Leaseholders and Managing Agents

Debate between George Howarth and Barry Gardiner

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.

--- Later in debate ---

[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.