Leasehold Reform

Liz McInnes Excerpts

Thursday 11th July 2019 Commons Chamber

[Liz McInnes (Heywood and Middleton) (Lab)]

I am grateful for the opportunity to take part in this important debate and I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for his excellent speech and for all the work done by the Select Committee.

I took part in a similar debate in December 2017, just after the Government had announced for the first time an end to leaseholds for new-build houses, but there is a still a huge amount of work to be done to help those caught in the leasehold trap, like many of my constituents. I first became aware of the issue in 2016, when I was contacted by a constituent, Linda Barnes. She told me that her house, which she had bought from Taylor Wimpey in 2011 for £147,000, had a ground rent that doubled every 10 years and that had been sold on by Taylor Wimpey to E&J Estates. Linda had been quoted a price of £35,000 to buy the lease before it doubled—that is a quarter of the value of her house.

I heard from another constituent, Jonathan, who bought a house from Countryside Properties using the Government’s Help to Buy scheme. Jonathan said that he had been made aware that the development was to be leasehold and that an annual ground rent of £200 was payable to Countryside Properties. Six months after he moved in, Jonathan received a letter informing him that the freehold had been sold on to a company called Tuscola Ltd, based in the British Virgin Islands. He was quoted a price of more than £6,000 for the freehold. He also discovered a doubling clause in his lease which meant that by 2055, the ground rent would be £1,600 a year. That is naturally causing him a great deal of concern, because by the time he reaches retirement age, his ground rent will be unaffordable and will make his home unsellable. As Jonathan said,

“Considering the significant cost of new homes one would have thought that the last thing one should worry about is the land the house sits on and that it can seemingly be sold on from underneath you.”

I have been contacted by many of Linda’s and Jonathan’s neighbours, and they all tell the same story: that they were encouraged to use the developer’s choice of solicitor when they bought their homes, that they were not informed of the doubling clause, and that the prices that they are being quoted for the purchase of the freehold are simply unaffordable.

Many residents are rightly angry that the developer sold off the freehold to a property investment company without first consulting the homeowners and offering them the first chance of purchase. Many pointed out that the leases on their homes are for 250 years; if the ground rent doubles every 15 years, it will be £13 million by the end of the lease. If the Government do just one thing, they must ban this exponential growth in ground rents. I heard from Lee, who told me:

“We are unable to sell our house…as the true nature of this mis-selling has now been revealed. We have a 10 year doubling ground rent on our house that is now known to be toxic. The only option currently offered by Taylor Wimpey is to convert us to an RPl lease and somehow this is supposed to remedy their wrongs.”

William, who contacted me, has also been offered an RPI ground rent. He took advice from a barrister who said that although it was not a good deal, it was better than a doubling ground rent. He advised William to accept the RPI deal and take out a professional negligence claim against the solicitors, who had been recommended by Taylor Wimpey. So my constituent is now embroiled in a professional negligence claim and an unsatisfactory ground rent deal, when all he wanted and aspired to was a home of his own. He points out that he is paying, in addition to his mortgage, estate management fees, service charges and ground rent in what was supposed to be an affordable home—but it is not all about money. William said:

“This is causing so much mental stress and is affecting the quality of my life with worry.”

[Sir Geoffrey Clifton-Brown]

One of the worst scandals of all has not yet come out in this debate. When people buy their houses, part of the contract states that they must obtain a compliance certificate before they will be allowed to sell them. If they are in arrears with any of the charges that the landlord has imposed on them, if they are in dispute or if they have not paid the interest, they will not be able to obtain the certificate, and they will not be able to sell their houses.

[Liz McInnes]

The hon. Gentleman speaks from a position of knowledge, and I am grateful to him for introducing an issue that does not feature in my speech.

I have been contacted by many other constituents with very similar stories. Sarah said:

“The Leasehold itself makes me feel like the property isn’t ours, having to pay fees for the most simple changes to your house, like painting the door and changing its colour…The leasehold is simply a joke and should never be allowed in law to happen to New Homeowners…or anyone.”

The north-west has one of the highest percentages of leasehold new-build homes, so sadly it comes as no surprise that so many of my constituents are struggling. We in the Labour party have said that we will abolish ground rents for new leases, will cap ground rents for existing leases at 0.1% of the property value up to a maximum of £250, and will introduce a simple formula for leaseholders to buy their freehold or commonhold, capped at 1% of the property value. We will crack down on unfair fees and contract terms, and will introduce new rights for residents to take over the management of their homes themselves.

Will the current Government do the same, and end the misery of the leasehold trap? Will they also launch an inquiry into how this was allowed to happen, similar to their inquiry into the mis-selling of payment protection insurance?