Leasehold and Freehold Reform Bill

Debate between Lee Rowley and Stella Creasy

Report stage
Tuesday 27th February 2024 Commons Chamber

[Lee Rowley]

The hon. Gentleman makes an important point, which I know we debated in Committee. He correctly highlights the challenges in certain areas of enforcement. If I may, I will come back to that later in the debate.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I join my hon. Friend the Member for Brent North (Barry Gardiner) in recognising that this is not a partisan issue, because so many of us see the problems. The Minister talked about people not paying the costs when they win, but many will be shocked to discover that no precedent is set at a leasehold tribunal. We see companies exploit our constituents time and again, and it creates no precedent on which the courts and the tribunal courts could draw. Will he look at my amendment 1? It seeks to set that precedent and give people the protection of knowing that a freehold manager who has mistreated people will not be able to do it with impunity, because the courts will be able to take that into consideration if a tribunal has found that to be the case.

[Lee Rowley]

I am grateful to the hon. Lady, and I know that she feels strongly about this matter and has raised it previously. I am always happy to talk outside the Chamber, but the advice I have received is that, at the higher tier of the tribunal, there is the ability to give an indication of the direction of travel and a precedent can be set there. As I say, I am happy to talk to the hon. Lady separately.

In Committee, we made efforts to further improve and expand the Bill. We moved 119 amendments, including on expanding leaseholder rights of redress and providing new guarantees that leaseholders will receive sales information, and tabled a number of technical amendments to improve it. Today we are proposing further improvements, and I will now turn to the Government amendments on Report. I will first speak to new clauses 30 to 35, and amendments 23 and 49.

Building on the Building Safety Act 2022, the Government have tabled a number of amendments to clarify and extend protections in specific areas to further prevent freeholders and developers from escaping their liabilities to fund building remediation work. The Building Safety Act provided leaseholders with a range of protections to ensure that those responsible for building safety defects were made to carry out the works or pay for them to be carried out. However, before and during the process of remediation, relevant steps may be required to keep the building and the residents safe. Relevant steps include such measures as providing waking watches, fire sprinklers or simultaneous alarms. Unfortunately, there have been cases where the landlord has failed to put those in place or to pay for the relevant steps. That has caused the leaseholder to bear the financial burden or required the local authority to step in.

New clause 30 would place beyond doubt that the first-tier tribunal can order that the costs of the relevant steps are met when making a remediation contribution order or a remediation order. It is often the case that doing surveys or investigative works to discover the full extent of remediation required on a building takes time, money and effort, and those assessments can be invasive. New clause 31 would place it beyond doubt that the first-tier tribunal has the power to order that a respondent must arrange and pay for evaluations, surveys or expert reports to establish the full extent of a building’s defects.

On new clause 32, we know that in some instances, landlords of buildings that are 11 metres high or above are failing to provide alternative accommodation for leaseholders when they are decanted from their homes. This new clause would place it beyond doubt that, in addition to relevant steps and expert reports, the costs of alternative accommodation for leaseholders and other residents who are decanted from their homes can be recovered through remediation contribution orders.

On new clause 33, resident management companies and right-to-manage companies allow leaseholders to have more control over their buildings. However, such management companies are unable to fund litigation against non-compliant landlords, as they are unable to recover the costs for doing so from leaseholders in their buildings. This new clause would allow such management companies, where the relevant lease allows, to raise funds for remediation contribution orders, making sure that we continue to hold those responsible for life-threatening defects to account.

New clause 34 would repeal section 125 of the Building Safety Act, which was intended to allow for the recovery of remediation costs relating to residential buildings that are 11 metres high or above in an insolvency, and for these funds to be used to remediate the building. However, there is a conflict with insolvency law and a risk that, instead of being used for remediation, any sums recovered under section 125 could be directed to pay down the debt. This problem cannot easily be remedied, so we are seeking to repeal the section at this time.

New clause 35 proposes that regulators need to be made aware if those responsible for relevant buildings—that is, responsible persons—become insolvent. This new clause introduces a duty on insolvency practitioners to notify local fire and rescue authorities, local authorities and, where necessary, the building safety regulator.

I also want to speak to new clauses 42 to 66, new schedules 2 and 3 and amendment 84. We know that there is little justification for selling houses on a leasehold basis. For years, developers have exploited the sale of houses on a leasehold basis for the sole purpose of generating an income stream from ground rents and fees. This has been done at the expense of consumers, who receive little or no benefit in return. We promised to shut down this abusive practice by banning the sale of houses on a leasehold basis, and today we are doing so. Other than in narrow circumstances where a lease can still be justified, all new houses will need to be sold on a freehold basis.

Leasehold and Freehold Reform Bill

Debate between Lee Rowley and Stella Creasy

2nd reading
Monday 11th December 2023 Commons Chamber

[Stella Creasy (Walthamstow) (Lab/Co-op)]

May I begin by echoing the comments of those on both Front Benches in supporting all those who, for many years, have been working on leasehold reform? As we have seen from this debate, this cuts across the Benches, because it is a classic example of the reality that we see in our constituency surgeries day in and day out. I also pay tribute to the all-party parliamentary group on leasehold and commonhold reform for all the work it has done. I know that I have benefited from reading much of its material while trying—often in vain, frankly—to help constituents with freehold manager companies.

As we head into the festive period, I know that this would be the best possible Christmas present we could give to so many people who are struggling with the impact of what I call “leasemin”—the day-to-day admin or work they have to do to manage the fact that they have a leasehold property. In my constituency, like that of so many other hon. Members, thousands of people are in that position. It is not just about the costs of renewing a lease; it is the day-to-day problems that come from being in a leasehold block.

Given that it is the festive period and we all want to give people good news at this time of the year, I have to tell the Minister that it does feel a bit as though my constituents have seen Santa’s sleigh flying past with all the lovely presents, but all they are getting is a lump of coal because so many of them are in flats that will not be affected by this legislation. May I urge him to think about what more we could do to protect those people in flats, because there has been an explosion of this, particularly in cities and in areas such as mine?

Sadly, I am told this evening that Condé Nast has described part of my constituency as one of the new hot places. I always dread it when I see that because it means a lot more building, a lot more pressure on house prices and very little support for my local residents. So many of the people who move into those properties will be moving into leasehold properties and face these problems; they will face that basic nightmare of thinking they own their home when they really do not. It is theirs but only under certain conditions; it is not their castle to do what they want with. Those conditions can be about whether they can have pets or a loft extension. During the pandemic, many residents could not access the energy-saving proposals because that had to be done at leaseholder level and their leasehold managers were not doing anything about it.

There have been good freehold companies as well as bad ones; there is variation. But the fundamental challenge at the heart of this legislation, and why I asked the Secretary of State about it earlier, is that commonhold is the only way we can genuinely give voice to people. It is a voice that deals with the “leasemin” problem—much more so than having the most efficient freehold management companies possible. So I want to stress to the Minister that there is still time to put commonhold as the default tenure into this legislation, and give people the Christmas present they really deserve—the most proper protection against being exploited that we could offer.

Let me give the Minister some context for why I feel so strongly about this. The number of flats in my community has risen 13% in the last eight years while the numbers of other types of properties have remained broadly static. Frankly, every time Kirstie and Phil turn up in Walthamstow, we see another tower block go up, and those tower blocks are leasehold; more than half the property transactions last year were for leasehold properties.

This is a massive issue now for most local residents, fundamentally changing the nature of my community both in terms of the people who can afford to live in those properties and the impact this is having on the cost of living. It is no surprise to me that I have the ninth highest level of child poverty when I look at people who have bought what they think are great starter homes but then find themselves saddled with charges and costs that they cannot afford in order to try to stay in the area. The question for me is whether this legislation will address the challenges that they are facing, and I do not see that happening, However, I do want to acknowledge there are many things in the legislation that we all welcome, such as the shift to peppercorn rents and ending escalating ground rents, which for some of my constituents has been a massive challenge, and the idea of longer default leases.

Many people in my constituency are part of a group of leaseholders because they live in properties that were built en masse. That is not a recent phenomenon. Indeed, I want to talk about the Warner estate in Walthamstow. They are beautiful properties, and I declare that I used to live in one myself. They were built from the 1930s to house the workers for our local industrial estates in the Lea valley. They were purpose-built flats built in two-storey terraced rows with a double front door and a split back garden. On a practical basis, that means that both residents in the properties have to want to buy the freehold, which creates a barrier for people and a challenge for so many of my constituents.

More fundamentally, the frustration I see is that, although thousands of residents live in these properties, every single one of them has a different interaction with the freehold manager. That is partly because in 2002 a situation happened which this legislation would not deal with. The Warner estate was sold and split up between Circle 33, Final Brief and various other commercial freeholders. The Minister might say that the residents would have had the right of first refusal, but because the leasehold companies were sold within parent companies and child companies of each other, residents did not get a look in. Therefore, local residents who organised themselves into Warner estate residents groups have had to deal with different companies even though they live side-by-side, complicating their ability to exercise what few rights they have under existing legislation. That means that there are different prices for renewal of the same length of leases, and different prices for quotes for having an extension and the paperwork needed for that. The most egregious difference is in the insurance they were all charged. In fact, many years ago they were asked to take on terrorism insurance for living in these properties. When I queried that with the freehold company, I was sent back the details of somebody who had been accused of terrorism and lived in Walthamstow; therefore, those who wanted to continue to live in the Warner properties as leaseholders needed to pay that additional premium. That is all perfectly legal and at the moment in this legislation there is no way to challenge that when a freeholder “takes the mickey”—I was trying to find a polite parliamentary term.

I guess my leaseholders on the Warner estate are at least grateful that they do not have a lease for Bridge Court, which is under—I am sure the Minister will know the name of this management company— Y&Y Management.

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

indicated assent.

[Stella Creasy]

As the Minister is nodding, he will know the amount of casework that small set of properties, only 24 flats, has generated for me over the years. To give some examples of the charges residents have faced, one was given an extra £1,500 bill and another was due to be evicted for being spuriously charged £5,000 by that company. It is not legally possible for those residents to withhold those payments and not lose their properties, so they had to try to find the money to pay, even though it was patently obvious that that egregious company was levying the charges as punishment for their having dared to exercise their rights. The only option open to them was to go to court.

Again, this legislation offers nothing to help support people in such a situation. It offers nothing to help support people when their freehold manager shifts the leasehold around to avoid them having the right to manage or even the right to buy their own freehold out. This company decided the private communal gardens could be turned into a public car park, opening up the entire estate and letting in huge problems with antisocial behaviour, all because it thought it could make a fast buck in the London area with a car park.

Y&Y then transferred the ownership of the building to Triplerose, a management company owned by Israel Moskovitz, who is part of Y&Y Management. Just the other week a resident came to me to point out that they had an onerous ground rent clause, which means that their ground rent has to be reviewed every five years against the retail price rate. That was not in the original lease but was added in. The owners of that property tried to sell the flat, and they asked whether they could vary that condition, because it was stopping them being able to sell it. Triplerose responded, demanding an immediate non-refundable payment to provide a quote—just a quote—for what it would cost to vary that condition. It then came back with a quote of £700 for an admin fee, £1,400 for legal fees and £8,000 for the premium.