Committee also suggested a housing court for the Government’s private rented sector reforms, but the Government are loth to do this. There are an awful lot of housing problems that need to be addressed by a specialist and simplified procedure, which has not been introduced either. Such a procedure would mean easy redress where things are still going wrong.

I am disappointed. The argument is not about whether we abolish leasehold, although it will be some time before leasehold disappears completely, if it ever does. What the Government could have done in the four years since the last general election, rather than waiting until after the next general election, is take steps to make sure that leasehold is completely abolished for new homes, to protect current leaseholders from unfair service charges and permission rights, and to give leaseholders the right to enfranchise themselves through a simple and reasonably cheap process. Why have the Government simply failed to do any of these things over the past four years?

--- Later in debate ---

[Rachel Maclean]

If the hon. Member will allow me to answer the questions I have been asked, I will come to his points in my remarks.

We are making significant progress to afford real relief to leaseholders, which everyone in the Chamber is calling for, while reforming the system for the better. However, the questions facing leasehold tenure are not simply about money—important though those are—but also include, “Who decides?” For people living in a leasehold home today, we are going to make it easier and cheaper for them to take charge of their building, whether by taking advantage of our reforms to the right to manage or by going all the way and buying out their freeholds following our planned enfranchisement reforms. Both offer to put owners in the driving seat over the decisions that affect them.

In the case of new homes, our ground rent Act has cut off a key source of revenue for freehold landlords. Without strong economic reasons for developers to hold on to, or sell on, the freeholds of other people’s homes, we have created a powerful incentive for builders to put buyers in charge of their new homes from the outset. We know there is more to be done, which is why we are taking two key further steps on new homes.

First, we have made great strides in tackling the needless practice of selling new houses as leasehold. Our actions, including prohibiting Government programmes such as Help to Buy from funding new leasehold houses, have seen the share of new houses sold as leasehold cut from over 15% in 2016 to less than 2% today. But we are clear in our intention to go even further, which means that soon, other than in the most exceptional of circumstances, the selling of new leasehold houses will be banned altogether.

[Mr Betts]

The Minister has just made two commitments. One is banning the sale of new leasehold homes, and the other is bringing in a new process for enfranchisement. Is that a commitment to have both of those in the Bill that will be presented in this Parliament?

[Rachel Maclean]

It is a commitment that I have made from this Dispatch Box, and the hon. Gentleman has heard me say it clearly. He is an extremely experienced Member of Parliament, and he knows that it is not possible for any Minister to commit to the details of what will be in a future Bill or King’s Speech, but I am making commitments about the measures that we intend to enact.

For buyers of new flats—[Interruption.] Perhaps hon. Members would like to hear some further commitments. For buyers of new flats, we will also bring forward much-needed reforms to the commonhold system, so that flat owners and developers will finally have access to a viable alternative to leasehold. It was this Conservative Government that set up the Commonhold Council, and it has met regularly and we are working closely with it.

Several hon. Members spoke about recent reports from the Law Commission, and it is worth saying that we have been working in lockstep with the commission to ensure that our reforms are workable and deliver the outcomes we all want to see. Indeed, I take this opportunity to thank the commission for all its work in this area. It has made more than 300 recommendations for improving the leaseholder system across enfranchisement, including how valuation operates, commonhold, and the right to manage. I have no doubt that hon. Members appreciate the complexity of the reforms in this fiendishly complicated area, and it is absolutely right that we take the necessary time to ensure that they are done properly. We are unapologetic about saying that, for the sake of the owners of 5 million leasehold homes, we have to get this right, and that is what we are committed to do.