Leasehold Reform (Ground Rent) Bill [Lords]

Justin Madders Excerpts

Report stage & 3rd reading
Monday 24th January 2022 Commons Chamber

[Sir Desmond Swayne]

I draw your attention, Madam Deputy Speaker, and the attention of the House to my entry in the Register of Members’ Financial Interests.

I am deeply embarrassed about the way that the retirement living industry has been treated over the past few years in the progress to this Bill. In recognition of the significantly greater capital costs of building developments that have communal areas, which have traditionally been funded through an income stream of ground rent, the industry was granted an exemption, or an assurance that it would be exempt from the provisions of the Bill, back in June 2019. That exemption was then withdrawn in January 2021. I understand that the decision to withdraw the exemption was made almost a year earlier, in February 2020, and that discussions about revoking the assurance of exemption had actually begun in August 2019. Throughout all that period, the industry continued to be reassured that the exemption was good and would hold, and it was not.

Throughout that period, the industry continued to raise capital on the basis of the model with which they had been told they could continue. The amendment goes one tiny little bit towards trying to remedy the damage that has been done. It accepts that the practice will have to end, but it asks for one tiny concession, namely that, when the provisions of the Bill bite in March 2023, properties that are part-sold can continue to sell the residual remaining flats or properties on the basis of a continued ground rent. Without that, what we will have is some properties within a development being worth significantly more in terms of the purchase price than others, and some properties paying a ground rent and others not. It will be hugely complicated and divisive. Therefore, the amendment merely asks for that to be addressed. At the most, if the provision were to pass, we anticipate that this would account for about 2,000 properties. I ask the Minister to reflect on this, and, even at this late hour, accept the amendment.

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

I rise to speak in support of new clause 1, tabled by my hon. Friend the Member for Weaver Vale (Mike Amesbury).

To respond to the previous speaker, the right hon. Member for New Forest West (Sir Desmond Swayne), on the issue of ground rents, it is clear that service charges are for communal areas. Indeed, McCarthy Stone’s website says very clearly—

[Sir Desmond Swayne]

rose—

[Justin Madders]

Go on then.

[Sir Desmond Swayne]

It is unlawful to charge ground rent for the maintenance of a communal area. They are clean different things.

[Justin Madders]

Indeed: ground rents are payments for which nothing is received in return, which is why they should be abolished. For the record, I am a co-chair of the all-party parliamentary group on leasehold and commonhold reform and have campaigned for the abolition of ground rents for a number of years, having seen the impact on individuals of their use and abuse.

I thank my hon. Friend the Member for Weaver Vale for tabling the new clause and for being a consistently strong advocate for leaseholders during his time as an Opposition spokesperson. He apologised at the start of his speech; I would ask him to resign based on that apology had he not already been moved to another position. [Laughter.] He has done a sterling job in this brief, and the new clause is typical of the way he has used every opportunity available to him to push forward the cause for leaseholders.

As we know, new clause 1 would not abolish ground rents altogether but, if it is agreed to, will set a timescale by which concrete proposals on their abolition must be put forward. That is important because for too long my constituents and thousands of others have suffered because of the leasehold scandal.

I know that the overturning of a system that has been in place for 1,000 years is not necessarily straightforward, and arguments will always be made as to why things cannot happen, but, as has been said so many times—I have already said it once in this debate myself, but it is worth saying it again and again because it is such a powerful point that can never be made enough—ground rent is a payment made for which absolutely nothing is received in return. Why, then, can we not get on and reduce that payment to effectively nothing so that the legal position reflects the reality of the situation? That would send out an important signal—not just a departmental press release but a signal that will make a tangible difference to people’s lives: that the days of leasehold are numbered and that this place does not accept that ground rent is a legitimate payment.

We see ground rent for what it is: a feudal device used to suck money away from people who get no benefit and no advantage from the payment but risk losing their home if they do not make it. Such arrangements have no place in the 21st century or, indeed, any century.

Some say that we should not ban ground rents on existing leases because that would introduce an element of retrospective impact on long-standing investments, including pension funds, but that is not an argument I have any sympathy with. The toxicity of leasehold has now been known for at least five years, which is plenty long enough for any investor to have taken a closer look at what they were involved in, looked for alternative sources of income and realised that nobody with an ounce of humanity should be using people’s homes as an investment vehicle—and especially not ones that included leases that were so onerous they made the homes unsellable.

Yes, there is a concern that we should not readily change the law so that it works retrospectively and changes the legal nature of a contract after it has already been entered into, but let us not forget that this place voted to introduce the loan charge, which retrospectively changed the law, arguably to the considerable detriment of many who say they were misled about what they signed up to at the time. There are parallels, because let us not forget that the victims of leasehold did not sign up to leases in the full knowledge of what they entailed. The developers, lenders and lawyers all have some degree of culpability, but the innocent victims—the leaseholders—do not.

The Competition and Markets Authority has been clear on several occasions that leaseholders have been wronged, and I welcome its decisions, but of course those decisions do not cover everyone, which is why we in this place need to step in. We often talk in the House about the plight of the Women Against State Pension Inequality—did the WASPI women not sign up for something very different from what they ended up with?

I know there are legal opinions about freeholders’ human rights, but what about my constituents’ human rights? In fact, I would love the owner of a set of freeholds to get on the witness stand and try to convince a judge that they are the wronged party in all this. I would love to ask them whether they think people should have the right to live in their own homes without them being used as an income stream for someone else.

The irony of what we are debating is that many of those who have done the most to bring the leasehold scandal to the public’s attention—I think in particular of the National Leasehold Campaign—stand to benefit the least from this Bill because there is nothing in it to help existing leaseholders. That is why new clause 1 is so important. Four years ago, when he was Communities Secretary, the right hon. Member for Bromsgrove (Sajid Javid) promised an outright ban on leasehold houses, and we all hoped that by now a law would be in place for everyone so that these wrongs could be righted. Those people deserve an end to this. They deserve hope that something will finally be done to make their lives a little better. If the Government cannot support the new clause, then, at the very least, I would like to hear from the Dispatch Box a commitment in the form of a final date by which the scourge of leasehold will finally be consigned to the history books. The wronged leaseholders deserve that, and it is about time it happened.

[Andy Carter (Warrington South) (Con)]

It is a pleasure to follow the hon. Member for Ellesmere Port and Neston (Justin Madders). I share his concerns and those of the hon. Member for Weaver Vale (Mike Amesbury), because a significant number of new homes built in the north-west of England, particularly in my constituency and in theirs too, have been on leasehold contracts. Although I recognise the aim of the new clause, I am not completely sure that it will resolve all the issues for my constituents, and I want to talk through some of the issues that they have told me about over the past couple of months.

I welcome many of the proposals set out in the Bill and recognise the important role that they will have in protecting leaseholders moving forward. I am, though, concerned that, as the hon. Member for Ellesmere Port and Neston said, they will offer little comfort for the thousands of homeowners who have become trapped in historical leases, which I am afraid many were even unaware they were purchasing when they signed for their new home. That includes an number of constituents in Warrington South who have spent the past 12 years trying to resolve a situation that they were inadvertently drawn into when they were mis-sold their properties on the Steinbeck Grange estate in Chapelford village by David Wilson Homes.

My constituents believed they were purchasing their properties freehold, and many were not disabused of this position until several months after they moved in, when they received an invoice. One might rightly ask why their lawyers did not make them aware when they were signing the contract. It has become clear that most of them used a legal firm recommended by the developer—by the house builder’s sales team—and those lawyers failed to point out the tenure under which the properties were being sold, and failed to make Steinbeck residents aware of the important clause in their contract documents. By using their first names in dealings with clients, they made sure they could not be traced by dissatisfied customers once they became aware of the situation. The law firm went into administration within days of the estate being completed.

I note with interest that the Law Society’s response to the Bill states that it is not the solicitor’s place to dissuade a client from entering into a particular transaction; their role is to ensure that the transaction is legally sound and efficiently completed. I agree with that, but I believe that every lawyer has a responsibility to their clients, and in this case the client was not the developer but the homeowner, or prospective homeowner. They should have made clear all the elements of the contract and their clients should have been advised accordingly. I am aware of one Warrington solicitor who, when looking at the contract that was brought to him, advised the purchaser not to proceed because of the leasehold situation, and has come forward to give me all those details.

As hon. Members have mentioned, the Competition and Markets Authority is currently investigating several issues surrounding the potential mis-selling of leasehold properties. I thank the CMA for its endeavours in addressing this poor practice. It has been to Warrington and engaged with my constituents, and I am incredibly grateful for the work that it is doing there. These investigations have looked at four developers—Persimmon, Countrywide, Taylor Wimpey and Barratt Homes, which is the parent company of David Wilson Homes. To date, the CMA has reached agreements with the first three. I therefore encourage the management of Barratts to recognise the harm that has been caused by its past sales polices and agree a way forward with the CMA as soon as possible to put things right.

Many hon. and right hon. Members have raised these issues in this House, but progress is also down to the tenacity of the men and women trapped in unfair leasehold contracts across the country who have continued to fight for their rights. I particularly praise my constituent Mr Mike Carroll, who has refused to take no for an answer and is continuing to work tirelessly with me and his neighbours to achieve the right and just outcome for them.

Ministers also need to look again at how consumer bodies around the country, particularly trading standards, should be working in the interests of homeowners, to help them resolve some of these issues. In the case of homeowners in Warrington, trading standards appear not to have been interested and have done little to involve themselves in any investigations. That is not the case in other parts of the country, where resolutions have been reached. I note in particular that Cardiff trading standards got involved and looked very closely at some of these practices.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Eddie Hughes)]

This is a bit like the Rolling Stones tour in that I said goodbye to the hon. Member for Weaver Vale (Mike Amesbury) and he has come back for an encore, for another concert. However, like the Rolling Stones, it is good to see him back again. I thank all right hon. and hon. Members for their contribution to this debate and for the constructive way in which they have engaged with the Bill throughout its passage. I particularly thank the Opposition Front Bench team for their helpful contributions.

I will address each amendment, starting with amendment 1 in the name of the hon. Gentleman. The difficulties faced by existing leaseholders have rightly been raised by Members across the House, both in Committee and in correspondence. I understand Members’ points about the fact that the Bill relates only to new leases. I point out, however, as I did in Committee, that the Bill is just the first of two-part legislation to reform the leasehold system and that further legislation will follow in this Parliament, so I encourage others, including my right hon. Friend the Member for Hemel Hempstead (Sir Mike Penning), to engage with me in discussions on the second part of the legislation as it begins to form.

The Government understand the urgency of the need for changes for leaseholders paying out unacceptable charges day to day. However, I do not think that the arbitrary deadline in new clause 1 is useful in this context, and similar is true of the alternative deadlines suggested by the hon. Member for Sheffield South East (Mr Betts). Although I appreciate that this is not completely relevant, Madam Deputy Speaker, on what he said about new burdens, the point of legislation such as this is to encourage people to behave appropriately so that they treat leaseholders fairly and there are no cases. However, as the Bill is implemented and we see how it develops, I look forward to discussing with him and the Levelling Up, Housing and Communities Committee the impact that that will have on councils.

[Justin Madders]

The new clause is obviously not going to find favour with the Minister tonight, but could he at least give us the date—maybe even just the year—by which leasehold will finally be in the history books?

--- Later in debate ---

[Justin Madders]

It is a pleasure, as always, to follow the Father of the House. As we have already mentioned this evening, we are now four years on from the promises that were made about reforming leasehold, and the Bill, as we have all accepted, is a step in the right direction. However, as we have all acknowledged as well, it is little comfort to those who are still trapped in homes that they cannot sell because of the onerous leases with which they have been left, and we must do something about that. I tried to get the Minister to give us a year when that might happen, but we could not get anything out of him. None the less, I can assure him and the House that we will keep pushing on the issue, because justice demands that it is resolved.

It is also worth commenting on the fact that one in three houses sold in the north-west in the past 10 years is leasehold. There has been much talk about levelling up. Who can doubt that a person’s home is the biggest investment they will make? So it is simply unacceptable for so many homes in my part of the world to have been built off the back of an exploitative and unjust business model. Surely, if levelling up is to mean anything, it should at the very least mean that people’s homes are owned on the same basis wherever they live in the country.

The ending of ground rents for new homes is a positive, but it will create a strange situation. There will be houses within a stone’s throw of one another that have a different form of ownership. That will just add more weight to the sense of injustice that existing leaseholders feel, which is why I am so keen for us to push on and deal with that issue.

As many Members have said, a lot more needs to be done. A whole range of issues have been mentioned tonight. We have, for example, barely touched on park homes. There are so many scandalous things going on there, and we really should be paying them more attention. For homeowners, we see the following: management fees, which are a rip-off; non-transparent service charges; the cost of enfranchisement; insurance scams; obscure penalty clauses; and other costs that appear everywhere we turn in a lease. They are all baked into the business models of those avaricious companies which, let us not forget, are still out there building houses.

I am a little concerned that the companies on which we rely to build the houses that we need are responsible for many of the injustices that we have discussed tonight. We need to keep a close eye on their practices in future. I still think that we need an inquiry into the whole industry. We have previously discussed some of the things that we touched on tonight, and the question of how close lawyers were to developers and whether they were acting in the best interests of their clients needs further examination. We need to look at the lenders and surveyors and what the developers were saying to people, often first-time buyers, who were misled about what they were buying. We need to make sure that the system is examined thoroughly so that there is no repeat of the scandal that we have seen over the past five years.

People who buy a home should have a right not to expect it to become an ongoing income stream for a third party. If we have that as our guiding principle we will not go far wrong, so let us crack on with legislating so that that can become a reality for everyone. As many Members have done, I want to acknowledge the fantastic work of the many campaigners who have been active in bringing this issue to the fore including, as we have heard, the Leasehold Knowledge Partnership, Martin Boyd, Sebastian O’Kelly, the late Louie Burns, the National Leasehold Campaign, Catherine Williams, Katie Kendrick, Jo Darbyshire and many others, with the Father of the House being one of the biggest cheerleaders. There are many people who have contributed to bringing the issue to the attention of the House, but there is much more that we need to do. It feels at times as if progress is painfully slow, but that should not dim our determination finally to consign leasehold to the dustbin.

[Sir Peter Bottomley]

We know about some of the abuses, because people who were working in firms that I would respectfully declare to be dodgy provided information anonymously. Will the hon. Gentleman join me in saying to Richard Davidoff, who might take defamation action against people who have blown the whistle on practices that we would condemn, that the courts should not be used to stop people blowing the whistle on practices that are questionable, if not completely wrong?

[Justin Madders]

As always, I find myself in agreement with the Father of the House. Whistleblowers should be able to speak up freely. With my other hat on, it is probably time that we had a review of whistleblowing legislation to make sure that people are adequately protected. We owe a debt to people who are prepared to speak up and put their head above the parapet, possibly at great personal expense. The scams have to be stopped, and people need to be supported.

On that note, we have made a little progress tonight, and I want to keep making progress. I am sure that the majority of the House will want leasehold finally to enter the history books, rather than being something that we deal with on a day-to-day basis.