Draft Building Safety (Leaseholder Protections) (Information etc.) (England) Regulations 2022

Kate Green Excerpts

Monday 18th July 2022 General Committees

[Kate Green (Stretford and Urmston) (Lab)]

I am grateful to the Minister for his introduction of the regulations. I hope that the Committee will allow me to ask a few questions on behalf of constituents of mine who are directly affected by the provisions in the Building Safety Act. Although I welcome those provisions—they represent a big step forward in protecting my constituents—I have real concerns about the detail of their implementation. I hope that the Minister will be able to reassure my constituents.

First, I have spoken on a number of occasions about landlords who are linked to the original developer. A network of companies can exist with common directors and shareholders, and such companies can move in and out of liquidation, passing freeholds among themselves in a sort of merry-go-round of ownership. There is no doubt in my mind of the connection between those landlords—some of which have, of course, gone into liquidation and no longer exist—and the original developer, so it would be useful if the Minister explained what he means by “linked”. If a link between landlords and the original developer is clearly there but cannot be shown, how might the costs be apportioned between them?

Secondly, in the case of landlords that have gone into liquidation and disappeared, the directors and shareholders of which are still known because they have moved into other companies that are now the landlords, how effective will it be to apportion the costs among anyone who has ever had a hand in owning or developing substandard buildings?

In cases in which the landlord is the director of, a shareholder in, or is connected to a company that is also a leaseholder, or indeed owns a number of leases in the block—as is the case for Aura Court in my constituency—will that landlord who is also a leaseholder be able to benefit in any way from the regulations? It would be absolutely invidious if a landlord’s costs could be capped simply by virtue of owning some leases in the building, when in fact that landlord directly or indirectly bears responsibility for the condition of the building.

Thirdly, may I ask about management companies? Again, those may be controlled—I fear that, in the building I am thinking of in my constituency, it will be controlled by one of the individuals who is, in my opinion, linked to the original developer and to other landlords.

Finally, I would like to raise the concerns of constituents who feel they have waited many months to see any remediation at all, and still have no real idea of when works might start so that they can get out of this terrible position of having properties that they feel are not safe and which they cannot sell. My constituents would welcome any update from the Minister on what progress is being made on carrying out remediation work.

--- Later in debate ---

[Mr Jones]

I thank the hon. Member for Greenwich and Woolwich and other members of the Committee, who in many ways seem content to allow the regulations to pass. I will start by answering some of the questions raised by the hon. Member and the hon. Member for Stretford and Urmston. The hon. Lady mentioned landlords linked to the developer and the apportionment of costs. The regulations clearly set out a formula for how those costs will be apportioned. In cases where landlords or developers are no longer trading, as I am sure the hon. Member knows, there is a levy scheme where developers pay into that levy, so we can support those people who end up—through no fault of their own—in a situation where the people responsible are not likely to pay for the remediation.

The hon. Lady asked a question about enfranchised buildings and leaseholders, which I will come to when I respond to the hon. Member for Greenwich and Woolwich. The hon. Lady also mentioned management companies. The type of arrangements she was thinking about were those with non-resident owned management companies that are subject to tripartite leases and arrangements with the landlord and leaseholders. It is important and urgent to prepare these two sets of regulations in the way that we have, so that they enable the protections to take place. We are confident that the way the regulations have been drafted will be effective in ensuring that the qualifying leaseholders gets the right outcome for the type of arrangements the hon. Member has mentioned. We are absolutely clear that all types of management company should be covered by the regulations, and we will closely monitor the progress of cases. If it becomes apparent that changes are necessary, we will come back to Parliament with further proposals.

[Kate Green]

Perhaps I could write to the Minister to set out the specific circumstances that pertain to my constituency. The regulations were helpfully accompanied by some worked-through examples, so perhaps I could add another one that is being faced by my constituents at the moment and the Minister could respond in detail as to how they would be affected?

[Mr Jones]

I would very much welcome that correspondence. I would be more than happy to receive the example that the hon. Lady is talking about and to come back to her with a response.

The hon. Member for Greenwich and Woolwich mentioned that the protections came into force on 28 June, which was two months after the Act received Royal Assent. The regulations, along with the Building Safety (Leaseholder Protections) (England) Regulations 2022, which were laid on 28 June, will provide the detail to operationalise the new leaseholder protection regime. Landlords are now only able to pass on costs where the Building Safety Act permits them to do so, and that includes pursuing unpaid bills for historical safety remediation issued prior to commencement. As of 28 June, landlords must not pursue bills for historical safety remediation that are not in accordance with the Act. As the hon. Gentleman said, doing so would be illegal and I will come back to him on his point about the operation of that.

Leaseholders should seek to complete the leaseholder deed of certificate that is outlined in the regulations as soon as possible, so they can demonstrate to their landlord whether they qualify for the protections.

In an enfranchised building, the freehold is owned by some or all of the leaseholders. Capping leaseholder liability in a fully enfranchised or commonhold building would not have the effect of reducing or limiting leaseholders’ liability as leaseholders are the freeholder. The other complication is that often not all the leaseholders own part of the freehold, which is why my right hon. Friend the Member for Pudsey (Stuart Andrew) committed to bringing forward a consultation and a call for evidence on this important issue, which will be released shortly. It is important that we try to help clarify matters for people in that position.

On the report by the Joint Committee on Statutory Instruments, the Committee will know that the underlying statutory provisions for leaseholder protections were added to what is now the Building Safety Act 2022 about half way through its passage through Parliament, in recognition of the unfair and intolerable position that many leaseholders were in. They faced bills, as has been acknowledged across the House, running into thousands of pounds to fix problems that they had no part in creating. In many senses, as the hon. Member for Greenwich and Woolwich said, those people were put into significant financial distress as a result.

The leaseholder sections were devised and drafted at pace, drawing on expertise in a number of fields, including proposals put forward by Members of both Houses. I record my thanks for their time and engagement on that. The Act received Royal Assent at the end of April and the protections came into force two months later. It was therefore both important and urgent to prepare the two sets of regulations that will enable the protections to take practical effect. The urgency meant that we were not in a position to share the regulations in draft with the Committee, as is the usual practice. That meant, however, that the Committee and its staff had limited time to get to grips with both the regulations and the underlying primary legislation in what is in many ways a groundbreaking piece of law.

None the less, we engaged in two rounds of correspondence with the Joint Committee, culminating in the memorandum and response set out in Appendix 1 to the Committee’s report. Some Members will have read that report in full—I am sure the hon. Gentleman will have—and we have seen the detail of the Committee’s concern and the Government’s response.

To summarise, the Joint Committee raised a number of technical and legal issues with the draft instrument in respect of its drafting and of its vires. The Government have considered those issues carefully, including by working closely with the first tier tribunal about the way in which it will deal with appeals. The Government are satisfied that, notwithstanding the Committee’s concerns, there are no issues with the regulations that will prevent the process from operating successfully.

As I have described, the Government consider it imperative that the regulations come into force before the summer recess to alleviate the issues facing leaseholders in defective blocks. We will of course monitor closely the progress of cases. If it becomes apparent that changes are necessary, we will come back to Parliament with proposals. Therefore, as I said before, I ask colleagues to show some forbearance. I am glad that that seems to be the case, but that hon. Members will still feed in their particular cases.

On the final point made by the hon. Member for Greenwich and Woolwich on the memorandum from the Law Officers about confirmation of the retrospection on the 28th due date, if he will forgive me, I will take that away and come back to him with a fuller response. On that basis, and given that we have considered the draft regulations, I hope that the Committee will approve them.

Question put and agreed to.