Leasehold Reform (Ground Rent) Bill [HL]

Lord Berkeley Excerpts

Committee stage
Monday 14th June 2021 Grand Committee

[Baroness Pinnock (LD) [V]]

My Lords, I will speak to Amendment 20 in my name and that of my noble friend Lady Grender. I draw the Grand Committee’s attention to my relevant interests, recorded in the register, as a member of Kirklees Council and a vice-president of the Local Government Association.

Today marks four years since the Grenfell tragedy, which cost the lives of 72 people. It took away from many others their homes and their livelihoods. Those who survived will for ever have the dreadful memory of that night, leaving a dark mark on the rest of their lives. That tragedy has rightly cast a long shadow over the construction industry. Questions asked immediately following Grenfell are still failing to be adequately answered.

The Government know that the Grenfell fire was accelerated by the use of flammable cladding. They know that hundreds of other buildings have the same or similar cladding, with the same fire risk. They also know that post-Grenfell investigations of these self-same buildings have uncovered further fire safety defects, such as the lack of building regulation-required fire breaks. The Government’s response to this life-threatening catalogue of errors is half-hearted at best. Leaseholders are being forced by the Government to carry the financial and emotional burden of the total inadequacy of the Government’s response.

The reform of leaseholders’ obligations is of course a central purpose of this Bill. I understand that the Bill seeks to prevent future unwarranted financial burdens being placed on leaseholders through ground rent demands. The purpose of Amendment 20, in my name and that of my noble friend Lady Grender, is for the Government to assess the financial impact on leaseholders of this Bill after six months. It is a perfectly reasonable and sensible amendment that I hope the Government will be minded to accept.

The cladding scandal has revealed the enormous financial impact on leaseholders. In a housing association block of flats in the Manchester area, leaseholders have been sent bills for £95,000, when those very flats were built to enable people on lower incomes to buy their own homes. Given that the value of their asset is now zero, paying any bill of that size is simply impossible for the leaseholders.

Those leaseholders who have, often unknowingly, signed up to escalating ground rent penalties are also omitted from the Government’s thinking. For instance, one leaseholder found that his annual ground rent for a one-bed flat in London was to double every five years on a flat that was purchased for £170,000 in 2018. In 20 years’ time, the ground rent will have risen from an affordable £1,050 per annum to a completely unaffordable £16,800 per annum. As with the innocent victims of the cladding scandal, these leaseholders need help from the Government, hence subsection (2) of my amendment.

There is an accumulation of evidence that leaseholders are not getting fair treatment as malpractices are uncovered. Those leaseholders facing massive bills for putting right fire safety defects have done everything right and nothing wrong. Those leaseholders who face increasingly large bills, having unwittingly signed up to ground rent clauses, are also victims of a housing scandal.

Amendment 20 is the opportunity for the Government to turn their attention to righting failures in the housing system for leaseholders, current and past. On the day when we remember Grenfell, let this also be the day when the Government finally agree to find financial solutions for leaseholders who have been left to pay the enormous price of the wrongs of the housing industry. I look forward to the Minister’s response.

[Lord Berkeley (Lab)]

My Lords, my Amendment 21A is grouped with Amendments 19 and 20, spoken to by the noble Lord, Lord Lennie, and the noble Baroness, Lady Pinnock. They have one thing in common, in seeking further information and reports from the Government to clarify and provide more information to help us debate not only this Bill but subsequent ones. I will confine my remarks to the Crown issues listed in Clause 23(2), which comprise the Crown Estate, the Duchy of Lancaster, the Duchy of Cornwall and government departments in summary, and in particular the definitions and scope of excepted areas.

It is interesting to refer to paragraphs 7.149 and following in the Law Commission’s report. These basically suggest that the Crown, in its totality, is happy to comply with whatever legislation the Government put forward on these issues, except in relation to what are called “excepted areas”, which are listed in paragraph 7.151. To summarise, those are:

“(1) where the relevant property stands on land which is held inalienably; (2) where particular security considerations apply”—


which is fair enough—

“(3) where the property is in”

or closely connected to

“historic Royal Parks and Palaces; and … (4) where the property … has a long historic or particular association with the Crown”.

When it comes to the Duchy of Cornwall, which of course claims to be part of the Crown, the report goes on to say that the Duchy of Cornwall estates

“are specifically stated to fall within the fourth category”.

I would challenge that; I think that it is specifically stated by the Duchy, and I will come on to why.

Leasehold Reform (Ground Rent) Bill [HL]

Lord Berkeley Excerpts

Report stage
Tuesday 20th July 2021 Lords Chamber

[Lord Berkeley (Lab)]

My Lords, I support the amendments in this group and I am grateful to the Minister for finding the time to have a meeting with me. It was very helpful.

I shall come on to another amendment I have later. For this group, the noble and learned Lord, Lord Mackay, mentioned the need to speed things up. I entirely support that. We should get the rest of the Law Commission’s report on the statute book as quickly as possible. The noble and learned Lord’s amendment and that from my noble friend Lord Lennie are fundamental in trying to, shall we say, stem the tide of very unfair practices that seem to have developed in some parts of the market. I do not know how widespread it is, and I am quite surprised that the CMA has not been more helpful because its role, after all, is to look after the interests of consumers. Sometimes I feel that it possibly does not do that, but we can discuss that another time.

I have the pleasure of being on your Lordships’ Built Environment Committee that has just started one inquiry—out of two—into housing. At our meeting this morning, I was struck by three of the witnesses all saying that security of tenure was one of the biggest problems in housing. Whether it is leasehold or rental, it does not really matter very much. It is important to understand that people need to have some comfort that they can continue to live where they are living if they want to, and that the amount that they pay cannot go shooting up because of the wishes of the owners or other people involved in a way that could not have been foreseen when they took out the lease. It is not good when people are locked in—there are many press comments about it—and cannot sell. What do they do? That is before you get into the problem of cladding, which again is outside this discussion.

I am not sure whether my noble friend’s amendment or that of the noble and learned Lord is the best one. They both try to find some way of providing financial comfort to those who have been caught in this sudden upsurge—to me anyway—of increasing ground rents or other similar charges.

When we do these stages, it is funny that the Minister answers before the amendment has actually been proposed—but that is another thing we will get to. I look forward to my noble friend speaking on this matter, as he is much more knowledgeable than I am on it. I shall also be very interested to hear what the Minister has to say. It is really important that something like this is done very quickly, long before the next stage of the Law Commission’s report becomes a Bill.

[The Earl of Lytton (CB) [V]]

My Lords, I am largely supportive of this group of amendments, particularly the one moved by the noble and learned Lord, Lord Mackay of Clashfern. It always seemed to me that some of these clauses, particularly relating to escalating ground rents, were unfair, with hidden implications that were not apparent to purchasers at the time when they were entered into. The CMA intervention is welcome but the ongoing blight continues. This is certainly an evil that causes me to support this amendment very much.

I also support Amendment 9. This seems to be a logical provision against pre-emption and creates, as I see it, greater transparency, which really should be the hallmark of landlord/tenant relationships in this area.

It is unfortunate perhaps that I am speaking before Amendment 26 has been spoken to. I see it as potentially retroactive, and think it might remove the value of an asset without fair compensation. In its specific scope, it would not distinguish between a fair and reasonable ground rent and one that was flagrantly unfair. I do not in any way defend leasehold interests as such, but if we go down this road it has much wider public interest and property law implications.

Again with Amendment 30, I would have liked to have spoken after the noble Lord, Lord Stunell, whom I believe will speak to it, but, from a technical standpoint, the question of rent is a payment that in this instance the tenant makes to the landlord for the bits of the property which exist but which are not within the tenant’s specific demise under their leasehold. It is not a service charge. Are we at risk of getting rent and services provided for rent confused—in other words, the use of property as opposed to a tangible benefit in terms of the service charge? In general, however, subject to those points, I support this group of amendments.

--- Later in debate ---

Moved by

[Lord Berkeley]

42: Clause 23, page 14, line 5, leave out paragraph (c)
Member’s explanatory statement
This would remove the Duchy of Cornwall from the definition of Crown Land since the Duchy describes itself as a private estate.

[Lord Berkeley (Lab)]

My Lords, in moving the amendment in my name, Amendment 42, I will speak also to Amendment 43. This returns to the subject of the Duchy of Cornwall, which we discussed at some length in Committee. The Minister responded very helpfully, at col. GC 362, setting out the current exemptions from existing legislation for the right to buy. He also mentioned that the Crown Estate had given a parliamentary undertaking that it will not seek any special arrangements. He mentioned the comments on the Law Commission report about the concerns that the Duchy of Cornwall had on enfranchisement itself. Not much has happened since then.

The Minister did say that he would write to the Duchy of Cornwall. I would be interested to know whether he has written, whether he will put a copy of the letter in the Library and whether he has had an answer. If he has, it will be the first that any Minister has published—a first certainly for any noble Lords who have written. As I have mentioned before, the Duchy of Lancaster and the Crown Estate respond very helpfully and in a timely manner to letters from me and others; that does not apply to the Duchy of Cornwall. Mind you, the Duke of Cornwall is visiting the Isles of Scilly today; maybe that will remind him that there needs to be an answer, but I am not holding my breath.

The Duchy of Cornwall has confirmed, in its latest annual report, that it is in the private sector. On that basis, I would like to reinforce my argument: if it is in the private sector, as it says it is, then it should obey the same rules, laws and everything else that the rest of the private sector has to. There are many other private estates—earlier today, somebody mentioned the Grosvenor Estate—and they will all comply with the legislation, I am quite sure. Therefore, it seems to me that, in respect of this particular clause, the Duchy of Cornwall should be removed from it, which would turn it into the private estate that it says it is.

Amendment 43 reinforces the arguments about Crown land not including land belonging to the Duchy of Cornwall. This is the continuation of my probing amendment. I certainly will not seek the opinion of the House, but I will be interested to hear whether the Minister has made any progress on this, because it will, I hope, have much more effect on the next Bill, which we hope will come soon. I beg to move.

--- Later in debate ---

[Lord Greenhalgh (Con)]

I now turn to Amendments 42 and 43, brought to your Lordships’ House by the noble Lord, Lord Berkeley. I understand that it is his wish for the Duchy of Cornwall to be considered as private land and not Crown land under this Bill. Irrespective of the definition, both Crown land and private land are captured by the Bill. This Bill will therefore apply to the Crown Estate, of which the Bill stipulates the Duchy of Cornwall is part. As I am sure noble Lords are all aware, the Duchy of Cornwall is a private estate which has a Crown exemption. However, the purpose of this Bill is not to decide how these estates are defined; rather it is to get a better deal for future leaseholders to prevent them being exploited by ground rent in the leasehold market.

The Duke of Cornwall’s estates will be treated as any other private landlord under the provisions of this Bill and will no longer be able to collect ground rent in future leases. I will clarify again that this Bill is narrowly focused on ground rents and not all leasehold matters. That is why, in response to the noble Lord, Lord Berkeley, we have not yet written to the Duchy of Cornwall about the issues around enfranchisement and other matters, but we will be doing so as part of the second stage of the legislation. I will obviously keep noble Lords informed if we get a response, but the noble Lord, Lord Berkeley, seems rather sceptical of that. Nevertheless, we have made that commitment and will write at that stage.

The Government have committed to an ambitious, large-scale reform programme, and we will deal with all these other issues not related to ground rents in the near future. I am very sorry that, on two occasions now, I have not been able to give a precise response to the noble Lord, Lord Lennie, but I will make sure that we get the information to him at the earliest opportunity, in writing, and lay a copy in the Library—I believe that is precisely what you have to do in these circumstances.

The Government will consider the concern of the noble Lord, Lord Berkeley, regarding the Crown Estate exemptions from the parliamentary undertaking on enfranchisement rights for leaseholders in the next stage of the leasehold reform programme. I can also reassure the noble Lord that the Government will consider his concern in tandem with the Law Commission’s recommendations on the issue of enfranchisement rights for leaseholders. On that basis, I ask the noble Lord to withdraw the amendment.

[Lord Berkeley (Lab)]

My Lords, I am very grateful for the Minister’s response and I will read it with great interest. He has tried to answer most of my questions, even if he has not yet got my noble friend’s numbers. We will look forward to seeing them in the Library. It is very important that what he has said may well set a precedent for the next Bill. That is why we will need to read what he has said with great interest. In the meantime, I beg leave to withdraw the amendment.

Amendment 42 withdrawn.