Leasehold Reform

Jim Fitzpatrick Excerpts

Thursday 11th July 2019 Commons Chamber

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

I am grateful for the opportunity to speak briefly in yet another leasehold debate and I am pleased to follow my hon. Friend the Member for Leigh (Jo Platt) in this very well-informed discussion. I thank the Housing, Communities and Local Government Committee for its excellent report. I thank the Leasehold Knowledge Partnership, Martin Boyd and Sebastian O’Kelly for their analysis of the Government’s response, their ongoing expertise and their unstinting support for the all-party group on leasehold and commonhold reform. It is due to their efforts, and those of the National Leasehold Campaign and others, that this issue has risen up the political agenda steadily in recent years.

The plight of leaseholders is not new. Governments of both colours have tried in recent decades to improve the position of leaseholders and to offer them more regulatory protection. That vulnerability has increased because of the explosion of tenure as the demand for new housing has grown and the profits to be made have been understood. Some of those profits have been entirely unearned and border on profiteering and ongoing criminal exploitation.

Poplar and Limehouse has the second-highest proportion of leasehold properties of any constituency. The tragedy at Grenfell only highlighted some of the problems that leaseholders have faced from some freeholders, developers and property management companies. That is only one example of the lack of protection that the law affords leaseholders, which led this Government to set aside £400 million for the public sector and £200 million for private sector blocks for fire safety work and repairs.

As my hon. Friend the Member for Leigh has just mentioned, there has been a lot of noise from the Government on other aspects: the 2017 housing White Paper; the 2017 consultation on ground rents; the 2018 consultation on leasehold sector reform; the report on the regulation of management agents and permission fees; the Government’s engagement with the Law Commission on commonhold; their commitment to consult on enfranchisement to help leaseholders buy freehold; and the Competition and Markets Authority’s announcement of an inquiry, having been written to by the Secretary of State.

The Chair of the Select Committee did an excellent job of introducing the debate. I want to make only a few points. First, the Government have repeatedly used the defence

“as soon as Parliamentary time allows.”

That appears in paragraphs 11, 36, 89 and 96 of their response to the Committee’s report, to mention just a few, and it has been used regularly at the Dispatch Box in recent years. If not now, in this Parliament, then when?

Secondly, I would be grateful if the Minister could reassure us that Lord Best’s inquiry into the regulation of property agents, permission fees and so on is still on track for the end of this month. Thirdly, the Government have announced for a third time that leasehold house sales, with exceptions, will be banned. Can the Minister confirm that Help to Buy has shut this down in the meantime? Fourthly, lease forfeiture is a source of major abuse, as we have heard, and many well documented cases have been supplied, yet the Government still seem hesitant. Perhaps the Minister could explain why.

On a separate matter, the Minister will know that the APPG’s officers, the LKP and others have been critical of the Leasehold Advisory Service—LEASE—especially following a recent meeting. Can the Minister advise when the APPG’s officers might receive a response to our request for an apology to our secretariat?

The Labour party has published its policy platform on leasehold. Its five strong pledges are very welcome, and I commend our shadow housing team for their excellent work—I look forward to hearing my hon. Friend the Member for Croydon Central (Sarah Jones) respond to the debate.

In conclusion, the Government have an impressive list of promises—I have mentioned some, but there are also ground rents on new leases at zero, and a new housing ombudsman. I commend the hard work of the many civil servants in the Department who have worked on the programme. However, most of the Government’s programme, if not all of it, is subject to that great “Get out of jail free” card:

“as soon as Parliamentary time allows.”

Leaseholders have been waiting long enough. Surely it is now time to deliver.

--- Later in debate ---

[Justin Madders (Ellesmere Port and Neston) (Lab)]

I am delighted to take part in today’s debate on an issue close to my heart, having first been contacted by constituents back in March 2016 and having campaigned with the APPG of which I am proud to be the vice-chair under the wise stewardship of the hon. Member for Worthing West (Sir Peter Bottomley) and my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick). With the Leasehold Knowledge Partnership and the National Leasehold Campaign we have shone a light on these issues over the last three years. It has been a long journey. We have had some successes, but the further we have travelled the more deceptions, scams and greed we have uncovered, and the more it has become crystal clear that this has been nothing short of a national scandal.

As my hon. Friend the Member for Leigh (Jo Platt) mentioned, first there is the serious impact on mental health. A survey carried out by the National Leasehold Campaign found that 90% of leaseholders thought about their leasehold problems every single day and about a fifth thought of self-harm. We must never forget the human cost of all this.

It saddens me to say that while the Select Committee inquiry brought a sense of vindication and indeed hope among all those who campaigned on this issue, the Government response feels tepid in comparison. An example of that is the response to the Committee’s conclusion that leaseholders were treated as a source of steady profit, because it is not good enough just to say that the Government have noted the conclusions of the Committee. One campaigner said to me, “How do they think that makes us feel?” Having waited four months for a response, I agree.

We have had voluntary codes, which are doing some good, but that is not enough, and an example that has come to light recently in a new Redrow development just down the road from where I live shows why we need to do more to enforce these changes. The first phase of the development was sold on a leasehold basis—goodness knows why—but following some pressure locally, Redrow agreed that subsequent phases would be freehold and all those who had purchased leasehold properties would be able to purchase the freehold at 26 times the ground rent after two years; that was still too high, but at least Redrow was prepared to sell it back rather than send it to an offshore investor.

Several constituents have now contacted me because after the offer was made they inquired of Redrow whether they would still need to pay the ground rent during that two-year period and were told they would not need to, but now Redrow is sending out bills and denying ever having said that. That is rubbing salt into the wounds, because it has also asked for a legal contribution to its costs, and is refusing to disclose any information about other covenants that might go with the land should it purchase. That, along with the fact that Taylor Wimpey has got rid of doubling ground rents but has still left itself in control of advantageous leases, shows me why we need legislation. We cannot have confidence that the developers, who, after all, are the authors of this racket, can put right the wrongs they have created.

I look forward to hearing the outcome of the Competition and Markets Authority investigation. There is plenty of evidence out there for it to conclude that this was a deliberately constructed income-stream effort. I have seen many documents talking about leases being optimised. It does seem to me that there was a deliberate strategy.

[Jim Fitzpatrick]

Does my hon. Friend agree that one of the difficulties now is that though the CMA intervention is very welcome, it is going to take time, and its consultations and engagement just put everything back? It kicks the can down the road in a Parliament where we are not doing an awful lot of legislating.

[Justin Madders]

My hon. Friend is absolutely right. I do not see that we need to wait for the Competition and Markets Authority investigation to conclude before we come up with tangible legislation to help leaseholders now. It is important that that investigation is carried out, however, because I think it will shine a light on wholesale practices. I have seen evidence such as the CBRE market review of 2013 saying that “leases had been optimised” in terms of rent review clauses, notice fees and other provisions to maximise freehold sale receipts for developers. It talked about soft income being generated from insurance premiums, commission, service charges and enfranchisement premiums. There is clearly an industrial-scale racket going on, and it is important for the future of the industry that we get to the bottom of it and find out who is responsible and make sure that they never get the chance to do it again.

Perhaps what is most concerning in this respect is that evidence has emerged of what are described as forward purchase agreements. These are contracts between an investor and a house builder to acquire a scheme before the individual units have been sold off on long leases. These agreements can often be in place as construction is ongoing, or even before commencement. It would be interesting to know which developers had forward purchase agreements in place before completion of their developments, because if they did they surely had a responsibility to inform the prospective leaseholder prior to their making their purchase that such an agreement was in place.

Instead, what we have heard from constituents is that they were told the exact opposite: they were told freeholds would be available to purchase after two years. Was this a deliberate deception? What did the sales staff know? Just how deep does this scandal run? For those reasons and more, we need a fully independent inquiry into the whole scandal so that those responsible are held to account for their actions and we get a house building sector that works for everyone, not just itself.