Leaseholders and Freeholders

Lee Rowley Excerpts

Wednesday 15th May 2024 Commons Chamber

[The Minister for Housing, Planning and Building Safety (Lee Rowley)]

It is a great pleasure to respond in this short debate, and to talk about an issue of huge importance to so many colleagues around the House. Over the past few months, as we have talked about leasehold, more and more colleagues have come up to me to highlight the iniquities, problems and challenges that they see in their constituency. I am grateful to my right hon. Friend the Member for North Somerset (Sir Liam Fox) for highlighting the issues that he has experienced, and I am very sorry to hear about Port Marine and the challenges that its residents face. I obviously cannot comment too much on individual cases, but it is absolutely vital that we hear individual examples. I have heard examples from around the country of particularly egregious extortion, and problems with the framework of leasehold. That is one of the reasons why we are bringing forward leasehold reform—because we recognise that there needs to be change.

Leasehold can work in some places, and some elements of it can be successful, but as my right hon. Friend has outlined, the problem is that there is too much bad practice in the sector. There are too many distortions within that tenure, too many inefficiencies that can be exploited, and frankly too many rent-seekers in the sector who are trying to exploit those distortions and inefficiencies. I know that Opposition colleagues also feel strongly about this issue, but we Conservatives are nothing if we do not seek to smash monopolies, stop rent-seeking, make markets more perfect and stand up for the little guy. Stories such as the one that my right hon. Friend recounted today highlight the reason why we are reforming leasehold. There is a way to go in making that market more perfect, but that is exactly what we are trying to do.

The Leasehold and Freehold Reform Bill will bring into law many reforms to better protect and empower leaseholders. Existing leaseholders will find it easier and cheaper to extend their lease or buy their freehold. Reforms to the cost regime for enfranchisement and right-to-manage claims will make them more accessible, enabling leaseholders to take control of their building and, therefore, their future.

[Sir Liam Fox]

The issue of rent charges also applies to freeholders; it is not just leaseholders who are the victims. An amendment to the Rentcharges Act 1977 would deal with the problem once and for all, so I encourage my hon. Friend to look at amendments to that Act when we bring forward legislation on this subject. If the Government do not want to bring forward such an amendment to the 1977 Act, I would be more than happy to table one.

--- Later in debate ---

[Lee Rowley]

My right hon. Friend is absolutely right: there are impacts on both freeholders and leaseholders. Different types of property and tenure are impacted in different ways. Elements of the rent charges regime will be extinguished by the 1977 Act, which he rightly referenced, in 2033; that has been in law since before I was born. However, there are a number of other issues that need addressing, and the Leasehold and Freehold Reform Bill was introduced to address some of them. A whole range of reforms are necessary across the leasehold sector, and the Bill seeks to address that, but as my right hon. Friend outlined, there are two main issues that this discussion of Port Marine has highlighted: the variable service charge, and the rent charge point, which he just spoke about a little more.

The Bill as it stands will absolutely make progress on variable service charges in a number of ways. It will not fix what has happened in the past, but it absolutely seeks to minimise the chance of it happening again. Unjustified increases in variable service charges are not acceptable. Any service charges must be transparent and communicated effectively, and there should be a clear route for challenging them if things go wrong. The Bill ensures that all leaseholders will receive: key minimum financial and non-financial information regularly, including a standardised service charge demand form; an annual report of charges; the timely provision of service charge accounts; and the right to obtain other relevant information. That is a significant step forward, as I know from discussions with both leaseholders and freeholders in my constituency, and from having spoken with colleagues from all around the House who have similar issues. We are also taking measures on service charges to ensure that leaseholders are not subject to unjustified legal costs. For the first time, they can, when appropriate, claim their costs from landlords if they go through the tribunal process and win. There will be a significant change on variable service charges as and when the Bill passes through both Houses.

On fixed rent charges, the Bill introduces a framework to empower homeowners and to hold estate management companies to account for the service they provide. There will need to be transparency of information. There will be a new legal requirement that estate management charges must be reasonable. For the first time, there will be an ability to challenge excessive costs through the tribunal, and to ensure that estate management companies are held to account. The measures will also cover admin fees, including deeds of variation—my right hon. Friend highlighted that point. As I say, there will for the first time be a right to apply to the tribunal for redress. If there is a strong view, and proof, that the managing agent in charge is doing something inappropriate or is not fulfilling their duty, people can apply to a tribunal to have a substitute manager appointed. That will for the first time provide an opportunity for residents to highlight problems, and remove people who consistently cause problems.

As I said in Committee, we recognised in Committee and from previous debates in the House the strength of feeling among colleagues; that has been shown again by my right hon. Friend in this debate, and by the contributions of other hon. Members. We are considering further whether we can look at this area in more detail. I hope that I can soon say more from the Government Front Bench about that, although I cannot do so tonight.

To conclude, my right hon. Friend is absolutely right to raise the issues in this case and to highlight the key challenges that we see daily to do with when this system does not work. He raised how and when this system is not working for Port Marine. I hope there is restitution, and that a solution comes as soon as possible. I recognise the individual examples of when things are not working, but the Government are taking action, in a very Conservative way, recognising that we have to deal with these monopolies, smash the rent-seekers and remove distortions to make markets more perfect. We must ensure that there will not be another Port Marine in 10, 15 or 20 years’ time. When the Bill goes through, we will significantly improve this market and leasehold, and significantly change rent charges, so that people who want to buy their house and have the benefits of owner-occupation—we want to do all we can to empower people —gain real control over their future. We look forward to colleagues supporting the Bill as it goes through its final stages in the House in the coming weeks.

Question put and agreed to.