Leasehold Reform

Helen Morgan Excerpts

Tuesday 23rd May 2023 Commons Chamber

[Helen Morgan (North Shropshire) (LD)]

The last Liberal Prime Minister, David Lloyd George, launched a campaign against leasehold in 1909, describing the leasehold system as blackmail, not business. In 2023, it is unacceptable that, despite campaigning by the Liberal Democrats and right hon. and hon. Members on both sides of the House—and some truly excellent speeches today—we are in the same position.

The Leasehold Reform (Ground Rent) Act 2022 was a necessary small step in the right direction to protect leaseholders from exploitation, but it is extremely disappointing that the next steps of the Act have once again been delayed, despite the Secretary of State admitting that the system is feudal in nature. He is, of course, right. Being unable to control the amount of ground rent paid each year is a relic of the feudal system, and is why pretty much every other country apart from Australia has abolished it and replaced it with some form of commonhold tenure.

It is also not right that homeowners should have to pay tens of thousands of pounds to renew their lease and remain in their own home when it ends, often having seen very little—if any—of their landlord during the period of ownership. Hon. Members have already made excellent speeches about the unfairness of this outdated system. Like them, I have casework from residents frustrated by extortionate ground rents and management fees.

I would like to reflect a little more on the management fees, which are becoming a scourge not only in traditional leasehold arrangements but in many new developments, where shared management companies for the areas outside the bricks and mortar of the owner’s home are exhibiting many of the characteristics of the landlord in a leasehold arrangement. These are known colloquially as “fleecehold” arrangements, and are as much of a problem as the traditional leasehold charges that we have been discussing at length.

Across North Shropshire there are several new developments, built by both large well-known developers—Persimmon has been mentioned, which I have dealt with—and smaller rogue developments, where the council have rightly required shared space as part of the planning conditions. But the developer has made no provision for those shared areas and the roads, street lights, pavements and play facilities to be adopted by the local authority. Instead, the shared areas are maintained by a management company and all the homeowners of the new development, who are the freeholders of their own homes, must share the costs of maintenance. The commercial substance of that arrangement is a leasehold.

Homeowners have come to me, fleeced by their management company and unable to force the directors of those management companies to hold annual general meetings or provide proper accounts. They do not want me to name their developments because that will reduce their ability to sell a home that they desperately want to leave and are completely trapped in.

The companies share similar features. They are often non-profit-making, simply passing on the costs of maintenance to the owners of homes on the development. But there is a catch: they are controlled by the original developer and they outsource the maintenance work to a connected business—often run by the original developer—which charges an exorbitant fee to the maintenance company. That way, the developer can fleece the people who bought their homes in good faith, and who cannot exit the arrangement. More importantly, having just taken on a mortgage for the most important purchase of their life, they do not have the resources to take the company to court, or to force it to hold meetings or get competitive quotes for the work required.

As Members have pointed out, there is often no point turning to the conveyancing solicitor for help with faulty conveyancing, because the solicitor was recommended by the developer, which offered a discount to use them. Quite how those solicitors get around conflict of interest laws I am not sure, but the result is that the homeowner is left with nowhere to turn.

It is important to emphasise that these people do not get a reduction in their council tax, often while suffering unfinished roads, inadequate lighting and wasteland that should be some sort of park or recreation area. If the council enforces the conditions of the planning permission—to tidy up and landscape the shared areas for example—the costs are passed on to the residents, who have no choice but to pay. I have a case where a large national developer—Persimmon—requires the permission of the management company to allow someone to sell their freehold. That is leasehold in all but name, and it needs reforming along with the feudal arrangement that we all agree needs getting rid of.

There is one development that I can name because it has already been made public, and I described it in some detail in an Adjournment debate last year. The Brambles in Whitchurch was set up under one of these arrangements but, catastrophically, the developer went bust before the estate was finished. The homeowners are liable for the maintenance of the shared areas, which includes their sewerage connection. But it was not completed properly, and they have faced exorbitant costs of over £1 million between 14 homes to get their foul waste connected to the mains sewers and their roads surfaced. That is very similar to the situation in which some leaseholders found themselves after the disastrous Grenfell fire, when they discovered they were living in buildings covered with dangerous cladding, but there is no equivalent of the Building Safety Act 2022 to protect the homeowners in my constituency who have no sewerage connection.

In a second case, a developer charges astronomical fees for the maintenance of a shared ground source heat pump, but keeps the renewable heat incentive payment, paid by the Government, to himself, in his own, separate company.

In a third case, the management company is connected to the maintenance outsource provider and passes on astronomical costs to the residents. There is no mechanism to help these people; indeed, the practice is becoming the norm. Local authorities are not incentivised to adopt shared areas when they can charge full council tax and effectively dodge the maintenance costs that come with the new dwellings.

When the legislation to deal with our outdated leasehold system is finally brought before the House, I urge the Minister to consider measures to deal with the outrageous practice of fleeceholds, which is being exploited by sharp practice at best and possible criminality at worst, and to ensure that people who have already been subjected to those arrangements can take more control of their situation.

Many people have already entered into fleecehold or leasehold arrangements, before any legislation to protect them has been implemented. For example, nobody should feel pressured to renew their lease before the Leasehold Reform (Ground Rent) Act 2022 is implemented. To this end, I am happy that Liberal Democrat peer, Lord Stunell, introduced amendment 9 to that Act in the other place, to protect people who need to renew their leases by creating a duty to inform leaseholders of the contents of the Act before negotiating or renegotiating a lease extension. Unfortunately, the Government removed the amendment when the Bill returned to this place.

When people buy a home, it is often the biggest and most important purchase of their lives—it is a dream realised. They are often promised reasonable-sounding ground rents and maintenance fees, but when they find themselves tied into a cycle of rapidly increasing costs, beyond their control, that dream turns into a nightmare.

We have the means to prevent that happening and we should stop delaying. We should act now to protect them. The Liberal Democrats will support the motion today. I urge the Minister to do so, and to consider the additional problem of fleecehold arrangements when she brings leasehold reform to the House.