Housing: Leaseholders

Lord Kennedy of Southwark Excerpts

Thursday 25th June 2015 Lords Chamber

[Lord Kennedy of Southwark (Lab)]

My Lords, I thank the noble Baroness, Lady Gardner of Parkes, for putting down this Question for Short Debate. As usual, she raises an important issue, which the Government should look at and take action on. The noble Baroness has an impressive record in raising these matters and the Government would be wise to listen to her.

I warmly welcome the noble and learned Lord, Lord Keen, to the House. I look forward to his maiden speech, responding for the Government. I looked at the noble and learned Lord’s biography and it makes impressive reading indeed. As the noble Lord, Lord Trefgarne, said, he is a lawyer with a distinguished legal career, a Queen’s Counsel and a member of the Bar both in Scotland and in England and Wales. He joined Her Majesty’s Government as the Advocate-General for Scotland immediately after the general election last month. He is a law officer of the Crown and advises the Government on Scottish law. He derives considerable power from the Scotland Act and one of his roles is to consider all Scottish Parliament Bills as they progress, in consultation with interested UK departments, to assess their legislative competence. I, together with all Members of this House, wish him well in his new responsibilities at the start of this Parliament.

As the noble Baroness, Lady Gardner of Parkes, pointed out, the law in respect of leaseholders, commonholders and other aspects of living in a property which is leasehold rather than freehold is complex and not easily understood by people. That is not a good place to be in. The law should always aim to be clear, simple and understandable for ordinary people, particularly when it affects where they live. This must surely be an aim of the Government. It would be useful if in his response the noble and learned Lord could address what plans the Government have to ask the Law Commission to look at these matters, with a view to producing a Bill that consolidates all the various property Acts, as the noble Baroness, Lady Gardner of Parkes, referred to. I think it is long overdue and will be warmly welcomed.

I have never lived in a leasehold property, having grown up with my parents, brother and sister in a council property; each property I have bought and sold as I have moved around the UK has always been freehold. But I have a number of friends who live in flats that are leasehold and I have seen some of the quite unsatisfactory arrangements and conditions they live under. It is not something that I would find acceptable in all cases and the Government really should seek to act on it.

I am also aware of the considerable number of new flats being built in the London Borough of Southwark, where I grew up, and the London Borough of Lewisham, where I live, and other parts of London, which will have these similar leasehold arrangements. The system of leasehold tenure that we have in England and Wales is fairly unique. The lease can be as long as 999 years and ensures that the leaseholders of a property with communal areas are equally responsible for its maintenance. There are significant problems with this type of tenure and the managing agents, who have no responsibility to the leaseholders; the leaseholder is in effect frozen out of any involvement in the effective management of a property they own, which may be their home.

We should all expect good service and value for money but living in a leasehold property with a managing agent, where there is little competition, can be something of a lottery. It is very difficult to change your managing agent or to challenge a service charge. The leaseholders can find it extremely difficult, having to go to the leasehold valuation tribunal to receive a satisfactory remedy. There are further problems with connected companies where a freeholder also owns the management company. Of course, leaseholders have sometimes been successful at the leasehold valuation tribunal and been awarded sums of money, having suffered unacceptably high service charges.

This is a huge issue. We have up to 5 million people living in 2.5 million leasehold properties spending as much as £2.5 billion in service charges per annum. I would like to see the introduction in this sector of an independent regulator which would be able to ensure that agents act in a professional manner and adhere to minimum standards of competence. I would like to see all managing agents subscribing to an ombudsman service guaranteeing leaseholders free and accessible arbitration. I would also like to see reform of the leasehold valuation tribunal, and the order that prevents freeholders reclaiming their tribunal costs retrospectively through service charges should be automatic unless the freeholder can prove that they should be able to reclaim charges and that the threat of forfeiture of properties for failure to pay charges is disproportionate.

The Commonhold and Leasehold Reform Act 2002 created commonhold tenure, designed to be used in both new and existing tenure. Similar forms of tenure are used across the world, which offer perpetual ownership of blocks of flats alongside a share of a company responsible for common-area management. The commonhold community association is owned by the unit-holders and they decide who manages the property. The major barrier, which the noble Baroness, Lady Gardner, referred to, is the 100% requirement for converting existing leasehold properties. This should be relaxed because we are giving one leaseholder a complete veto on transferring to commonhold. That is one of the key points the noble Baroness made in her contribution.

That 100% requirement should be reduced to a figure in the region of 75%, which still means that you need three-quarters of the leaseholders to agree, but no one individual has a veto on making this change. I will be very interested in the response to this point from the noble and learned Lord, Lord Keen. Will the noble and learned Lord also tell the House what plans the Government have to promote commonhold and whether they are considering incentives to sell new blocks of flats as commonhold?

The Government should also do more to promote the right to manage, which allows leaseholders to assume control over management of their properties without having to pay to own the freehold where they get 50% qualifying support to do so, although the freeholder should be required to assist the leaseholders in making contact with each other as they may not be in residence at any particular point in time. Again, the noble Baroness, Lady Gardner of Parkes, referred to this. This is an important policy matter that affects many people and the time has come for the Government to take positive action to help leaseholders and create more flats in commonhold. I particularly like the idea of non-responders being regarded as having accepted. That may be one way of injecting some life into this policy.

In conclusion, I again thank the noble Baroness, Lady Gardner of Parkes, for raising this important issue in your Lordships’ House, and hope that the noble and learned Lord, Lord Keen—in what I am sure will be a very eloquent contribution—will be able to set out some hope for the future.