Leasehold and Freehold Reform Bill

Lord Bailey of Paddington Excerpts

2nd reading
Wednesday 27th March 2024 Lords Chamber

[Lord Bailey of Paddington (Con)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Twycross, with whom I have worked for many years in City Hall. This is my first time contributing to a debate, so if I get a few things wrong, please handle with care.

I have personal experience of being a leaseholder, and I know how the system can be abused to rob you of your dignity and deny you control of your own finances. Today I speak on behalf of millions of leaseholders who want to be released from this feudal system—I share enthusiasm for the term—that renders them “captive consumers”, according to the Competition and Markets Authority.

This is about whether or not we are a property-owning democracy. In 2019, some 13.9 million people voted for a Conservative manifesto that pledged leasehold reform. A further 10 million people voted for a Labour party that promised the same. Since 1966, all parties have promised leasehold and commonhold reform in election manifestos. Once we understand how important this has been to most people in this country, it is astonishing that we have not yet been able to deliver the changes that many, if not all, leaseholders want.

Freeholders have no incentive to get the best financial value for upkeep, insurance or repairs, because they are not picking up the tab. This arrangement is ripe for abuse. Some 95% of flats are leasehold; this legal structure is a forced condition of sale for an increasing number of first-time buyers and elderly downsizers.

Many people in the leasehold world propagate a number of myths to make sure that we continue to hold on to this old-fashioned and—I will say it again—feudal regime. They say that leasehold reform is an affront to property rights, but leaseholders have already paid a premium for their home. According to a leading freehold lobby group, the Residential Freehold Association, professional freeholders typically own only a very small economic interest, defined as just 2.5% of the capital involved in most cases. The association says freehold reform is unprecedented abuse of existing contracts. Freehold lobby groups are ignoring all the times in the past when Parliament has stepped in to rebalance rights and obligations on property for the greater good. This is not a recent leaseholder thing; there are laws dating back to the 19th century that have sought to bring greater equality to existing contracts. Indeed, in the 1980s and 1990s, Margaret Thatcher and John Major gave flat leaseholders the right to acquire their freehold.

Leasehold reform removes professional landlords and puts a burden of management on residents who do not have the time or skill to take care. This is simply a straw man to prevent bill-paying leaseholders taking rightful control of their home, their money and their lives. I am a Londoner and know the valuable role that the great estates play, not only serving leaseholders but the wider community, in placemaking.

However, let us not pretend that all freeholders are benevolent actors or high-performing service providers, such as Cadogan Estates, the de Walden Estate or even the Canary Wharf Group. Your average freeholder appoints a managing agent who does the day-to-day management. That agent could easily be appointed by leaseholders, as flat owners already do in many places across the world. It has already been said in this debate that a property is best managed by those who live there and know what is going on. We could concentrate on some of the bad behaviours by freeholders, such as artificially inflated and undocumented service charges, major works projects that are handed to a friendly contractor and then billed at double, sometimes triple, the going rate when you get a second opinion on what the cost should really be. We have some of the highest housing costs in the whole of Europe, and I submit that leasehold is part of the problem. Last year, Hamptons found that leaseholders in England’s flats were paying a punishing £7.6 billion in service charges, which had jumped 50% in five years.

There are many parts of the Bill that should be commended and that I wholeheartedly back, and I have heard many other noble Lords back the measures in it. However, there are some things on which we need to go further. I personally think the ultimate solution is commonhold, and it is a shame that it is not being proposed here.

Things like 990-year leases as an extension as a norm are of course a good measure. Stopping the punitive legal costs regime, which allows freeholders to dump all their legal and professional costs on to leaseholders whether they win or lose a case, feels like feudalism to me—so I will use that word again.

All of these points lead to the question: how do we beef up the Bill? The Bill, in my opinion, does not go far enough in liberating leaseholders. For those who think the provision of information will deal with the abusive practices, I say: think again. The Government are basically saying to leaseholders, “You must become serial litigators, you will have to take on the big guys” —in the same way that the sub-postmasters had to take on the Post Office. As Conservatives, we should be fighting any unchallenged power anywhere in our system. We must always support the little man. The best version of Conservatism is supporting the little man to take care of his own affairs, and that has to be done.

For me personally, the most egregious thing is forfeiture. This is a gangster-like power, routinely used to abuse and extort money from hapless leaseholders under the threat of losing their home and all of their equity. There is no doubt that, even though there are only a few cases of this every year, just the idea that it can be done is terror enough. I come from a group of people for whom buying your own home is freedom, and that freedom is curtailed by the mere existence of forfeiture.

I could go on at length about all of the things that should be added to the Bill, but I will say this: we must turbocharge the right to manage and enfranchisement. More needs to be said about that, and I personally will be tabling amendments to make sure that it is done.

To conclude, to accept these few amendments, and many of the amendments that have been talked about in the House today, will make the Bill what has been promised. The Tony Blair Government promised to do this and did not. This Government can do it and fulfil something that the people of this country deeply need to happen. I say again: are we a freedom-loving, property-owning democracy or not? The passage of the Bill and the provisions it actually brings into law will make the difference in that statement.