Leasehold and Commonhold Reform

Debate between Esther McVey and Matt Western

Wednesday 2nd October 2019 Westminster Hall

[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.

[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.