Leasehold and Commonhold Reform

Liz McInnes Excerpts

Thursday 21st December 2017 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Sir David.

It is also a pleasure to follow the hon. Member for Hazel Grove (Mr Wragg). Like him, I welcome today’s timely announcement, but there is still a huge amount of work to be done in helping those who are caught in the leasehold trap like many of my constituents.

I first became aware of this issue around Christmas last year, when I was contacted by my constituent, Linda Barnes. She told me that her house, which she had bought new from Taylor Wimpey in 2011 for £147,000, had a ground rent that doubles every 10 years and that had been sold on by Taylor Wimpey to E & J Estates. She had been quoted a price of £35,000 to buy the lease before it doubled.

Very soon after that, I heard from another constituent, Jonathan, who had bought a house from Countryside Properties in 2010 using the Government’s HomeBuy Direct initiative, which was later renamed Help to Buy. 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 the owner of the land, 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 over £6,000 to buy the freehold. He also discovered a doubling clause in his lease that meant that by 2055 the ground rent would be £1,600 per year. This is 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.”

[Mark Tami]

Although the property companies may not have done anything illegal, what they have done is morally wrong. They knew full well what those products were. They were making an extra buck on a financial product and they did not give a damn about what happened to the people they sold those properties to.

[Liz McInnes]

I totally agree with my hon. Friend and will expand on that point later in my speech.

I have been contacted by many of Linda 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 they are being quoted to buy the freehold are simply unaffordable. Many residents are rightly angry that the developers 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 lease on their home is for 250 years, and 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 rent.

I am sure that some hon. Members will be familiar with the concept of grains of rice on a chessboard, with the number of grains doubling on each successive square. By the time the 64th and last square is reached, the of grains of rice are a staggering 20-digit number: more than 18 quintillion, or 2 to the power of 64 minus 1. Clearly, any further attempts by developers to use this deceptive piece of mathematical trickery must be made illegal.

One couple wrote to me to complain that when they bought their property from the developers they actually posed for photographs and recommended the company to other prospective buyers, and that was posted on the developer’s website. The couple now say:

“We would very much welcome being able now to express our very different views and to tell the truth about you as developers on your website. We doubt very much you will give us that opportunity. You have turned what should be our happy home into a very expensive prison.”

Research from the House of Commons Library highlights the fact that leaseholders may be required to seek the freeholder’s consent before carrying out alterations, as many hon. Members have already said. I think that the publicity surrounding this leasehold scandal may have actually emboldened some unscrupulous landlords to make unreasonable demands on homeowners, and I have an example of that from my constituency.

Recently, I and my staff have been dealing with issues raised by residents who have received letters from a company named the Dean and Whipp Ltd Group, asking for money for retrospective ground rents and for payments for alterations such as dormer windows and extensions. These homeowners bought their properties after those alterations had been made. In one case, the homeowner actually discovered that the previous owner had in fact paid the landlord for the alterations to the home when they were carried out in 1978. The current landlord, Dean and Whipp, which had either bought or inherited the freehold, had obviously not checked whether payment had been received in respect of the alterations, and had just sent out the letters demanding payment regardless. That is something that looked to me very much like a fishing expedition.

The behaviour of this company, Dean and Whipp of Dukinfield, Cheshire, is outrageous. It has told me that it will deal only with either me or a solicitor but not both, seemingly missing the point that I can act on behalf of any of my constituents regardless of whether they are using a solicitor. I have written to the Housing Minister about this case, and so far I have not received a reply. As the Housing Minister is here, I would be grateful if, in his concluding remarks, he would say what action he will take to prevent those landlords from acting in such an arbitrary manner. Their actions are causing a great deal of distress to my constituents, many of whom are elderly and worried by the prospect of having to pay such large bills.

I hope that in addition to addressing the issues raised in this debate, the Minister will be able to give my constituents some reassurance that action will be taken against the sharp practice of companies such as Dean and Whipp, so that my constituents might enjoy a peaceful, relaxed and happy Christmas in their own homes.

--- Later in debate ---

[Alok Sharma]

My hon. Friend makes an interesting suggestion. I will take that away and come back to him.

Certainly, in bringing forward legislation we will continue to work with stakeholders, including the APPG, to ensure the best outcomes for consumers. We have heard many ideas in this debate. We want to ensure that our plans do not have an adverse impact on supply, and we will work with the sector to consider the case for exemptions.

It is important that we get the detail right. We are committed to ensuring that our reforms deliver a fairer and more transparent system for both existing and future leaseholders, and to stamping out the leasehold abuses that have existed to date. I have written formally today to the hon. Member for Ellesmere Port and Neston to confirm that I welcome the opportunity to meet him early in the new year to discuss further his thoughts for a Bill. I am open to a dialogue with the APPG about our thoughts as we move forward.

A number of colleagues have talked about building regulations. As we know, on Monday Dame Judith Hackitt published her interim independent review of building regulations and fire safety. It is important that leaseholders have access to specialist advice to understand their rights. The hon. Member for Poplar and Limehouse, the hon. Member for Brentford and Isleworth and my hon. Friend the Member for Worthing West mentioned LEASE; we can confirm that the Secretary of State announced on 4 December that the Department for Communities and Local Government is providing additional funding to the Leasehold Advisory Service over 2017-18 and 2018-19 to provide a dedicated advice and dispute resolution service for those leaseholders affected. I can also confirm that we will conduct an internal review of the wider landscape of support and advice to leaseholders, to ensure it is fit for purpose in the new legislative and regulatory environment.

To cover a few other points that were raised, the hon. Member for Greenwich and Woolwich (Matthew Pennycook), the hon. Member for Battersea (Marsha De Cordova), the hon. Member for Poplar and Limehouse, the hon. Member for Brentford and Isleworth and, of course, the shadow Minister raised the issue of costs related to cladding. The Secretary of State has said that local authorities and housing associations with which we are engaging are not passing on the costs of essential works. He has also encouraged private sector freeholders to follow suit, and some have. I spoke to L&G, the company mentioned by the hon. Member for Brentford and Isleworth, and I am delighted with the approach it is taking. I realise there are some instances where costs are being passed on. That is why we are providing additional funding to LEASE, as I have just mentioned, to provide leaseholders with the advice and support they need.

Colleagues have raised a number of issues. The right hon. Member for Delyn asked about homes built in Wales by companies that are not from Wales. Of course, whether Wales abolishes leasehold is a devolved matter. However, I can confirm that my officials have been working with the Welsh Assembly to inform them of our plans on leasehold, and we will continue to liaise with them.

My hon. Friend the Member for Worthing West talked about forfeiture. I can confirm that that is being considered by the Ministry of Justice. There are protections in place, but I agree that reform is needed. We will continue to work with the Ministry of Justice to take this matter forward. I also noted his point about the National Trust, but as he knows, National Trust properties are exempt from enfranchisement under the Leasehold Reform Act 1967.

If I understood him correctly, my hon. Friend the Member for Witney (Robert Courts) asked whether we were looking to abolish leasehold. Leasehold needs reform, and although in certain cases it is an established structure that can work well, we want to make sure that there is fairness in the way that the system operates.

[Liz McInnes]

The Minister has not addressed the point that I raised. I wrote to him several weeks ago about my constituents receiving unreasonable demands from the landlord for payments for historical alterations. I would appreciate it if he would commit to answering that letter.

[Alok Sharma]

Let me apologise to the hon. Lady if we have not been answering our letters in a timely fashion. I will make sure that that letter is answered as a matter of urgency. She is absolutely right. She raised the issue about limited ground rents and the impact on leaseholders. As I said earlier, we have asked developers to contact homeowners regarding unfair terms. We will keep a close eye on that, and I will respond more fully to her.

I hope colleagues feel that we are making progress, and that we understand there is more to do on this. We said earlier this year that we would act, and I believe that we have done that so far. We are resolved to reforming leasehold, and ultimately to promoting fairness in the system.