Leasehold and Commonhold Reform

Esther McVey Excerpts

Wednesday 2nd October 2019 Westminster Hall

[The Minister for Housing (Ms Esther McVey)]

I congratulate my hon. Friend the Member for Worthing West (Sir Peter Bottomley) on securing today’s debate on the progress of leasehold and commonhold reform. He is a determined and formidable campaigner. I am also grateful to the Opposition Members who, with my hon. Friend, have been making solid progress on this important matter. With more than 4 million leasehold properties in the UK, we need to ensure that the system is working correctly, and that where it is not—where we see unfairness and exploitation—the market is held to account and changed.

[Sir George Howarth (Knowsley) (Lab)]

During a recent Backbench Business Committee debate on the Floor of the House, my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) and others raised the problem of people who had bought new properties in the north-west with leasehold arrangements that, to be frank, are a rip-off. At that point, the body language of the Minister—great champion of free enterprise that she is—conveyed her recognition that we had a case. Will she agree to meet a small delegation to discuss what can be done? The developers involved, in particular Redrow in my constituency, are completely unwilling to discuss the rights and decencies due to our residents.

[Ms McVey]

I will indeed meet the right hon. Gentleman and a delegation of fellow MPs. I did not realise he was such a good reader of body language, but he is quite right. The cases raised are not right, the system is not working right and those who agree with the market can see that it is not working right for the market either. Such cases should not be happening.

Let me be clear: the Government are committed to improving consumer fairness for leaseholders, and we have a programme of work under way to make sure that changes are made. Some of that work has already happened, including setting out how the ban on leasehold for new homes will work and stating our intention to reduce to zero ground rents on new leases, if we have them at all.

[Mark Tami]

The Minister talks about going forward, which is great, but we must go back too. We cannot leave behind the people who have been sold a pup. People tell us how they were advised to use Taylor Wimpey’s own lawyers and how it was never pointed out to them that the properties were leasehold. Even now, some people do not realise that they have a leasehold property.

[Ms McVey]

The hon. Gentleman makes a fair point; I will come to it later in my speech. No doubt, he realises that with leaseholds dating back a long time, there are legalities to unpick, but we are working on understanding how to do that.

I am pleased to see that the leasehold house ban has had an immediate effect on the market. In 2017, when we first made the announcement, 10% of new-build houses in England were sold as leasehold; today, that figure is down to 2%, which is significant progress, but we obviously want to make more. We will still legislate to ensure that, in future, apart from in exceptional circumstances, all new houses will be sold on a freehold basis.

Developers will no longer be able to use leases on houses for financial gain—a practice that has become the norm in some parts of the country, as we have heard again today. That will make certain that the right tenure is used on the right properties, which will make it fairer for all. The reforms will remove the incentives for developers and freeholders to use leaseholds to make unjustified profits at the expense of leaseholders.

[Matt Western (Warwick and Leamington) (Lab)]

To echo the point made by my right hon. Friend the Member for Alyn and Deeside (Mark Tami) about going back, do the Government see that as a responsibility and could they find a way to intervene? We have identical houses on the same estate: they were sold in the first phase as leasehold but are being sold in the second phase as freehold at the same price, yet the owners of the first-phase houses have been told that they must pay £3,750 to Persimmon, Redrow or whoever to convert to freehold. There is no market and there is no choice in that—is it not wrong?

[Ms McVey]

Everybody here can agree that is wrong, but it is about the steps that we will have to take to get the situation under control. We are looking at help for existing leaseholders, many of whom face, as the hon. Gentleman says, onerous fees and charges, including the doubling of ground rent in some cases. The Housing, Communities and Local Government Committee and many existing leaseholders want the Government to legislate to amend those. We are deeply concerned about the difficulties that people are having with those charges, but we clearly have to look at how to unpick those contracts, which are set in law.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I am grateful to the Minister for her generosity in giving way and to the hon. Member for Worthing West (Sir Peter Bottomley) for securing the debate.

One thing I would beg the Minister for is a simple right-to-buy formula, perhaps based on the number of years remaining—a multiple of the ground rent, in some way—that could be applied nationwide. I know there will be a lot of complexities in that, but is it something she is looking at in those plans? It would be great to hear if she were.

[Ms McVey]

We are indeed looking at a much simpler model that people can understand and make sense of, and at how to make it easier, smoother and quicker to do.

We have also made sure that there is a voluntary way for the sector to come together to solve the problems of its own creation. The industry pledge is an important first step. It has been signed by more than 60 leading developers, freeholders and managing agents. We will work with them and keep a vigilant eye on how it is working. Through that pledge, freeholders have committed to identifying any lease that doubles more frequently than every 20 years and contacting the relevant leaseholders to offer to amend their lease where necessary. I acknowledge those developers that have signed the pledge not to insert such clauses into future leases and welcome that. The pledge is an important first step, but we need to keep our eye on it. We will continue to monitor how effective it is in supporting leaseholders and we will take further action where necessary.

[Matt Western]

The Minister is being generous in giving way. It is interesting to hear that there is a voluntary assembly of the various housebuilders and developers. Surely, however, there is an opportunity for a paid-for body, funded by all those builders, to come together and arbitrate on behalf of the leaseholders and come to a sensible cost for them to pay for the conversion to freehold. Would not an independent body funded by the builders be a better solution?

[Ms McVey]

All the ideas that have come forward are being looked at to figure out what the way forward will be. That may well be something that ends up happening. At the moment, I cannot say, but we will look at every idea that comes forward.

The Government are looking to standardise the enfranchisement process and have asked the Law Commission to review the current arrangements. That is to support existing leaseholders and, as mentioned, it includes making buying a freehold or extending a lease easier, quicker and as cost-effective as possible. The Law Commission is analysing responses to its consultation paper on leasehold enfranchisement reform, “Leasehold home ownership: buying your freehold or extending your lease”. This autumn, it will report back to Government on the options for reducing the price of that, and on all other aspects of the enfranchisement regime early next year. I look forward to receiving its recommendations.

[Mike Amesbury (Weaver Vale) (Lab)]

If there is evidence of mis-selling and collusion between solicitors and developers, what action can the Government take?

[Ms McVey]

I shall come to that later, but the hon. Gentleman will know as well as I do, I hope, that that is looked at and where it can be proved that something wrong and unlawful has been done, it will be taken up and checked.

Obviously still more needs to be done. Our recent publications show the other plans we have for leasehold reform. They include our responses to the technical consultation on implementing reforms to the leasehold market, and to the Select Committee, most of whose recommendations we were able to accept in full or in part. We have also committed to regulating managing agents, and to improving the transparency and fairness of service charges. Too often, people feel ripped off by fees and charges, sometimes not even being told what they are paying for. We have committed to introducing a single mandatory and legally enforceable code of practice to set standards across the sector. We will also require agents to be qualified to practice.

Last October, we established an independent working group, chaired by Lord Best, to look at how standards can be raised across the property sector, and to consider how fees such as service charges should be presented to consumers. The working group published its final reports to the Government in July. We are considering its recommendations and will announce the next steps in due course.

[Sir Peter Bottomley]

The whole House is grateful to my right hon. Friend. There may not be time to get through all the things that the Government are doing and looking forward to doing, so would she consider making a written statement to lay things out and make them available to all, not just those who are here for the debate?

One thing that may not be dealt with straightaway is looking at the regulations on recognised tenants’ associations—in effect, recognising leaseholders, which I know is a tricky issue. The Government wrote to me saying that they would consult the property tribunal about how this was working. I do not ask for an instant response, but that is one of the issues that should go forward.

The Minister’s response to the Select Committee report is very good. The report was one of the best I have seen in all my time in the House, and the Government are responding to it well.

[Ms McVey]

My hon. Friend makes a good point. We should and will lay the matter down as a written statement. Everyone, across the House, appreciates that there is bad practice. Where bad practice happens, in whatever form, it should be taken to task.

It is unacceptable that some freehold homeowners are unable to challenge excessive fees for the maintenance of their estates. We are going to legislate so that residential freeholders will be given the right to challenge the reasonableness of such fees. They will also be able to apply to the tribunal to appoint a new manager. That will help to increase the transparency, accountability and reasonableness of the fees.

Many leaseholders have raised concerns because they believe they were mis-sold their properties—the leasehold tenure was not properly explained to them, and the onerous terms were not made clear. Some were told that they could buy the freehold for a certain price after a couple of years, only to find out that it had been sold on to an investor in that time and that either the price had gone up considerably or they could not buy it. I welcome the Competition and Markets Authority’s current investigation of the issue.

I appreciate that I am running out of time, but I will indeed meet with my colleagues. I thank my hon. Friend the Member for Worthing West for bringing this important matter to Westminster Hall. It is something that all colleagues want to get right. Abuses will not be accepted by any of us.

Question put and agreed to.