Protection for Homebuyers

Debate between Jim Fitzpatrick and Helen Goodman

Thursday 13th December 2018 Westminster Hall

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

It is a pleasure to see you in the Chair this afternoon, Ms Ryan, presiding over the debate. I congratulate my hon. Friend the Member for Stretford and Urmston (Kate Green) both on securing this important debate and on her excellent opening speech, which covered so much ground. I am grateful to the House of Commons Library and to the Leasehold Knowledge Partnership for their briefings. I will focus on two points: leaseholder tenure, which my hon. Friend mentioned, and, briefly, fire sprinklers.

I co-chair the all-party parliamentary group on leasehold and commonhold reform with the hon. Member for Worthing West (Sir Peter Bottomley) and the right hon. Member for Kingston and Surbiton (Sir Edward Davey). It is good to see our inestimable vice-chair, my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders), in the Chamber.

Governments of both persuasions have recognised that homebuyers are vulnerable to purchasing a property that does not meet their expectations. The Tories legislated in this area in 1986 and 1993, and Labour did more in 2002. Despite incremental increases in protection, the Government recognise that more needs to be done. As a result, the Prime Minister, and successive Secretaries of State and Housing Ministers, have been making promises on ground rents, the conduct of property management companies, the right to manage, dispute resolution and commonhold. We have had various statements—written and oral—a White Paper, calls for evidence and consultations. The Law Commission has been tasked with a major review of the law and is on the case.

The first anomaly comes with the purchase of the property. I say “purchase”, but as the Library briefing makes clear:

“Owners of long leasehold properties do not necessarily appreciate that, although they are owner-occupiers, they are in a landlord and tenant relationship with the freeholder.”

It might not be clearly pointed out by the solicitor acting for the purchaser. As my hon. Friend the Member for Stretford and Urmston mentioned, that is perhaps no surprise when those solicitors are recommended by the selling developer and, it can be reasonably suggested, manage to juggle a conflict of interest that would be beyond most of us.

My constituency of Poplar and Limehouse has the second highest number of leasehold properties in the country, and had the highest number of leasehold sales in 2015. Whereas the Home Builders Federation says that more than 90% of new homebuyers say that they would buy a new-build home again—somewhat contradicted by the nightmare stories articulated by my hon. Friend—a national survey in 2016 conducted by the Leasehold Advisory Service, the Government-funded advisory body known as LEASE, found that 57% of leaseholders regretted buying a leasehold property. That is quite a contrast.

LEASE has come in for quite a bit of criticism for not doing enough for leaseholders. When Mr Gavin Barwell was Housing Minister, he stated that LEASE should be the leaseholders’ champion, but LEASE still has a remit for freeholders and developers. That looks like a conflict of interest, and I would be grateful if the Minister would give her view of where LEASE sits within the legislative framework.

There is no doubt that some leaseholders are perfectly happy with their homes. However, many are not. The duration of leases can be anything from 99 years, 125 years, 250 years or 999 years. That is quite a range. The Library briefing lists a range of potential problems, some of which were mentioned by my hon. Friend. They include high service charges and a lack of transparency over what people are being charged for; freeholders blocking attempts by leaseholders to exercise their right to manage; excessive costs for building insurance; administration charges; applications to extend lease agreements; and event fees.

I was contacted by a group of leaseholders in my constituency only last night, on the Aberfeldy village estate, complaining that their property management company, Rendall and Rittner, had raised service charges in 2016-17 by 12%, and this year by 6% in a new estate. Residents are also complaining about the poor service for the significant charges that they are paying—nearly £3,000 per year. The Leasehold Knowledge Partnership, the campaigning charity in this area, and the all-party parliamentary group secretariat, run by Martin Boyd and Sebastian O’Kelly, ably assisted by Ms Katherine O’Riordan, have been lobbying the Government on those matters for years.

One of their notable successes early on was getting the Department for Communities and Local Government—now the Ministry of Housing, Communities and Local Government—to revise the figures for leasehold properties. The Department was working on the basis of 2.3 million properties for a number of years. LKP persuaded it eventually that there were many more, and the Ministry now uses the figure of 4.3 million. However, LKP calculates that there are more than 6 million such properties, and the all-party parliamentary group knows which figures we think are likely to be more accurate.

The Select Committee on Housing, Communities and Local Government is in the middle of an inquiry, the conclusions and recommendations of which are keenly anticipated by the sector. There is strong pressure to regulate the sector in respect of property management companies. Some are trying to do a professional job and are observing their own voluntary standards in the meantime—many are members of the Association of Residential Managing Agents. However, many others need regulation that requires them to perform to professional standards. Lord Best has been leading a working group developing a regulatory regime, which the Government have committed to introduce.

[Helen Goodman]

Does my hon. Friend not agree that it sounds as though there has been some serious mis-selling, and the Minister ought to refer it to the Financial Conduct Authority?