Leasehold Reform and New Homes

Julie Marson Excerpts

Wednesday 28th February 2024 Westminster Hall

[Julie Marson (Hertford and Stortford) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Harris. I congratulate my hon. Friend the Member for Harborough (Neil O’Brien) on securing this important debate. I am sure we all have constituency issues that emanate from this issue and I echo the points that he made yesterday and in today’s debate. In particular, I want to mention the issue of developers wriggling out of planning commitments. I have several examples of that and one, which I have discussed with the Minister, that is particularly egregious. I am sure I will mention it again in this House.

The Leasehold and Freehold Reform Bill is a landmark piece of legislation that will help every leaseholder in Hertford and Stortford and beyond, throughout the country. I know the Minister is more than aware of the problems with leasehold ownership. They are there for all to see: no control over agency fees, how the value of the property dwindles as the lease begins to elapse, how tricky and often expensive it is to extend a lease and how, in essence, it is not true property ownership.

I have heard the argument that if prospective leaseholders do not want to endure all those issues, they should simply not sign on the dotted line to become a leaseholder. That frame of mind shows a misunderstanding of the system and the lack of choice in it. To begin with, becoming a leaseholder is practically a rite of passage in climbing the property ladder nowadays. Many young people buy flats to begin with because they are smaller and cheaper, and try to use them as a platform to climb the property ladder, upsizing as they can, which is how I started. I should declare that I am the owner of a leasehold property now, although my freeholder is as wonderful and fair as they come. Perhaps that makes me the lucky one.

In many cases, people become leaseholders only to have the wool pulled over their eyes. For instance, I have heard stories of first-time buyers signing up to be leaseholders, accepting the estimated service charge amount when they do so. They then exchange contracts and, when they receive their leases to sign a few days before completion, the service charge amounts have more than doubled. What are the leaseholders to do? They have already exchanged contracts by that stage, which is the legal point of no return. Are we asking them to throw away their life savings—their deposit—or are we asking them to find hundreds or thousands of extra pounds out of their back pockets to cover the difference? I appreciate that advertising a lower than anticipated service charge might get more sales over the line, but I am sure that everyone would agree that more than doubling the amount on completion day shows how managing agents are seldom on the side of leaseholders.

I want to share a couple of examples from my constituents. One Hertford resident bought his flat seven years ago, with 109 years left to run on the lease. He has, however, received a quote from the freeholder of £10,000 to extend—not money he would find down the back of a sofa. That is an extraordinary amount. The other side of the coin is that, as the years of a lease become fewer, the value of the asset dwindles. My constituents have worked extraordinarily hard to buy their homes, and now they have to face headaches not that far down the line. It goes without saying that if someone owns a house by freehold, they do not experience any issues like that. They own a property and that is it.

Another constituent owns a flat with a doubling ground rent, which is currently £750 a year. They want to sell the flat but are having issues, as very few mortgage companies will lend against the property when a buyer’s affordability capacity is hampered so significantly by such ground rent levels. That leaseholder asked the freeholder for a quote to have the lease amended and a reduced ground rent. The freeholder flat out refused to negotiate. Why would they engage in negotiations? Ground rent is literally money for nothing for them. Meanwhile, either my constituent is stuck in a property that will become only more problematic over time, or they will manage to sell it to someone else who will simply inherit the same issues, not solving the problem. The greatest irony is that the leaseholder in question works as an estate agent. That totally dispels the notion that all one needs to avoid leasehold’s fundamental flaws is to be savvy in the property market.

I tell those stories to show how too common they are, and I know that the Minister is very engaged in these issues. The Leasehold and Freehold Reform Bill is the greatest opportunity in 30 years to put things right, and I support and welcome it. Personally, I would love to be more radical. I would like to see all leaseholders in flats turned into commonholders overnight, but I appreciate the complexity of doing so. Will the Minister mull over and comment on a two-stage plan? Even then, I know that it will not happen overnight. The first part will be to ensure that all future flat sales come with a share of the freehold. That will be a much-needed stopgap until the second stage, which is the total abolition of leasehold ownership in this country, turning leaseholders into commonholders.

We should commit to the total abolition of leasehold. It is time to be radical and ambitious, and to liberate millions of leaseholders from the myriad issues they face. With such an objective we can turn millions of people into proper homeowners overnight. It would give leaseholders more security and peaceable enjoyment of their tenancies, and it would truly give them a proper stake in society.