Leasehold and Commonhold Reform

Jonathan Reynolds Excerpts

Thursday 21st December 2017 Westminster Hall

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Thank you for calling me in this debate, Sir David, to add my voice to the pertinent points that have already been raised. I also thank the hon. Member for Worthing West (Sir Peter Bottomley) and my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick)—they lead the all-party group—for securing this debate and all the work they have done to date.

[Mr Peter Bone in the Chair]

This problem is very big in the north-west of England, but based on the contributions today it is clearly a nationwide problem. The Library has provided information on the constituencies with the highest proportion of leasehold sales of houses. Seventeen of the top 20 constituencies in the country are in the north-west, and 14 of them are in Greater Manchester, so the problem is at epidemic levels in my part of the world. We sometimes hear the argument that there is somehow a market with varying costs between freehold and leasehold properties, but that does not apply to us when the majority of tenures sold for houses or flats are leasehold.

I am genuinely shocked by the stories I hear in my constituency and that we have heard in this debate. I am not a man prone to hyperbole, but I would go so far as to say that the only fair description of some of the practices we have heard about in this debate is legalised extortion. There is simply no relationship between the services being rendered and the costs charged for them.

I will be as brief as I can because so many colleagues wish to speak, but I want to give a number of examples from constituents, all of whom were only too happy to be mentioned in the debate to illustrate the point about the costs being extorted in relation to the services offered. Gemma Hornbuckle lives in Ashby Gardens in Hattersley in Hyde. She says that the charges she is facing are

“only getting worse to the point where we are unable to keep up with the payments. They are making the properties worthless and causing that much upset and stress that we need something to be done urgently.”

Gemma is paying £2,000 per year, and her costs, when she receives them, are not itemised. She says that the bills that are sent are confusing, and the penalty charges if she does not pay are outrageous. Let me tell hon. Members about the latest development, which is hard to believe. She says that the latest bill includes a quote for the 18 apartments in her block to be decorated. Of course, by that I do not mean the apartments themselves, but the communal areas—just the hallways. The quote for that work is a staggering £32,000. I do not see how anyone could stand up and defend that.

Mr Stuart Ryan, another constituent, lives in the same area. He says he did not know about the costs, but was told by the management agent that they are simply part of the terms of sale and are in the deeds. Colleagues who know a little bit about Greater Manchester might know that Hattersley is one of the most successful urban regeneration housing schemes in the country. It took a huge amount of resources under the last Labour Government, and was originally one of the overspill estates from Manchester City Council. It is a fabulous story of urban regeneration and success, and activities such as this are frankly blighting that very successful legacy, which is extremely distressing to hear.

Another issue is what happens when constituents try to solve the problems using the apparatus currently available. Another constituent, Simone Potter, says that she inquired what the charge would be for the purchase of her freehold. She was told by her management company that there was a charge of £180 to make any inquiry—£180, just to ask them a question. When she made the inquiry, they came back to say the freehold was not for sale in any case.

Alison Hinchcliffe also inquired what the cost would be to purchase her freehold. After a number of attempts to negotiate a fair price, she was told that her only recourse was to go to a tribunal. Of course, that will instigate a whole series of court costs. She is waiting to see whether the Government will take decisive action to give her a more obvious and satisfactory remedy.

I could go on, and I imagine many colleagues have a range of stories like this. I will share just one more story, from someone whom I know. She is not from my constituency and did not want to be named, but I can say that she is a key worker—a police officer. She bought her property this year. She was told that the service charge would be nearly £2,000, but that it would be split into two payments during the year. Last Monday, she received a bill for the whole £2,000—seven days before Christmas, which would not be easy for anyone. She says that the request for payment does not contain any of the basic information she would have expected. It does not say when the amount is due, nor whether she has to pay before or after Christmas. It does not explain why they are charging for service works that pre-date this company taking charge of the development. That cannot be a reasonable cost for her to pay. It does not say how the costs have been calculated, which is crucial because there is a term in her contract that says that any underspend will be credited back to tenants. It does not give any information on how they have reconciled the accounts to comply with the terms to which people have already signed up. She says:

“The whole world is murky and as it currently stands as with most housing issues it relies on tenants organising themselves and individuals dedicating enormous effort legally and financially to fighting these companies who are failing to deliver services for the money charged.”

I think that is an entirely fair description of the status quo, which is clearly unacceptable. It is superb to see so many colleagues from across the House, and the Government, saying that they are willing to take action, as this issue is clearly damaging a great many lives.

My right hon. Friend the Member for Delyn (David Hanson) talked about first-time buyers. We have all been in that position of moving into a newly-built property, perhaps with a spouse or partner, for the first time and thinking about the carpets, flooring, fixtures, and furnishings. Purchase of the freehold, even if it is offered, will always be a more abstract and less tangible thing to think about purchasing. It is easy to see how so many people have found themselves locked into this trap. Clearly, this issue will also cause severe damage to the housing market. As my right hon. Friend said, if somebody has an option about whether to be put into this trap, perhaps in a similar development on the same piece of land in the same area, it is pretty clear that they would not voluntarily get themselves into that position.

In terms of remedies, it is clear from today’s debate that no more properties should be sold with this form of tenure, but clearly there must be a straightforward right-to-buy formula that is standardised and national, in order to avoid the kind of regulatory arbitrage that we have heard about today. I think a price cap on not only the overall cost but the charges that can be levied for inquiries and questions would be entirely fair. I also do not think it is too strong to propose that some consideration be given to whether some of the terms of these leaseholds should be rendered void as unfair contractual terms—particularly those provisions about doubling the costs, which my hon. Friend the Member for Heywood and Middleton (Liz McInnes) described, with the overall cost, when considered in aggregate, an absurd amount of money. The closures on forfeiture are, to my mind, entirely unjust, and should form no part of such a leasehold contract.

If solicitors have been recommended by the developer and that has led to a substandard service, clearly the Law Society should look at that, but there have been several examples in British legal history of courts finding that contracts should never have been entered into because people signed up to unfair terms, because the advice was not sufficient, or because quite simply the contract should not operate in that way. I am thinking, for instance, of local authorities and interest swaps in the 1980s. Those contracts were rendered void. That needs to be considered. I am really distressed to hear that some pension funds may have entered into this as an asset class, particularly because I cannot believe that with their expertise they would not know what they were entering into. Anyone with any sense of political risk would understand that this issue might be something the Government would look at, no matter who was in charge.

[Sir Peter Bottomley]

It goes a stage further than that. There is a case going to appeal—the Stanley v. Mundy case—where the Wellcome Trust, which bought freeholds from the Henry Smith Charity, has managed to persuade a property tribunal that the rate at which people pay for extending leases should be much higher than at present. In fact, most of the evidence is that it should be lower. Governments should get involved in that and produce a chart that gives fair prices. If freeholders want to challenge that, they should guarantee to pay the costs of the leaseholders—not the other way round.

[Jonathan Reynolds]

I absolutely agree. My distress is even greater after hearing about that situation; action like that will cause great distress across the country. As I say, I cannot believe that any organisation to whom leases have been sold on, these leaseholders, asset classes, or any pension fund that has got involved in investing in them, would not have made a reasonable assessment of the political risk involved. It is clearly unjust. I cannot imagine any colleague from any party standing up to defend the kind of constituency examples that have been shared in today’s debate.

The time is clearly ripe for action, and there is clearly a consensus for strong action. My only plea to the Minister would be this: for many constituents, this matter is urgent. It is blighting their lives and affecting their quality of life. It is clearly affecting the liquidity of the housing market, and whether people can make reasonable decisions about their households going forward. We need the action to be as swift as possible. Clearly, it is not straightforward and there are issues to resolve, but I cannot believe that anyone who has listened to today’s debate, or others that have taken place, would not agree that there is consensus for political action. Please, Minister—let us get on with that as soon as possible.