Leaseholders and Managing Agents

George Howarth Excerpts

Tuesday 28th February 2023 Westminster Hall

[Sir George Howarth (in the Chair)]

We are expecting a Division at any moment. When it is called, there will be a 15-minute suspension to enable Members to go and vote, but if there are two votes, there will be a 25-minute suspension, so do the maths.

[Barry Gardiner (Brent North) (Lab)]

I beg to move,

That this House has considered leaseholders and managing agents.

I am grateful to present this debate under your chairmanship, Sir George, because I know that you have significant involvement with your local leaseholders in Knowsley, for which they are very grateful. Saying the word “leasehold” to any Member of Parliament is likely to begin a long conversation on one of two things: fire safety or service charges. I could have phrased that better: it would be more accurate to say “unsafe homes caused by fire safety defects” and “rip-off service charges by unscrupulous managing agents”.

For many people, the issue of leasehold crystalised after the tragedy of the Grenfell Tower fire and the subsequent purgatory that hundreds of thousands of residents throughout the country found themselves living through as they waited to have their own buildings’ fire safety defects remediated. They are still waiting. It was about much more than cladding and EWS1 forms. Residents who found that their homes had been constructed without internal fire stopping, or with inappropriate materials or inadequate fire doors, were unable to sell their property and move on with their lives because construction companies, project managers, surveyors, developers, freeholders, building control, the National House Building Council and managing agents all sought to pass responsibility among themselves. Nobody wanted to pick up the bill for remediation.

In truth, the debate about a wholesale reform of leasehold goes back much further. In the modern era, it starts almost exactly 50 years before 14 June 2017, with the Leasehold Reform Act 1967, which gave qualifying long leaseholders of houses the statutory right to buy the freehold of their homes. In 1969, a problem arose: the Lands Tribunal ruling in Custins v. Hearts of Oak Benefit Society noted that the 1967 Act treated the open market for the reversion of the lease as including marriage value. That is why the Government promptly and rightly reversed that decision with section 82 of the Housing Act 1969. They did not wish to artificially increase the cost for people wishing to buy the freehold of their own home.

To see the injustice of marriage value, one need only to consider the price difference on the open market between a leasehold flat with a 125-year lease and the same flat with a share of freehold. The difference is nil, yet the first is on a yo-yo tender, whereby an owner, such as the Duke of Westminster, sells for the full market value, only to receive the entire property back at the end of the lease, allowing him to sell it all over again or, more often, to receive a large payment to extend the lease when the reduction in the term risks being so short that no lender will advance a mortgage on it and the property becomes unsaleable by the leaseholder, who sees the value of their asset diminishing to zero.

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[Mike Amesbury (Weaver Vale) (Lab)]

I thank my hon. Friend for securing such a vital debate. Here we are again. The National Leasehold Campaign—

[Sir George Howarth (in the Chair)]

Order. The Division bell has gone. If the hon. Member finishes his intervention, he might get a response when we come back, but he should be brief.

[Mike Amesbury]

Isn’t it time to abolish, rather than polish, the leasehold system?

[Sir George Howarth (in the Chair)]

Order. The sitting is suspended. If there is one Division, we will suspend for 15 minutes; if there are two, it will be 25 minutes.

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On resuming—

[Sir George Howarth (in the Chair)]

Order. I think most people have now returned, so we can restart if people are ready to do so. Barry Gardiner was about to deal with an intervention from Mike Amesbury.

[Barry Gardiner]

Indeed, Sir George. My hon. Friend the Member for Weaver Vale (Mike Amesbury) is no stranger to witty epithets, and his suggestion that we should stop polishing and start abolishing was absolutely right.

Before I turn to some egregious instances of service charges and call out by name some of the managing agents that have played fast and loose with the Landlord and Tenant Act 1985, which provides that service charges must be “reasonable” and that services and works must be carried out to “a reasonable standard”, I wish to acknowledge some of the individuals who have championed the cause of leasehold reform over many years.

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[Several hon. Members rose—]

[Sir George Howarth (in the Chair)]

Order. I am going to impose a five-minute limit on speeches, in order to get everybody in.

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[Several hon. Members rose—]

[Sir George Howarth (in the Chair)]

Order. I am going to have to start calling the Front Benchers at 5.23 pm, so I will reduce the speaking limit to three minutes.

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[Munira Wilson (Twickenham) (LD)]

In my constituency of Twickenham, we do not have many high-rise blocks of flats, but we have quite a lot of low-rise blocks. I have had two cases come to me relating to two different blocks of flats in Twickenham, in which managing agents have wrongly commissioned fire safety assessments for buildings under 18 metres. In one case, the report has been shown to be flawed. The residents cannot sell their homes; they are trapped. In the other block, residents are potentially being charged up to £800,000 for remedial works that are not needed.

[Sir George Howarth (in the Chair)]

Order. Interventions should be brief, particularly given the time pressure.

[Florence Eshalomi]

I thank the hon. Lady for making that important point. That is the real insult that leaseholders face up and down the country: being forced to pay for the management of a block, even if the agent is not providing a worthwhile service. It is a slap in the face.

The sums we are talking about are not cheap; most end up being hundreds of pounds every year for leaseholders. We have to be clear that not all managing agents are like this; some are professional and diligent, and a number of them do a lot of great work. But the fundamental problem is that, whether agents are good or bad, leaseholders have no power to hold them to account. They do not even have a proper regulatory body that they can appeal to to enforce standards. Current arrangements leave leaseholders on the hook for almost everything, without having a say in how their building is managed.

The root of the conflicting motivations at the heart of this issue is the managing agents’ role. The problem is that, ultimately, they are not employed by the people who are paying—the leaseholders. We need freeholders to be accountable, and we need to ensure that they take responsibility.

I will leave my remarks there, but I hope that the Minister will hear the pleas from Members this afternoon. Instead of giving us warm words and telling us that he has heard us, he needs to outline a concrete plan for what he and the Department are going to do to empower leaseholders in a system where managing agents can be properly held to account, and we need a clear timescale for that work. My constituents in Vauxhall and leaseholders up and down the country cannot afford to wait any longer.