Leasehold and Freehold Reform Bill

Eddie Hughes Excerpts

Report stage
Tuesday 27th February 2024 Commons Chamber

[Lee Rowley]

My right hon. Friend is absolutely right, and the support that has just been expressed for her comments demonstrates that many of us see these issues in our constituency. As she says, it is vital that we give people who have made such sacrifices in order to achieve first-time home ownership the right to, and the greatest control over, that ownership.

[Eddie Hughes (Walsall North) (Con)]

In my constituency, Victoria Avenue (Harvest Grove) Management Company seems to be extorting money from leaseholders and not providing any of the works that it says it is providing. It is taking them to court and charging them for the benefit of having letters sent to them with invoices. Through this Bill, we desperately need to redress the balance between freeholders and leaseholders. Will the Minister see that that is the case?

[Lee Rowley]

My hon. Friend is absolutely right. He makes a very important point about transparency, which is at the heart of the service charge changes in the Bill. He makes an extremely important point about fairness. Not all companies will be doing things that are incorrect, but where they have been found to be incorrect, it is important that they shoulder their own costs.

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[Lee Rowley]

My right hon. Friend moves me on to my second point. We also recognise the strength of feeling on the vexed issue of forfeiture. The hon. Member for Greenwich and Woolwich (Matthew Pennycook) made a clear case on this in Committee, as did other Members, and I also heard a passionate and eloquent case in Committee from my hon. Friend the Member for Walsall North (Eddie Hughes).

[Eddie Hughes]

Will the Minister simply remove any opportunity for forfeiture? It is arcane and has no place in our system. I strongly suspect that would get support on both sides of the House.

[Lee Rowley]

The House sees my hon. Friend’s passion, which he demonstrated in Committee and is demonstrating again today. Both he and my hon. Friend the Member for Redditch made passionate cases in Committee.

I recognise that this is a real and significant problem, and there is a huge iniquity at stake. I have heard from colleagues, both today and previously, about why we should act, and we are currently working through the detail of the issue. We will report back to the House with more details shortly.

Finally, a comprehensive debate in Committee on freehold estates was led by my hon. Friend the Member for North East Bedfordshire (Richard Fuller). He is a committed campaigner on this issue, and I know that many other Members also have very strong views. I have also been involved in this in places such as Alderman Park and Hunloke Grove in my constituency. We understand the strength of feeling on this issue, and we are considering it further.

Leasehold and Freehold Reform Bill (Tenth sitting)

Eddie Hughes Excerpts

Committee stage
Tuesday 30th January 2024 Public Bill Committees

[Matthew Pennycook]

I beg to move, That the clause be read a Second time.

It is a pleasure to continue our line-by-line proceedings with you in the Chair, Sir Edward. For the sake of probity, simply because I will make reference to the organisation’s work, I once again declare that my wife is the joint chief executive of the Law Commission.

The reason for tabling the new clause is simple: forfeiture is a wholly disproportionate and horrifically draconian mechanism for ensuring compliance with a lease agreement, and it needs to be abolished through the Bill. To remind the Committee, the law of forfeiture gives the landlord the right, following a breach of a clause in the lease or an unpaid debt of £350, or a lesser sum if it has been outstanding for more than three years, to terminate the lease, regain possession of the property and pocket the unmerited windfall gain that would accrue from its sale.

Not all forfeiture actions relate to trivial breaches—some are made in response to serious transgressions of a covenant in a lease, such as instances of persistent and egregious antisocial behaviour—but many are initiated for entirely trivial breaches, such as nominal ground rent or service charge arrears. The current laws of forfeiture render it entirely possible, for example, for a tenant to lose possession of a £500,000 flat or house for a debt of as little as £351, or even £15 if unpaid for more than three years, with the landlord keeping the entire difference between the value of the property and the debt owed.

[Eddie Hughes (Walsall North) (Con)]

The hon. Gentleman is making a compelling speech. It seems crazy that in the 21st century somebody can lose possession of their property for such a small amount of money. I sincerely hope that he continues his compelling speech in such a way that he has a very positive effect on the Minister.

[Matthew Pennycook]

I thank the hon. Gentleman for that helpful intervention. I hope that I do have that effect, and that he can use his good offices to persuade the Minister of the merits of adopting new clause 1.

Leasehold and Freehold Reform Bill (Tenth sitting)

Eddie Hughes Excerpts

Tuesday 30th January 2024 Public Bill Committees

[Matthew Pennycook]

I beg to move, That the clause be read a Second time.

It is a pleasure to continue our line-by-line proceedings with you in the Chair, Sir Edward. For the sake of probity, simply because I will make reference to the organisation’s work, I once again declare that my wife is the joint chief executive of the Law Commission.

The reason for tabling the new clause is simple: forfeiture is a wholly disproportionate and horrifically draconian mechanism for ensuring compliance with a lease agreement, and it needs to be abolished through the Bill. To remind the Committee, the law of forfeiture gives the landlord the right, following a breach of a clause in the lease or an unpaid debt of £350, or a lesser sum if it has been outstanding for more than three years, to terminate the lease, regain possession of the property and pocket the unmerited windfall gain that would accrue from its sale.

Not all forfeiture actions relate to trivial breaches—some are made in response to serious transgressions of a covenant in a lease, such as instances of persistent and egregious antisocial behaviour—but many are initiated for entirely trivial breaches, such as nominal ground rent or service charge arrears. The current laws of forfeiture render it entirely possible, for example, for a tenant to lose possession of a £500,000 flat or house for a debt of as little as £351, or even £15 if unpaid for more than three years, with the landlord keeping the entire difference between the value of the property and the debt owed.

[Eddie Hughes (Walsall North) (Con)]

The hon. Gentleman is making a compelling speech. It seems crazy that in the 21st century somebody can lose possession of their property for such a small amount of money. I sincerely hope that he continues his compelling speech in such a way that he has a very positive effect on the Minister.

[Matthew Pennycook]

I thank the hon. Gentleman for that helpful intervention. I hope that I do have that effect, and that he can use his good offices to persuade the Minister of the merits of adopting new clause 1.

Leasehold and Freehold Reform Bill (Ninth sitting)

Eddie Hughes Excerpts

Committee stage
Tuesday 30th January 2024 Public Bill Committees

[Eddie Hughes (Walsall North) (Con)]

It is a pleasure to serve under you, Sir Mark. The civil engineer in me rises to agree with the hon. Gentleman completely; it is slightly embarrassing that we once again find common cause. The point is well made: if a set standard is identified that will be accepted universally by councils as one they would be prepared to adopt, and forced on the developers, the developers will meet that standard, but if they are left with any opportunity to build something substandard, they will always take it and they will frequently try to go further and not even meet the standard that they have prescribed in their own design work. I am sure that all Committee members will have seen examples of that in their constituencies. I again find common cause, and I hope the Minister considers these points.

[Matthew Pennycook]

I thank the hon. Gentleman for that intervention; it is a habit that I hope he continues because I think there is common ground here. When it comes to common adoptable standards, Ministers have often put it to me—the Minister no doubt will; previous Ministers have done—that local authorities have the tools they need to drive up the standards of public amenities that are constructed, but there is clearly something going wrong in that they are not ensuring that those standards are in place. As a consequence—not in every instance, but in many—local authorities have good reason to be reluctant to take them on.

We have tabled amendment 150 in an attempt to challenge the Government to consider how they might utilise the regulatory framework introduced by part 4 to drive up the standards of public amenities on the estates in question—that is the other half of the equation that I think we are all agreed we need. Our amendment would ensure that services or works on private or mixed-tenure estates that are required as a result of defects in construction are not relevant costs for the purposes of estate management. I think that, rather than the amendment of the hon. Member for North East Bedfordshire, would be the incentive that developers need to ensure that high standards are in place at the point that they hand the estate over. Ours is consciously a probing amendment and I hope the Minister will understand and appreciate the problem that it attempts to address, as does the hon. Member’s amendment. I look forward to hearing the Minister’s thoughts on it.

Leasehold and Freehold Reform Bill (Eighth sitting)

Eddie Hughes Excerpts

Committee stage
Thursday 25th January 2024 Public Bill Committees

[Eddie Hughes (Walsall North) (Con)]

It’s like those leases he keeps talking about; they just keep rolling round.

[Barry Gardiner]

Oh yes, I was intervening.

Leasehold and Freehold Reform Bill (Seventh sitting)

Eddie Hughes Excerpts

Committee stage
Thursday 25th January 2024 Public Bill Committees

[Lee Rowley]

I thank the hon. Member for his amendment. Even though I will not be accepting it today, it raises an important question and he is right to allow us to debate it. We absolutely recognise that leaseholders who pay fixed service charges do not have the same rights of challenge as leaseholders who pay variable service charges—that is accepted and understood—but it is also the case that there are good reasons for that.

As the hon. Member indicated, the main sectors where fixed charges exist are the retirement and social housing sectors, where households are often on limited and fixed incomes, as I do not need to explain to the Committee. Leaseholders, especially those on low incomes, who pay a fixed service charge have certainty about that charge, whereas those who pay variable service charges do not. Landlords benefit from not having to consider tribunal applications but, in return, they should have a clear imperative to provide value for money.

If we were to grant the right to challenge fixed service charges in a similar way to how variable service charges can be challenged, there would be some operational and practical challenges, which is one of the reasons why we will not agree to the amendment today. For example, if landlords underestimate costs in one year, but overestimate them in another, is it feasible and reasonable to be able to challenge the reasonableness only in the year in which the costs are overestimated? Should a reciprocal ability to challenge or to recover the balance of an underestimated cost in a year, on the basis that it would be reasonable to do so, not be proposed? Landlords might move away from employing fixed service charges and switch to variable service charges, which could have unintended consequences.

Fundamentally, I share the hon. Gentleman’s view that there are challenges in all parts of service charges, and so there will be challenges within fixed service charges. The whole point of other elements of the Bill is to provide transparency and visibility of the reasoning for charges being made. For the reasons I have outlined, we are not of the view that this extension should be made for fixed charges.

[Eddie Hughes (Walsall North) (Con)]

I want to pick up on the shadow Minister’s point about ambiguity. There is no definition of what exactly would constitute a fixed charge, so there is the opportunity for flexibility or the law of unintended consequences. Given the lack of opportunity for subsequent challenge, a landlord might choose to move a charge from one column to the other. When the Minister said he would not accept the amendment today, did he mean he would give this point some further consideration in the future, or was he just being polite?

[Lee Rowley]

I am grateful to my hon. Friend for his question. Notwithstanding the tone of my responses, given the Committee’s interest I will happily write to it to make sure there is clarity on that point. I hope that, as a general and broad macro point, my comment still stands.

Leasehold and Freehold Reform Bill (Sixth sitting)

Eddie Hughes Excerpts

Committee stage
Tuesday 23rd January 2024 Public Bill Committees

[Richard Fuller]

Somebody had to mention the vase.

[Eddie Hughes (Walsall North) (Con)]

Or the cup and saucer?

[Richard Fuller]

I am just so glad it was not me. The Minister and shadow Minister are far more experienced than I am on this matter, so I am drawing on a much more limited data set than they are. But, to date, I have not heard loud and clear that there is no such thing as marriage value. I have heard that there are questions about how it is calculated and that we do not think it should apply, which is a political point of view. If the shadow Minister is trying to say that there is something else he wants, between the issues of calculation and of making a political decision to transfer it, that is interesting to me. I do not think that he has been trying to make that point, and I certainly do not think we have heard that evidenced.

It is a crucial point. The idea that we are expunging values that relate to something real, which is under contract, is a material point in trying to make this legislation bulletproof or, as the Minister rightly says, to ensure that, in a hotly contested area, the Government get it right. In circumstances where there are real values —although perhaps massively overemphasised—where performance has been exemplary or to contract, where there has been no question of the performance required under contract, and, finally, where there has not been price gouging, or this automatic doubling every two years, and the rents have remained the same, what is the reason to apply legislation retrospectively?

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[Eddie Hughes]

It is a pleasure to serve under your chairmanship, Dame Caroline. I was triggered to speak by some of the references to limiting ground rents to 0.1% of the property value, and am feeling nostalgic about my ten-minute rule Bill from June 2019, the Ground Rents (Leasehold Properties) Bill. That is an issue that I have been interested in and concerned about since I got to Parliament.

In my ten-minute rule Bill, I suggested that we limit ground rents to 0.1% of the property value, or £250, depending on which was the higher. In the evidence session, we heard that in some parts of the country, ground rents can very quickly become onerous for existing or prospective mortgage lenders. I want to ensure, however, that we do not let certain elements of our discussion of the clauses of the Bill pass by without celebrating the great things that are going on in it.

To some people, this might be a dry exchange, with some technical data about calculations—as a civil engineer, I love a bit of differential calculus, but it might not be to everyone’s liking—but some great stuff is going on in the Bill. We should be enthusiastic about that and celebrating it, because it will genuinely make a difference to the lives of people who are listening. It has also made a great difference to my life, because I feel as if I am seeing my ten-minute rule Bill slowly come back to life in this Committee.

[Lee Rowley]

It is as if we have all the emotions in an all-encompassing and unexpectedly interesting post-lunch debate. Let me try to summarise as quickly as I can. I am grateful for everyone’s contributions.

Turning to the substantive points made by my hon. Friend the Member for North East Bedfordshire, I, like him, start from the principle that if there is consensus, we should look at things in more detail without casting any aspersions on our colleagues on the other side of the aisle. I think there is consensus not because I have suddenly converted to social democracy or socialism—that is absolutely not the case—but because even from different angles we can see that there is a challenge. I will try to argue this a little from Conservative principles for a moment.

I recognise the absolutely reasonable points made by my hon. Friend about the additional information that is needed, which we have talked about on multiple occasions, and I recognise that there are always inherent dangers and unintended consequences in any change, which is why things need to be thought through in the manner in which he indicated. In the limited time I have had experience of this matter, however, I have been convinced that the proposal is proportionate, and that is why I am in Committee today on behalf of the Government.

My hon. Friend rightly made the point about how property rights and contract law are the absolute bedrock of our functioning as a society. In particular as Conservatives—to speak just for those on this side of the aisle for a moment—we seek not to move them around, change them, or amend them on a regular basis, because certainty and clarity are at the heart of a functioning and robust democracy. As Conservatives and from the centre-right, however, we also have a deep aversion to rent-seeking and middlemen, and we have a deep and avowed, if imperfect, commitment to free and more perfect markets.

There is a challenge with all manner of things, whether that is marriage value or the percentage used in ground rent. If we were dealing with a market in widgets, with very low barriers to entry, a plethora of supply, and the ability for people to come in and out on a regular basis, I would potentially draw a different conclusion, but the reality is that the housing market is severely constrained by a number of factors, and it has been for many decades. It is not a perfect market. Therefore, it is proportionate to regulate in the ways we are talking about.

On the point about rent-seeking and middlemen, we must be cautious about legislating via anecdote, which we should not do. We must absolutely do the kind of deep analysis that hon. Members suggested a moment ago that we should. I am led to believe that a lot of what we are seeing with ground rent and other aspects included in the Bill would not have been visible 20, 30 or 40 years ago, because it would not have happened. Effectively, a market has been created—at least in part if not wholly—because, for want of a better phrase and without being pejorative, loopholes have been exploited. That has enabled middlemen to take profit out and distort the market, making it less perfect and meaning we have ended up in the place where we are today.

I absolutely share the caution expressed by my hon. Friend the Member for North East Bedfordshire about making sure the elements are right. We may differ in the end about whether or not the changes are proportionate, but I know we share the ultimate objective that the market should be made perfect. The clauses take us in that direction. It is an absolute requirement from a Conservative perspective to smash middlemen and rent-seekers and make sure that they do not take money from people for no reason. For those reasons, I commend the clauses to the Committee.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clauses 10 and 11 ordered to stand part of the Bill.

Schedule 2

Determining and sharing the market value

Amendment made: 59, in schedule 2, page 90, line 28, at end insert—

“Business tenancies

10A (1) This paragraph applies only to—

(a) the transfer of a freehold house under the LRA 1967, or

(b) the grant of an extended lease of a house under the LRA 1967.

(2) The standard valuation method is not compulsory for the property comprised in the current lease if that lease is a tenancy to which Part 2 of the Landlord and Tenant Act 1954 applies (see section 1(1ZC) of the LRA 1967).”—(Lee Rowley.)

This amendment would prevent the standard valuation method in Schedule 2 from being compulsory if the current lease is a business tenancy (which benefit from the rights of enfranchisement and extension under the LRA 1967 in the circumstances set out in section 1(1ZC) of the LRA 1967).

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[Lee Rowley]

New clause 7 is a key amendment to close a loophole that landlords could potentially use to recoup process costs from tenants via variable service charges. These are costs to which they are not entitled under the new cost regime. The new clause is supported by a number of consequential amendments.

The new clause will support the new cost regime introduced in the Bill, which, as the Committee will be aware, seeks to prevent landlords from recovering process costs from leaseholders making enfranchisement or right-to-manage claims in the appropriate tribunal. In its current form, the Bill takes active steps to prevent a potential loophole by ensuring that variable service charges cannot be used by landlords as a mechanism to charge leaseholders for their litigation or process costs in connection with any of the aforementioned claims made by leaseholders.

[Eddie Hughes]

Can the Minister clarify whether the prescribed format would include the application of charges for insurance?

[Lee Rowley]

I hope to clarify that issue for my hon. Friend in the next few minutes. If I am unable to do so, I will write to him.

New clause 7 seeks to go a step further in blocking the loophole by ensuring that landlords are unable to recoup costs through variable service charges issued to other tenants who are not actively participating in the claim. To be certain that the new clause is effective, we are clarifying that these costs are not defined as relevant costs that a landlord is allowed to include in service charges. We are also giving the appropriate tribunal a new power to order landlords to repay leaseholders in cases in which they have wrongly been charged for such costs.

Although we recognise that it is unlikely that landlords will seek to circumvent the intent of the Bill, it is important that our efforts to remove barriers to leaseholders bringing applications to enfranchise or to exercise the right to manage are not undermined, and that we ensure that the cost regime is watertight and fairer for leaseholders. I reiterate that new clause 7 will have the effect of preventing landlords from using service charges to obtain from leaseholders costs to which they are not entitled. This will be supported by a power for the tribunal to order landlords to repay leaseholders to whom they have incorrectly passed on such costs. I commend the new clause to the Committee.

I turn to the Government’s position on the amendments tabled to clauses 12 and 13. Amendments 4 and 5 would remove proposed new section 19C of the Leasehold Reform Act 1967 and proposed new section 89C of the Leasehold Reform, Housing and Urban Development Act 1993, which together would establish an exception to the new general rule that each side will bear its own costs in tribunal proceedings for enfranchisement and lease extension claims for flats and houses respectively. The exception exists to entitle landlords to receive a portion of their process costs from leaseholders in low-value claims—those for which the premium to be paid to the landlord by the leaseholder is less than the process costs.

I should note that I share the worthwhile desire of the hon. Member for Greenwich and Woolwich to make it cheaper for leaseholders to enfranchise or extend their leases. For too long, the balance of power has been weighted too much in favour of landlords. We have introduced changes to the cost regime because we believe that they will make it fairer, and because we wish to remove the risk and uncertainty facing leaseholders bringing such claims. While restoring balance, however, it is important that the new regime is fair for both sides when there are claims of this nature. Rightly, leaseholders have a statutory ability to enfranchise or extend when they like. In low-value claims, it is not fair for landlords to be required to incur a net financial loss at any time that leaseholders wish to exercise their rights. In claims that are not low-value, the landlord will receive sufficient compensation and will be able to use this to cover the costs incurred; in low-value claims, that is not possible, as the premium is less than the process costs.

Part of the reason why leaseholders have been liable to pay their landlord’s reasonable process costs is to ensure that landlords are protected from unfairly burdensome costs. They could face these costs at any time. In many cases, landlords have no choice but to pay out, given their duty to honour the statutory rights of leaseholders to enfranchise or extend their lease. The low-value claim cost provisions create protection. They mean that leaseholders will be liable for some of their freeholders’ costs, but their exposure to cost will not be excessive. Although it is right that the cost regime changes, we must continue to ensure that there are protections in place both for leaseholders and for landlords. I ask the hon. Member for Greenwich and Woolwich kindly not to press his amendments.

We have been clear that we want to make it cheaper and easier for leaseholders to extend their lease or buy their freehold; that is the whole point of this Bill. Clause 12 will make it cheaper for owners of leasehold houses to exercise their enfranchisement rights. It introduces a new cost regime with a general rule that, in future, both landlords and leaseholders will bear their own process costs during an enfranchisement claim. Process costs could include costs for services such as valuation, conveyancing and other legal costs. This could save a leaseholder thousands of pounds. Leaseholders will no longer be deterred from bringing a claim because of the process costs demanded by their landlord, and a leaseholder will no longer face unknown costs from their landlord, making it much simpler to buy their freehold or extend their lease.

Leasehold and Freehold Reform Bill (Fifth sitting)

Eddie Hughes Excerpts

Committee stage
Tuesday 23rd January 2024 Public Bill Committees

[Lee Rowley]

I thank hon. Members and Friends for their contributions. I will take them in turn. On the amendment, I find myself in the slightly unusual place of arguing against a Henry VIII power, as they are occasionally called and as he referred to them. As indicated, there are a number of Henry VIII powers in the Bill, and I am sure that people will have views on them when we get to them. Our colleagues in the other place often have very strong views on such powers. It is an unusual place to be, but I happily take it up.

I absolutely understand the point that hon. Members have made and the reality of what they are trying to articulate. The fact that we are making a change indicates that there are times when it is proportionate and reasonable to make changes. The reason for the Government’s not taking powers in secondary legislation—which I know, joking aside, that hon. Members would accept—is that there is a continuum for drawing or not drawing lines, and we think that this does not necessarily need to be on the line of taking powers in order to do things in secondary legislation, simply because this is a substantial change. It is being actively debated; Members are debating whether it is sufficient and, as my hon. Friend the Member for Redditch asked, precisely how it will work to improve the situation in practice. I think the Government’s preference is to keep that discussion in primary legislation. We recognise that primary legislation is always more challenging in terms of timelines and space in this place, but it is a sufficiently important change that it should be able to be debated in the way we are doing today.

[Eddie Hughes (Walsall North) (Con)]

I understand that it is appropriate to future-proof legislation and allow for flexibility, but I agree with the Minister that a substantial change has already been made. Proportionately, we are talking about the number of buildings that have already been constructed, and therefore the people that we are helping. I fully appreciate that the shadow Minister is concerned about future developers gaming the system, but in terms of proportion, it is important that we focus our efforts on the buildings that have been built.

[Lee Rowley]

I am grateful to my hon. Friend for highlighting that. The shadow Minister expressed hope that the Government would agree with some of his amendments at some point. I am afraid that I will have to dash his hope on this one. We understand its purpose, but on the basis that I have articulated, we would prefer to keep this in primary legislation. I hope that the shadow Minister might consider withdrawing the amendment.

On clause 3, as it stands, we have been clear that we want to improve access to collective enfranchisement so that more leaseholders of flats can enjoy the benefit of freehold ownership. Many leaseholders in mixed-use but predominantly residential buildings are currently prevented from buying their freehold, as hon. Members have indicated. Clause 3 amends the 1993 Act to increase that limit from 25% to 50%. This has been consulted on widely and was recommended by the Law Commission. Where residential leaseholders take up the majority of the floor space in a building, it is our view that they should be able to access the long-term security and control that comes with freehold ownership, if they choose to do so.

We recognise that this change impacts freeholders. If the leaseholders choose to buy their freehold, the freeholder stands to lose ownership of individual buildings, and that may fragment ownership of some areas over a longer timeframe. We believe that impact to be justified not only because of the significant benefit to leaseholders but because freeholders will be compensated for that loss. We do not believe, as a principle, that the single contiguous ownership of space is absolutely necessary for buildings to be managed well.

We have also heard arguments from leaseholders that they will be unable to professionally manage mixed-use buildings. Although I understand their point, through, for example, the delegation of a building’s management to an agent, that should be overcome. I accept the points made and understand the shadow Minister’s point on the difficulty of ensuring that leaseholders can be engaged to the point where they pass the threshold, whatever the number—and all numbers are ultimately arbitrary. As he has indicated, I think the Committee will return to this, but we think the clause, as it stands, is the right approach. Therefore, we resist the amendment and hope that the shadow Minister will withdraw it.

--- Later in debate ---

[Lee Rowley]

I am grateful to my hon. Friend for his legitimate points. He is absolutely right that it is important that right hon. and hon. Members have an opportunity to debate at the earliest possible opportunity the complex interaction of what we may or may not choose to do with the consultation. I take his point about hypotheticals. My point was simply that there are a number of different options in the Bill. Some of them are substantially different, as my hon. Friend indicated in some of his questions last week. To go through all the elements of the potential outcomes in all of those different options would be a substantial amount of work and potentially not necessary on the basis that we are likely to choose some rather than all of them. None the less, where I have missed anything out, I will—

[Eddie Hughes]

The point being made is one of proportion. We are talking about a couple of a billion pounds versus up to £25 billion, £27 billion, which is a significant amount of money for the Government to be considering transferring, as my hon. Friend says, from one party to another. The size of the costs that might be incurred from one party to another makes it important for us to know as soon as possible.

[Lee Rowley]

I absolutely accept the potential significance of the quantum involved, which is why we all seek to be as clear as we can at the earliest opportunity.

Leasehold and Freehold Reform Bill (Fourth sitting)

Eddie Hughes Excerpts

Committee stage
Thursday 18th January 2024 Public Bill Committees

[Barry Gardiner]

I am sure hon. Members can ponder on your words and work it out from there. Thank you; that is really helpful.

[Eddie Hughes (Walsall North) (Con)]

Q Mr Freedman, you represent developers and investors as part of your job. You just referenced the possible impact on pension funds. How significant is that? I am hearing, on the one hand, that people have very diverse portfolios, so although it would be a big number, it would be broadly distributed, nobody would actually feel any real impact and this is just a bit of shroud waving by people who would rather be very rich instead of quite rich. However, there are other people who say, “Hang on a sec, this is not very Conservative, is it?” or, as has been said, that we are talking about transferring wealth from one bunch of people to another. Clearly, Parliament can do that, but the impact might be greater on one than the other. I just wondered about your thoughts on that.

Philip Freedman: I am afraid that I cannot give you the answer to that. because I am not directly acting for those particular clients. I am afraid I know no more—

[Eddie Hughes]

You do not have a view. We will not take your professional—

Philip Freedman: I can completely understand that pension funds have invested in part in long-term income that they believed to be secure when they did it—that is, income for 90 years, 990 years or whatever it was going to be. I am told that a number of pension funds and other types of investment entity have invested cautiously, not necessarily buying portfolios where there are hugely escalating ground rents, but either fixed ground rents or modestly increasing ground rents that people would not say were egregious. However, they are still concerned because, in many parts of the country, particularly in the north-east, for example, property prices are so low that even 0.1%—even 1,000th of the price of a flat—would reduce the ground rent. The ground rent might be £100 a year or something, but the cap would result in it being £50 a year or something like that. Obviously, the impact would be great for those portfolios that have hundreds or thousands of these.

[Mike Amesbury]

Q Your organisation has said it is disappointed that the Bill does not deal with the regulation of managing and property agents. Can you elaborate on that? What needs to be included in the Bill?

Philip Freedman: The Law Society has been participating in various working groups following Lord Best’s report, trying to help with the preparation of codes of practice that were intended to sit underneath the regulatory framework for property agents of different types, whether selling agents, managing agents or whatever. We feel that, because tenants often do not know what their rights are, and if they did know what their rights were, they may not want to spend the time or money getting someone to help them enforce their rights, you come back to the people actually doing the management. They need to be proactively willing to be transparent, and to realise that they have duties to the tenants as well as to the landlord. It needs a mindset change in the people who are doing the management. You do not want to rely on tenants having to try and find out what their rights are and then enforcing them. We feel, therefore, that a lot of the changes in the Bill, and other changes that have been talked about, will be better achieved if property managers are regulated, and that the right people with the right tuition being told what their duties are would be improved by regulation.

Leasehold and Freehold Reform Bill (Third sitting)

Eddie Hughes Excerpts

Committee stage
Thursday 18th January 2024 Public Bill Committees

[Mike Amesbury]

Q Would you welcome amendments to the Bill to try to capture that by regulation, by legislation?

Paul Broadhead: Yes. Anything that makes it clearer and gives lenders confidence and consumers confidence that their building is safe and they are not going to face an unexpected bill has to be welcome.

[Eddie Hughes (Walsall North) (Con)]

Q I am slightly confused. I thought it was now the case that properties did have to be advertised as leasehold or freehold. Has that changed?

Paul Broadhead: Well, often the advert will say that a property is leasehold but that that will be confirmed by the conveyancer, so you do not know 100% whether it is leasehold or what the terms of the lease are.

[Eddie Hughes]

Q So there is not an obligation currently for estate agents to market properties in a way identifying whether they are leasehold.

Paul Broadhead: Not to my knowledge, no. I do not think there is.

[Eddie Hughes]

Q Maybe I made a mistake. You said that it would take some time to unwind the fact that we have—currently—4 million leasehold properties in the country. Can you give us an idea of how long you think it will take, depending on the outcome of the Government’s recent consultation? Were they to move to peppercorn rates, how long would this take to unwind? And give us a flavour of what would be the complexities.

Paul Broadhead: In terms of the peppercorn rate, it is a really difficult question, because it is almost, “How long is a piece of string?”

[Eddie Hughes]

Q But you are a man who knows, so even if you just give us your thoughts, that will be helpful.

Paul Broadhead: I still think it would take decades to unwind everything to a peppercorn rate, because you need the group of leaseholders together to agree to enfranchise, which is quite difficult. I will give you one example we have come across, which was following the escalating ground rents. Housebuilders had written out to leaseholders and said, “We will convert your property to leasehold for free. We are going back on what we’ve done; we think we did the wrong thing.” The number of people coming forward and taking that up was negligible. You need to engage consumers. It is not just about putting the building blocks in place to make this better; it is enabling—

[Eddie Hughes]

Q Or to make it possible. Just because it is possible, does not mean it will actually happen.

Paul Broadhead: Absolutely, and you still need to engage the public and the legal profession that is taking people through, to make sure they understand what the benefits are and the cost of that. That individual value equation will change from leaseholder to leaseholder.

[Eddie Hughes]

That is very helpful, thank you.

[The Chair]

We have five minutes left. I will turn to Lee Rowley but please bear in mind that I want to bring in Barry as well.