Leasehold Reform (Ground Rent) Bill [ Lords ] (Third sitting)

Debate between Eddie Hughes and Nickie Aiken

Committee stage
Thursday 9th December 2021 Public Bill Committees

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Eddie Hughes)]

It is a pleasure to see you back in the Chair, Ms Elliott.

As hon. Members will know, it is our intention to protect leaseholders from unfair practices through the Bill by ensuring that future regulated leases are restricted to a peppercorn rent, unless excepted. The Government believe that those who purchase retirement homes should benefit from the same reform as other future leaseholders. Although we would like the provisions of the Bill to come into effect as soon as possible, we have decided to give the retirement sector additional time to prepare for these changes. The hon. Member for Weaver Vale has tabled amendment 10 to remove this provision and do away with the transition period entirely. I am grateful for his consideration of this point and would like to explain the reasoning for including a transition period for retirement properties, and why I believe that that is the right thing to do.

The plan for peppercorn ground rent was announced in 2019, following the Government consultation entitled “Implementing reforms to the leasehold system”. At the time, we also announced that we would proceed with the proposal to exempt retirement properties from the peppercorn ground rents policy. That decision was made on the basis that developers of retirement properties incur additional costs as a result of the communal spaces that are characteristic of these kinds of development. However, having reviewed this in further detail, we concluded that the argument in favour of an exemption did not outweigh the benefits of ensuring that those purchasing retirement homes can take advantage of reform in the same way as any other leaseholder could.

The Government believe that it is a matter of fairness that those buying retirement properties should be able to realise the benefits of this legislation. It was therefore announced in January 2021 that the exemption for retirement property would no longer apply, and we have offered the transition in recognition of that change of policy. As such, the Bill will come into force no earlier than 1 April 2023 for retirement homes. This transition period will allow developers of retirement properties time to adapt to the forthcoming changes. We believe the transition period in the Bill has been fairly granted in balancing the needs of developers and fairness to leaseholders.

[Nickie Aiken (Cities of London and Westminster) (Con)]

I have some sympathy with the amendment, but I absolutely hear what the Minister says about what he is trying to achieve. Many house builders we have heard from over the last few weeks have decided not to continue charging ground rent, because it is not a good idea. If I may be so bold, perhaps the retirement development industry might like to stop charging such exorbitant fees for ground rent, without the need for legislation.

[Eddie Hughes]

I thank my hon. Friend for her intervention. I will no doubt refer later to meetings I have had, including as recently as yesterday, with representatives from the sector. It is not necessarily for us to prescribe how they might change their business models, but different developers in the sector certainly take different approaches. Given that we signalled one intention and subsequently changed to another, I think we are striking the right balance in allowing a transition period.

In the other place, arguments were raised on both sides; there were those who wished to extend the transition period and those who wished to remove it. As I said, conversations are ongoing, including as recently as yesterday, and hon. Members including my right hon. Friends the Members for Chipping Barnet (Theresa Villiers) and for New Forest West (Sir Desmond Swayne) have been in favour of amending the transition period for the sector.

We acknowledge that the retirement sector has had less time to prepare than the rest of the development industry. However, we have given the matter careful consideration, and we believe the transition period in the Bill strikes the right balance between protecting retirement property consumers and providing a fair period of adjustment for developers. In my conversation with representatives yesterday, it was clear that prospective purchasers are already aware of the planned legislation—they seem to be a well-informed group—and I guess they will be mindful of that when deciding when to complete their purchase.

With regard to hon. Members’ concerns about the impact, I think it will be minimal for two reasons. First, the people who buy this type of property seem to take longer to make the purchase than would perhaps otherwise be the case; in fact, the sell-out rate for such properties is considerably slower than for normal residential properties. Buyers have a greater period over which to consider the purchase, and they frequently visit several times—first by themselves, and subsequently with members of their family—so this is a very considered purchase. Secondly, they seem to be well-informed about the changes to legislation. For those reasons, I feel they will be protected.

Leasehold Reform (Ground Rent) Bill [ Lords ] (First sitting)

Debate between Eddie Hughes and Nickie Aiken

Committee stage
Tuesday 7th December 2021 Public Bill Committees

[Eddie Hughes]

As I said in answer to the previous question, we can already see—not just now, but over the previous few years—that there has been a rapid decrease in the number of properties being constructed and subsequently sold in this way, so the hon. Gentleman should feel reassured that the Government’s intended legislation is already having an incredibly positive effect.

[Nickie Aiken]

Following the previous point, does the Minister agree that the conduct of house builders such as Countryside Properties, which has voluntarily agreed to remove the doubling of ground rents from its leasehold contracts, is a step forward? The Home Builders Federation or another trade body should be working with its members to take that forward, as Countryside Properties and others have done, but too many house builders are still not doing so. Perhaps the CMA review will help, but perhaps the Bill will send a clear message to house builders that, actually, they should be looking at their own practices before they are made to do so by the legislation.

[Eddie Hughes]

I can say nothing other than that I completely agree with my hon. Friend’s comments.

--- Later in debate ---

[Eddie Hughes]

About the amendments, Mr Hollobone. Amendments 11 and 13, tabled by the hon. Member for Weaver Vale, seek to reduce the payment of rent on a shared ownership property. Shared owners are leaseholders of a share of their property. Most shared ownership properties fall within the terms of the Government’s shared ownership scheme, and the providers will be registered with the Regulator of Social Housing. In the Government’s existing shared ownership scheme, owners have a full repairing lease and are financially responsible for all maintenance charges and outgoings in the same way that any other homeowner is.

On 1 April, the Government confirmed the new model for shared ownership, which introduces a 10-year period during which the landlord will support the cost of repairs and maintenance on new build homes. Under the shared ownership model, landlords can collect rent on their share of the property, and I reiterate that the Bill will allow them to continue to do so. The payment of rent reflects the fact that the shared owner has purchased a share of their home, and pays rent on the remaining share, which is owned by their landlord. The rent paid is not the same as the service charge paid for repairs and maintenance previously described.

The effect of amendments 11 and 13 would be to remove the ability of a landlord to receive the rent that they are rightly due on the share of the property that the leaseholder rents in cases in which the service charge is more than £100 per month. The law is clear that service charges must be reasonable and that, where costs relate to work or services, the work or services must be of a reasonable standard.

[Nickie Aiken]

I just wish to mention service charges in central London, as the hon. Member for Weaver Vale did. I am very aware of extortionate service charges in central London, particularly for private blocks. Service charges of £100,000 are not unknown, but the properties in those cases are worth around £35 million; I suggest that, if someone can afford to buy a £35 million flat, they may be able to afford a £100,000 service charge. However, the hon. Member for Weaver Vale makes an important point, and I would like the Minister to consider it. We must not put all service charges into the same pot. We have to ensure that homes within the community—rent to buy, social housing and community housing—are different from very expensive properties. We cannot put them all into the same position. We must give landlords the ability to charge a fair service charge that is in keeping with the value of the home. There has to be a balance. There is a big difference between a £35 million flat and a rent-to-buy property.

Oral Answers to Questions

Debate between Eddie Hughes and Nickie Aiken

Monday 29th November 2021 Commons Chamber

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Eddie Hughes)]

I am disappointed by the hon. Lady’s suggestion that it has been abandoned. It certainly has not. The Government are committed to giving all people somewhere safe to sleep. We have the £10 million winter pressure fund and we have the winter transformation fund to help charities and faith groups to deliver single-unit accommodation, so this Government are very much committed to the cause and I would welcome working with the hon. Lady on this in the future.

[Nickie Aiken (Cities of London and Westminster) (Con)]

T7.   As the Secretary of State will be aware, I am working with peers, other Members of this place and charities to secure the repeal of the Vagrancy Act 1824, which criminalises rough sleepers rather than helping them. My constituency is home to the largest number of rough sleepers in the country. The former Secretary of State said in the House in February in answer to a question of mine that he thought that the Act should be “consigned to history”. What does the current Secretary of State think of the Vagrancy Act?