Leasehold Reform

Justin Madders Excerpts

Tuesday 23rd May 2023 Commons Chamber

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

I would like to start by taking the House back to 2012, when the right hon. Member for Welwyn Hatfield (Grant Shapps) was Housing Minister and appeared on Channel 4 to speak about leasehold, and said that only a “tiny, tiny, tiny” number of landlords caused problems. Since then, the Leasehold Knowledge Partnership, with Martin Boyd and Sebastian O’Kelly, along with the hon. Member for Worthing West (Sir Peter Bottomley), Jim Fitzpatrick, when he was a Member of this place, and the National Leasehold Campaign, have proved that analysis to be completely wrong. Let us be clear: those are the people who have contributed time and again to make this the issue that has led us to the debate today.

I got involved in the issue shortly after I was elected to this place. I remind the House of my opening comments in a debate that took place in this Chamber on leasehold:

“What we are discussing today is nothing short of a national scandal. It is the payment protection insurance of the house building industry. Every now and again a sharp practice comes to light which is totally unconscionable and of which every reasonable person would say, “We cannot allow this to continue. Parliament must act.” This is one such occasion.”—[Official Report, 20 December 2016; Vol. 618, c. 1342.]

I believe those sentiments have become widely shared by Members across this House, as details of the leasehold scandal have come to light. Indeed, those words could have been easily spoken by any number of Members, on either side, speaking today. But when did I actually say those words? 2016, some seven years ago. It is seven years since the sickness at the heart of our housing system was exposed, but for those who have been victims of the scandal, it seems very little has changed. They remain victims to this day. We cannot allow that to continue.

It is worth reminding ourselves why the issue has come up the political agenda. For me, the lightbulb moment came after I was approached by a couple of constituents who were concerned about having to pay ground rent on their newly purchased home—a home that was the sort of standard new-build construction that can be found anywhere in the country. Why were those properties leasehold at all? There were no common parts or complicated land ownership. The only reason these properties were leasehold was greed. That greed enabled a whole host of fees to be artificially generated, ensuring that every homeowner would be paying far more than they should, for each and every generation to come. What is the justification for those fees, except that it is what people have been signed up to, unwittingly and with poor legal advice? Well, we know what the CMA thinks about that argument. Prices quoted by the developer to purchase the freehold when the property was initially sold rose four, five or even 10 times higher once the developer had sold their interest on. Hundreds of pounds were being demanded for minor alterations to the property and thousands requested if planning permission was sought. Their home, the biggest single purchase most people will ever make in their life, had been turned into a cash converter for the anonymous freeholder.

Then there was the biggest insult of the lot: the ground rent. Initially, it was a modest fee, but a price escalator was hidden away in the small print. Sometimes it would double after 10 years, then double again after another 10 years, and so on. For some leaseholders, in a relatively short period their property became unsellable. The linking of ground rents to RPI is becoming a real issue with inflation so high, even making some of the outrageous doubling ground rent clauses seem reasonable in comparison. That is putting people in hardship, and it is the biggest insult of the lot because ground rent is, literally, money for nothing. Its payment is a complete legal nonsense that does not stand up to even the smallest amount of scrutiny. I do not give Vauxhall another £100 every time I drive in my Astra. If someone buys a home, that should be it; it should be theirs. It should not be a virtually unregulated income stream for an offshore investor who sees that home as just another number on the balance sheet.

As we have seen reported in the Financial Times last week, throughout history the cost of leasehold and freehold homes has generally moved in lockstep, but over the last five years the price of freehold properties has continued to rise but leasehold homes have not kept pace. There is no doubt that the Grenfell tragedy has played a huge part in that, as the inadequacies of the building safety regime have been laid bare, but I also believe that the general toxicity of leasehold as a form of housing tenure, with people unable to sell their homes, has played its part. Leasehold has clearly had its day, but we need the Government to finally consign it to the history books. The pieces are all in place. The knotty legal issues have been untangled and the argument that leasehold has had its day has been won. What is missing is the political will to get that change over the line.

In particular we need to see greater powers for residents over the management of their homes, with new rights for flat owners to form residents’ associations and a simplification of the right to manage. We need leaseholders to have the right to extend a lease to 990 years with zero ground rent at any time, and we need to bring forward reform to the process of enfranchisement valuation for leaseholders, including on marriage values, and prescribing rates for the calculations of the premium. We need a crackdown on unfair fees and contract terms through the publication of a list of reasonable charges, requiring transparency on service charges and giving leaseholders a right to challenge rip-off fees and conditions or poor performance from service companies. We must end the right of third-party landlords to build on other people’s homes without considering their interests, their safety or the quality of their homes. We need to squeeze the freeholders until the pips squeak.

This debate is, at its root, about power, who holds it and how it is exercised. Who owns the land holds the power. That has always been true in this country, but we have moved on from the barons and the lords of the manor to the offshore private equity companies—a 21st-century update of the feudal arrangements that have for so long held this country back. It is an arrangement that no other country in the world has sought to replicate. We know that this Government are not keen on international comparisons but perhaps that ought to tell us something. It is clear from this debate that just about everyone agrees that something needs to change, but I am not confident that we will see change any time soon. I thought the Government were all about taking back control. Do they not realise that a leaseholder does not have control? How can they have control if someone is trying to use their home as a cash cow?

It is a shame that the Secretary of State is not here today to hear this debate. Perhaps he is interviewing the next Housing Minister, given that we have one every couple of months. He is probably the most able member of the Cabinet. Maybe the competition is not up to much, but I believe that he has the cognitive skills to recognise that leasehold as a form of tenure is an intellectual dead end for the freeholders, for his party and for anyone who tries to defend it.

The Law Commission has given us the route out of this mess and the case has been made, but what is lacking is leadership from the very top and the courage to say that this is a priority and this injustice has to come to an end. I believe that all those on the Government Front Bench should go back to the Prime Minister and deliver the simple message that if his party does not want to deal with this issue, it should stand aside and make way for one that does.

--- Later in debate ---

[Rachel Maclean]

If Members will forgive me, I am attempting to answer the questions they have already asked me, but I will give way briefly to the hon. Member for Ellesmere Port and Neston (Justin Madders).

[Justin Madders]

In her opening comments, the Minister referred to the reason why this motion has been tabled, which is media speculation that there is some backtracking from the Government’s commitments on this issue. The motion very clearly says that the Secretary of State should give an oral statement in one month’s time, and the fact that he is not here today sends a terrible message about his and the Government’s priorities. Surely, in the absence of the Secretary of State, the answer is to support the motion.

[Rachel Maclean]

If the hon. Member will allow me to answer the questions I have been asked, I will come to his points in my remarks.

We are making significant progress to afford real relief to leaseholders, which everyone in the Chamber is calling for, while reforming the system for the better. However, the questions facing leasehold tenure are not simply about money—important though those are—but also include, “Who decides?” For people living in a leasehold home today, we are going to make it easier and cheaper for them to take charge of their building, whether by taking advantage of our reforms to the right to manage or by going all the way and buying out their freeholds following our planned enfranchisement reforms. Both offer to put owners in the driving seat over the decisions that affect them.

In the case of new homes, our ground rent Act has cut off a key source of revenue for freehold landlords. Without strong economic reasons for developers to hold on to, or sell on, the freeholds of other people’s homes, we have created a powerful incentive for builders to put buyers in charge of their new homes from the outset. We know there is more to be done, which is why we are taking two key further steps on new homes.

First, we have made great strides in tackling the needless practice of selling new houses as leasehold. Our actions, including prohibiting Government programmes such as Help to Buy from funding new leasehold houses, have seen the share of new houses sold as leasehold cut from over 15% in 2016 to less than 2% today. But we are clear in our intention to go even further, which means that soon, other than in the most exceptional of circumstances, the selling of new leasehold houses will be banned altogether.