Adriatic Land 5 Ltd (Stevenage)

Heather Wheeler Excerpts

Wednesday 27th February 2019 Westminster Hall

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Mrs Heather Wheeler)]

It is a pleasure to serve under your chairmanship, Mr Bailey. I thank the hon. Member for Croydon Central (Sarah Jones) for being here; I did not realise this was a walk-on part—that does not need to go in Hansard. I congratulate my hon. Friend the Member for Stevenage (Stephen McPartland) on securing this important debate on issues concerning leaseholders, and particularly the problem in Stevenage.

The Government are committed to improving consumer choice and fairness for the increasing number of leaseholders. That includes our work to make it easier and cheaper for leaseholders to enfranchise, the support we are providing for those with onerous ground rent terms, and our aim to make service charges more transparent for all. That work should act as a guard against the practices that form the subject of this debate, namely, where freeholds are sold on to a third-party investor without the leaseholder’s knowledge.

I am aware that many hon. Members have heard from their constituents on this matter, as have I and my Department, and the Housing, Communities and Local Government Committee also received evidence on it, so I recognise the importance of the debate. It is clear that we need to act to address the issues; I will use this time to set out the work that is under way to drive these unfair practices out of the leasehold sector.

The problem here is the excessive ground rent that leaseholders are being asked to pay. My hon. Friend the Member for Stevenage has rightly highlighted many issues that are faced particularly by those in shared ownership properties, but I know that the issue of onerous ground rents affects many other leaseholders. As he says, leases with onerous ground rent terms can make it difficult for the leaseholder to sell their property or re-mortgage. In this instance, as I understand it, the ground rent is £300 a year and doubles every 15 years. We have heard from the Housing Committee that many regard this as onerous, and it could also make the property hard to sell, exactly as he mentioned. People can therefore feel trapped in these arrangements.

It is the Government’s view that, in most cases, any lease with doubling ground rents will be significantly worse than an inflation-based arrangement. A rise in line with inflation maintains the value of the ground rent over time, whereas a doubling term every 10 or 15 years can significantly increase the value—too much—over time. The Secretary of State met freeholders last year and made that clear. There should be no reason why any clause that doubles ground rent every 10 or 15 years should be enforced. I welcome the proposals from some developers and freeholders to vary clauses so leaseholders pay less ground rent.

We have been clear that variations must have consumers’ best interests at heart. We will not look kindly on those who reduce the cost of ground rents with one hand and rip off leaseholders with the other, whether through permission fees or anything else. We need a proportionate response. I want industry to take the lead and make the changes voluntarily. It is not right that hon. Members should have to highlight the sort of issues that have been raised here today.

I want to see support extended to all leaseholders with onerous ground rents, including second-hand buyers, and for customers to be proactively contacted. We will continue to work with the industry on a way forward to help existing leaseholders with onerous leases. I want to stress that leaseholders should seek impartial legal advice about potentially onerous ground rents contained in their leases. Free advice is also available from the Government’s Leasehold Advisory Service—LEASE. Leaseholders and prospective leaseholders can get advice on all aspects of leasehold properties, including ground rents, service charges and the enfranchisement process, so I urge them to take advantage of that free service. We have recently appointed a new interim chair to that organisation, and I am confident that the standard of advice that leaseholders receive will be further strengthened. Furthermore, if the leaseholder’s solicitor or conveyancer did not point out the onerous terms at the point of purchase, the leaseholder can make a complaint against them, which can be escalated to the legal ombudsman. I suggest that my hon. Friend takes that point back to his constituents.

I have also heard from leaseholders who have seen a sharp increase in the level of their service charges, often with poor value for money. Many leaseholders are unclear about their service charges, how they were calculated, and whether they are paying too much. I believe very strongly that service charges should be transparent and communicated effectively, and that there should be a clear route to challenge or redress if things go wrong. With that in mind, the Government asked Lord Best’s working group to look at service charges and consider how they should be presented for both existing and prospective consumers. I have also asked the working group to look into fees and charges that go beyond service charges, and consider the circumstances under which they are justified and whether they should be capped or banned. That includes administration charges and permission fees. I am absolutely clear that we must see an end to leaseholders being charged excessive and unfair fees. I am following the working group’s progress with keen interest. I look forward to receiving Lord Best’s report in July, and I will be meeting him shortly.

I hope that my remarks demonstrate the Government’s strong commitment to supporting existing and future leaseholders. Although this debate has been on a specific practice in the leasehold sector, it is clearly a wide-ranging area that is in need of reform. The Government will introduce measures to deliver that reform. The work that is under way makes that commitment clear. Although successive Governments have left that work unfinished, we are just getting started. Nothing, including legislation, is off the table. In that spirit, I thank my hon. Friend for his speech and questions, and I look forward to pushing ahead with our programme of leasehold reform.

Question put and agreed to.