Oral Answers to Questions

Debate between Kevin Hollinrake and Eddie Hughes

Thursday 18th May 2023 Commons Chamber

[Kevin Hollinrake]

The hon. Lady raises an important point. As she knows, one of the Government’s commitments is to halve inflation, which will also have an impact on food prices. We absolutely need to do that, particularly for those low-income households. That is why we directed support mostly at low-income households, with more than £2,000 a household this year and £900 in additional support for low-income households this year. This is a twin-track approach, tackling inflation and lowering food prices, and also providing direct support.

[Eddie Hughes (Walsall North) (Con)]

Some 70% of our economy is services, so what is the Department doing to reduce barriers in that area and supercharge our global trade in services?

Leasehold Reform (Ground Rent) Bill [Lords]

Debate between Kevin Hollinrake and Eddie Hughes

2nd reading
Monday 29th November 2021 Commons Chamber

[Eddie Hughes]

I would say that we are doing a very important thing with today’s legislation, which effectively draws a line in the sand to prevent future onerous ground rent clauses. Once we have done so, we will then have the opportunity to work, hopefully quickly, to deal with the existing ground rent problem.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I have been known to swim against the tide once or twice with regard to this particular debate. I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I am a leaseholder, not a freeholder, in this context. Nevertheless, it is not right to think that effectively scrapping leasehold and moving to commonhold is a panacea. For evidence of that, hon. Members should look at the system in Scotland, which moved to a commonhold system. Some 80% of buildings require maintenance and there is a £2 billion unfunded maintenance backlog. We should step forward very carefully. Leasehold does need reform, but I am very concerned that if we effectively scrap it altogether, we will create ourselves a new problem.

[Eddie Hughes]

I thank my hon. Friend, who is incredibly knowledgeable in this area. I remember discussing my ten-minute rule Bill with him at the time. I completely assure him that we will proceed with caution and seek advice from experts both across the House and outside the House. I look forward to discussing this with him again in the future. I also take this opportunity to thank the former Secretary of State, my right hon. Friend the Member for Newark (Robert Jenrick)—I am delighted to see him in his place—for all the work that he put in in driving forward this agenda. Back in January, he announced measures to make buying a freehold or extending a lease cheaper and easier for many leaseholders.

I now turn to the specifics of the Bill. Ground rent is usually paid annually by leaseholders to their freeholder or landlord, but, crucially, no tangible service is provided in return. The industry is also familiar with the term, “peppercorn rent”, to describe a token or nominal rent used as a payment in forming a contract, which typically is not actually collected in practice. Historically, ground rents were generally very low. The past two decades have seen a surge in properties sold with significant and escalating ground rent. At its worst, this practice can lead to properties becoming unsellable. These unfair practices have caused real misery for those affected and, in turn, have undermined the reputation of the leasehold system. Regardless of whether the ground rent is a nominal peppercorn or thousands of pounds, the fundamental issue is that no meaningful service is provided in return. We want to end this for new leases, and that is why we are legislating so that new residential long leases will have no financial demand for ground rent. Instead, nothing more than an actual peppercorn can be collected from the leaseholder.

[Eddie Hughes]

The reason why we extended the timeframe for the introduction of this legislation for those properties is to allow people time to adjust their business models, so that they can cope with the change in legislation. To avert the risk of possible future shortages of peppercorns, and to ensure that our meals continue to be well seasoned, I should clarify that we do not expect any landlord to require the actual payment of a physical peppercorn each year. In reality, the new genuine peppercorn rent for future leaseholders means that they will not pay the rent.

The specifics of the Bill apply to residential long leases in England and Wales of over 21 years for which a premium is paid. The inclusion of the requirement for a premium clarifies that normal and legitimate practices relating to rack rents can continue. For leases regulated under the Bill, the rent demanded will not be any more than literally one peppercorn a year.

Following much careful deliberation, we have arrived at a broad and flexible definition of “rent”, using the real-world meaning, and therefore including anything in the conventional nature of rent. The Government are clear that landlords should retain the ability to collect legitimate charges. The definition will ensure that landlords can still collect legitimate charges where the market reserves them as rent, such as charges for services, including building maintenance. The broad definition will deter freeholders or landlords from trying to circumvent the new system by disguising ground rent as a different charge. It will also enable appropriate tribunals to make sound judgments on whether a leaseholder has in fact been charged a prohibited rent.

We plan to leave no loopholes for unscrupulous individuals, so we are also banning the charging of an admin fee for collecting peppercorn rent. Where a prohibited rent or administrative charge is paid, leaseholders will have the right to apply to the first-tier tribunal in England or the leasehold valuation tribunal in Wales. Provided that the tribunal deems the payment inappropriate, the relevant authority can then order the amount to be repaid. In the case of prohibited rent, that must be within 28 days and potentially also with interest.

There are a limited number of exceptions from the provisions of the Bill. The first is leases used purely for a business purpose. The intention behind the Bill has never been to reduce business leases to a peppercorn rent, so through careful consideration, we have excepted business leases that include the use of a dwelling in any way that protects the interest of residential leaseholders and commercial landlords. For mixed-use properties, such as a flat above a shop, the exception will apply only if the residential use significantly contributes to the business purpose of the lease.

Community-led housing may have few other feasible funding schemes that they can use to continue to grow developments that benefit the community, rather than secure profits. To maintain this growth, we have excepted community-led housing schemes. Home finance plan leases are also excepted. That includes regulated home reversion plans, such as equity release and rent-to-buy agreements, where the consumer purchases the freehold at the end of the term. We will also allow shared ownership landlords to continue to collect a market rent on their share of the property. That practice is integral to the shared ownership model.

[Kevin Hollinrake]

The Minister is setting out a list of exemptions. Are complex developments included in that—for example, a tube station with a cinema or shopping centre attached, and a block of flats above it, all in effect part of the same development? Who will manage the complexity of that development? If I was a long leaseholder in that block of flats, I would not be keen to manage all the mechanical and electrical systems stuff in that development.

[Eddie Hughes]

I am not sure that I completely understand my hon. Friend’s point. The Bill will not change the management of that building’s operation; it will just prevent ground rent from being charged. If a leaseholder feels that they are being charged ground rent inappropriately, they will have a right of appeal, and the issue will be determined by the ways and means authority.

[Kevin Hollinrake]

I am sorry; I should clarify my point. The Minister is quite right that a management company could look after the whole entity, but things such as common areas and insurance of the whole building —among many other issues—affect the whole building, and they require somebody to have an overarching view of the entire development. I not sure how that is provided for. In fact, in 2019, when I was a member of the Housing, Communities and Local Government Committee, it looked into that and said there should be an exemption for complex developments on that basis. However, that does not appear in the Bill, despite having been referred to in debates in the Lords.

[Eddie Hughes]

As I said, the Government’s intention is to ensure that, for fairness, the provision applies in as many circumstances as possible. I am happy to pick that up with my hon. Friend for further discussion after the debate, to which I hope he will contribute.

Statutory lease extensions are the subject of existing legislation and so are not covered by the Bill. The peppercorn limit will apply to the extended portion of any lease extended through the voluntary process.

I should note that there is no longer an exception for the retirement sector. As I said to my right hon. Friend the Member for Chipping Barnet (Theresa Villiers), we believe that all new leaseholders should benefit from the reforms. The measures for retirement properties will apply no earlier than 1 April 2023. Hon. Members, some of whom are in the Chamber, have raised that as a concern in correspondence, and it has been debated at some length in the other place. We feel that the transition period strikes the right balance between the sector and consumers.

The Government recognise that these provisions require a robust and effective enforcement regime. Freeholders and landlords who abuse the system and deliberately seek to charge a non-peppercorn ground rent on leases in contravention of the Bill will be subject to steep fines of up to £30,000. After listening to and considering carefully the view expressed in the other place, we concluded that the level of fines should be higher. The new maximum fine of £30,000 is in line with other housing penalties, including those in the Tenant Fees Act 2019. Fines can be even steeper for more egregious abuses of the system. For example, if a freeholder breaks the law by charging unfair rents at multiple locations, such as in a block of flats, they will pay a penalty per lease. It does not stop there; penalties can be supplemented by the repayment of all prohibited rent collected. Enforcement will be the responsibility of local trading standards authorities, which already do an excellent job of enforcing similar housing regulations. District councils in England will also have the power to take enforcement action if they choose.

We recognise that enforcement will require additional resourcing. That is why authorities can retain any penalties imposed, and put them towards the costs incurred in enforcement of residential leasehold property rules. Taken together, the enforcement regime will act as an effective deterrent, while giving authorities the flexibility that they need to ensure that any enforcement action taken is proportionate.

The Government’s vision for a reformed and improved leasehold system is one anchored in fairness and transparency. For too long, too many leaseholders have been let down by institutional inertia and a ground rent system that has not worked in their interests. The system has been dogged by opaque rules and left many people in the dark. This legislation is targeted on exactly what it should target. By reducing future ground rents to a peppercorn, we will deliver a tangible and meaningful improvement to home ownership for future generations. We have engaged extensively to get to this point, and this process is by no means over. We are clear-eyed about the challenges ahead, and know that there is more to do, but today is a significant step towards fixing our broken leasehold system for good. I commend this Bill to the House.

Levelling Up

Debate between Kevin Hollinrake and Eddie Hughes

Tuesday 16th March 2021 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con) [V]]

I welcome my hon. Friend the Minister to his place on the Front Bench. He has made a great start.

Will my hon. Friend confirm that the levelling-up fund will welcome applications from rural areas, such as Ryedale in my constituency, which may look prosperous from the outside but whose average earnings are below the regional average, partly because of a past lack of infrastructure investment? The situation could be reversed if funds were provided to important projects such as the improvement of railway stations in Malton and in Thirsk.

[Eddie Hughes]

I thank my hon. Friend for his kind words and his question. I encourage him to work with his local council to develop bids along the lines that he has just set out. Those bids will be assessed based on deliverability, strategic fit and value for money. We hope that that strategic fit element will be partly determined by the good work of local MPs who engage with local councils to determine priorities for their area.