Leasehold and Freehold Reform Bill

Lord Kennedy of Southwark Excerpts

Report stage & 3rd reading
Friday 24th May 2024 Lords Chamber

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I first make a number of declarations: I am a non-executive director of MHS Homes; chair of the Heart of Medway housing association; and a vice-president of the Local Government Association. In addition to that, I am a leaseholder. My noble friend Lady Taylor of Stevenage cannot be here as she is attending a friend’s funeral. That is why noble Lords have to put up with me today on the Opposition Front Bench.

I am sure that, when the noble Lord, Lord Gascoigne, responds to the debate, he will explain this in detail. Obviously, I have only just picked this stuff up this morning; I am sure that buried away in the government amendments are all the promises and pledges that we have had from the Government over the past six or seven years. There are things that we have heard repeatedly from the Member for Surrey Heath in the other place, which have been repeated on Sky News, the BBC, ITV and in most national newspapers. I am sure that now, finally—at the last possible chance—all those pledges are here.

I am sure that the Minister will confirm to me the promise on ground rents. We heard of course that there would be peppercorn ground rents and there was a consultation. Then we heard it leaked that they would be £250 a year with a taper. Again, I am sure the Minister can point out whether that is here. It will be very frustrating if leaseholders and campaigners have been promised action and there is nothing here.

Because of the Renters (Reform) Bill biting the dust, as it were, we have not dealt with the assured shorthold tenancy trap, which will be kept. My noble friend Lady Twycross had a PMB that addressed that very issue. She was repeatedly assured by the Government that there was no need to bring forward her PMB because they would deal with the issue in the Renters (Reform) Bill; so she quite rightly withdrew it. She accepted the assurance from the Government that it would all be sorted out in the Renters (Reform) Bill and withdrew her Bill. She was right near the top of the ballot, so she would have got it through this House and we maybe could have been arguing at the other end about getting it through during the wash-up. But she accepted, in good faith, the Government’s assurance that there was no need as it was in the Renters (Reform) Bill, and now it is lost, so the issue remains.

There is also the whole issue of the Section 24 trap: namely, that leaseholders in high-rise buildings cannot ask the First-tier Tribunal to appoint a manager under Section 24 of the Landlord and Tenant Act 1987. Again, we were expecting amendments to deal with that here. Because the manager cannot be the accountable person under the Building Safety Act, there is a gap in the law which means that people are trapped. You get unscrupulous landlords who have been thrown out as managers of a building, but they can get back in again and take control of the service charge. That was going to be addressed, but it is not here—or maybe it is and I cannot spot it.

We are not going to oppose this Bill at all, and I hope it can pass today. There are some good things in it, but it is far, far short of what was promised. The Government should be quite ashamed of how they have behaved over the last few years in relation to this Bill—making promise after promise and delivering very little. That is no way to do politics. If you stand up in the House, or make a pledge in a newspaper, about the things that you are going to do, you should go and do them. Not to do them is very poor. I know that it is not the fault of the noble Lord, Lord Gascoigne, but I hope he can tell us where all these things have gone. Where is the progress on forfeiture? It is just not there and it is just wrong. This is not the way to operate.

The noble Lord, Lord Moylan, asked me a question. Obviously, I cannot answer that question. At the end of the day, the people will decide who the Government will be on 4 July. Whoever is in power, whether it is a Conservative or Labour Government, I hope that they will look at what happened with this Bill, look at the Law Commission recommendations that are sitting there, done and ready to be introduced, and bring them in.

What is in the King’s Speech is a matter for the Prime Minister of the day. I certainly hope that, whoever is in power, the necessary action is taken and the leaseholder problems are dealt with. They have not been dealt with by this Government—we have had year after year and promise after promise and nothing done. That is very poor. Maybe I am wrong, and the noble Lord will point out what I have missed in the points that I have made.

[Lord Gascoigne (Con)]

I am grateful for all the contributions in what has been a relatively brief group. I will go through the issues that were raised chronologically.

My noble friend Lord Young raised a specific case, and I have seen the correspondence he referred to. It is the Government’s policy to allow equity release in home finance products in houses, including home purchase plans and lifetime leases. We have a power in this Bill to add, remove or amend definitions for categories of permitted leases. On the specific product, the department is considering an appropriate definition for secondary legislation, and officials have met the main provider in question. I assure my noble friend that the measures in the Bill relating to the ban on leasehold houses will not be implemented immediately, should the Bill secure Royal Assent, as there are other important regulations that need to be provided for first before the ban becomes operational.

My noble friend Lord Moylan is right to say that this will come up later, and we can have the discussion then. In brief, on the right-to-manage companies, we have laid amendments to set regulations to suspend the requirement for certain landlords to apply to the relevant court or tribunal to recover their litigation costs until an event set out in regulation occurs. An example of when it might be appropriate to suspend the application requirement is for resident-led buildings or assetless landlords. As I say, I think we will come back to it later.

[Lord Gascoigne (Con)]

On the first question, it is with regret that I cannot give that date now. On his second question—whether I have confidence that we will win—that is up to the electorate, but I have every hope that we will. Obviously, I would not like to curse us in saying that—touch wood. Who knows? Let us see.

I was also asked what action could be taken to make sure that this does not fall foul of legislation. The Government will work closely with stakeholders to ensure that the application requirement is suspended only where appropriate. In addition, the power is subject to the affirmative procedure.

This is the first time I have had the honour to speak directly to the noble Lord, Lord Kennedy, from the Dispatch Box. I know he has raised this issue inside the Chamber and outside many times, and he is right to do so. Obviously, there have been many constraints on the legislative timetable and, as we are now in wash-up, those pressures have increased tenfold. This is a good Bill as it stands, and the Government want to see it through. The noble Lord mentioned that we are at the beginning of a general election campaign. Who knows what will come thereafter, but this Bill is very good as it stands, and I hope noble Lords will be able to support it today.

[Lord Kennedy of Southwark (Lab Co-op)]

Can the Minister confirm that there is nothing in this Bill on forfeiture or ground rents, as had been promised?

[Lord Gascoigne (Con)]

There are lots of good things in the Bill as it stands that we have only just begun to talk about. I hope the noble Lord will support it. If we have the opportunity to serve again, we will continue to do what we can.

[Lord Kennedy of Southwark (Lab Co-op)]

I am not looking to oppose the Bill; I support it as it is. I am just trying to be clear on the specific question of ground rents being reduced to peppercorn rents. We have spoken about £250 a year; as far as I can see, that is not here, and neither is the issue around forfeitures. Can the Minister confirm those facts?

[Lord Gascoigne (Con)]

I can confirm those two points.

--- Later in debate ---

[Lord Bailey of Paddington (Con)]

Forfeiture is regularly used as a threatening tool so, although it does not land in court all the time so people have their property seized, it is often spoken about to pull people into line or to force people to pay bills that are, at best, iniquitous. It is used very regularly. I accept the noble Lord’s point that there needs to be another system, but forfeiture needs to go, even if that system does not exist, because its effect on leaseholders is broad, deep and very unpleasant.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, these are very welcome amendments that try to address two of the problems I referred to in my remarks on group 1. I still hope that the noble Lord, Lord Gascoigne, will jump up in a moment and say that the Government accept Amendments 44 and 45—that it was an error that the Government did not put their name to them—because they are exactly the things that the Member for Surrey Heath has been promising for months. I cannot remember the number of times I have heard in TV studios and the newspapers that he wants to do both these things. Here we are now with the mechanism to do it. All the Government need to do is accept the amendments and we can move forward.

As the noble Lord, Lord Moylan, said, anyone who is owed a debt should be able to recover it, but the threat of taking all the property away is completely wrong. Even on that one, I do not understand why the Government have not come forward with an amendment on it. It is absolutely bizarre. I think nobody in this House would oppose it, and it would be accepted. We want people to be able to recover their money, but this threat is totally over the top. We all agree on that.

What is even more frustrating is that, when I leave the Chamber and walk around the building, many Members actually agree with us, and say: “You’re absolutely right, Roy. This should happen”. I have even had Members of the Government Front Bench—not in the House at the moment—say to me: “The problem is, Roy, we agree with you, but Michael just goes off and makes these claims and pledges and promises without them being signed off”. It is no way to do business. We need to get these things done properly. This needs to be done. I do not understand why it cannot be done if everyone supports it. It is beyond me, really, that we operate like this. That is the whole frustration about this Bill. Promises and pledges and articles to say that we are going to do this and we are going to do that—I am sick of hearing it. And then when they get the chance, they do absolutely nothing.

[Lord Gascoigne (Con)]

My Lords, I thank all noble Lords for their contributions in this group. I thank my noble friends Lord Young and Lord Bailey of Paddington, and the noble Lord, Lord Truscott, for their amendments regarding forfeiture and service charge enforcement.

The upkeep and safety of buildings is paramount. Landlords, be they private companies or resident management companies, need an effective mechanism to recover unpaid debts, lest their costs fall to other leaseholders or to the detriment of the building’s upkeep. It is important to consider resident management companies in particular, which often have very limited access to other funds to cover any shortfall in the service charge fund. Having a robust and efficient way to enforce unpaid charges is therefore critical to ensure the efficiency and solvency of these resident-led companies. Equally, there are other breaches—unauthorised alterations, anti-social behaviour and use of a property for immoral purposes—that can be difficult and even impossible to remediate. In such cases, forfeiture may be the only effective way of putting a stop to the breaching behaviour. While well-intended, we do not believe that the abolition of forfeiture without a suitable replacement would ultimately serve the best interests of leaseholders, and in particular resident management companies.

My noble friend asked about progress in drafting. I hope he appreciates—it is with respect that I say this—that I do not think I am able to comment on what may happen or where that is, simply because I do not know who will be lucky enough to serve in the Government and answer that question after the election.

I turn to the amendment tabled by the noble Lord, Lord Truscott. Unfortunately, we believe that this amendment does not achieve its stated aim of protecting leaseholders, crucially against forfeiture over non-payment of service charges. The Government recognise that those home owners who pay rentcharges face the threat of forfeiture. Part 7 of the Bill already removes the risk of forfeiture for unpaid arrears of income-supporting rentcharges, since the remedy is so disproportionate to the sums owed. The Bill also contains a robust package of protections for home owners who pay estate rentcharges.

I now move to the amendment tabled by the noble Baroness, Lady Pinnock. Noble Lords will be aware that the Government do not believe that it is appropriate that many leaseholders face unregulated ground rents for no clear service in return. The Government have already legislated to put an end to ground rents for most new residential properties in England and Wales through the Leasehold Reform (Ground Rent) Act 2022. We have also encouraged work led by the Competition and Markets Authority to investigate abuses of the system, such as the mis-sold doubling ground rent leases, securing commitments from freeholders to remove these costly terms, benefitting more than 20,000 leaseholders. Given where we are in the parliamentary timetable, I hope noble Lords will understand that we cannot accept an amendment on complex new policy at this stage.

I turn to Amendments 51 and 52 in the name of my noble friend Lord Bailey. I fully agree that it is important to have effective enforcement measures in place. Amendment 51 seeks to retain criminal sanctions for failure to provide information to leaseholders in a timely manner. The existing measures, including the statutory offence under the existing Section 25 of the Landlord and Tenant Act 1985, have historically proven to be ineffective. Local housing authorities, as the enforcement body, were reluctant to bring prosecutions against landlords, and the cost and complexity of doing so were a significant barrier to leaseholders bringing a private prosecution. That is why we are replacing it with a more effective and proportionate proposal, set out in Clause 57.

Amendment 52 would require landlords to account to all leaseholders where costs were found to be unreasonable and would impose a two-month limit on repayments to leaseholders. It would introduce a power to enable the appropriate tribunal to award interest on any determination in favour of the leaseholder, where a leaseholder has made an application. While I agree that there must be a robust regime in place to challenge service charges, we do not think that this is the right approach.

Landlords may wish to compensate leaseholders by offering a credit against future service charges rather than returning money, and a leaseholder may prefer this. In addition, the Court of Appeal held in 2022 that a tribunal decision of the type to which my noble friend refers is a determination of whether the service charge is payable and not of whether it is due. Therefore, although the amendment is well-intentioned, it would not be possible to implement in the form drafted.

As I have said, I would have liked to go further, and indeed that was the intention, but we are in wash-up. With that, I hope my noble friend will withdraw his amendment.

--- Later in debate ---

[Baroness Pinnock (LD)]

My Lords, we on these Benches totally support Amendments 62 and 63 in the name of the noble Lord, Lord Best, and moved and spoken to by the noble Lord, Lord Young of Cookham. The most unfortunate part of doing this Bill in wash-up is that we have lost the opportunity to address some of the omissions in and failures of the Building Safety Act. Many leaseholders who are stuck in their properties with high and escalating insurance rates and service charges that are growing inexorably and still have a fire safety issue. These two will be issues that will I ensure are addressed by the next Government, whoever they are.

I thank those on the Front Bench for the helpful comments and the co-operation they have provided during this Bill. Most of us are of one mind: it is such a shame that this Bill is being lost without the changes that many of us would want to have put into it; but with that, I end my contribution for today.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I will, very briefly, just add our support for Amendments 62, 63 and 67. The noble Lord, Lord Bailey, presents a way forward for addressing those issues as well. I wish we could be doing them, and I think it is disappointing we are not, but I will leave it there.

[Lord Gascoigne (Con)]

I thank the noble Lord, Lord Best, the noble Baroness, Lady Hayter, and my noble friends Lord Bailey of Paddington and Lord Young for their amendments, and all who have spoken in the final group of this Bill.

I will start with the amendments regarding the regulation of property agents. I thank the noble Lord, Lord Best—I appreciate he is not here—for raising the issue with the Minister recently; I know that it is something which he is passionate about, and I hope that he continues to engage extensively with the noble Baroness, Lady Scott. The Government are committed to driving up professionalism and standards among property agents. Leaseholders deserve a good service for the money they pay, whether that is from from their landlord or their managing agent, where one is in place. Industry plays an important role in driving up standards, and we welcome the ongoing work it is undertaking to support this. This includes industry-backed qualifications, as well as the preparations of codes of practice. Furthermore, the measures in the Bill, alongside existing protections in place and work being undertaken by industry, seek to make managing agents more accountable to those who pay for their services. That includes making it easier for leaseholders to take on management of their buildings themselves, where they can directly appoint or replace agents. The measures above will, I believe, contribute substantially to that objective.

In addition, we need to consider the question of standards for all property agents in the round rather than in a piecemeal fashion. That was the original purpose behind the idea of a regulator for property agents. While I recognise the intentions and desired outcomes of these amendments, I do not consider that now is the right time to introduce them.

I turn to Amendment 87. I trust that your Lordships will understand that the Government cannot accept these proposed amendments. Defining a Section 24 manager as “an accountable person” would move financial and criminal liabilities away from the existing accountable person to the Section 24 manager. It was the intent of the Building Safety Act that financial and criminal responsibility for certain aspects of maintaining the building should always remain with the accountable person and accountable persons cannot delegate this responsibility to a third party. Given these assurances, I hope that the noble Lord will withdraw his amendment and that other noble Lords will not press their amendments.

--- Later in debate ---

[Lord Gascoigne (Con)]

My Lords, in moving that the Bill do now pass, I recognise that we are now, finally, reaching the juddering climax of this Bill and this Parliament. As is only right and proper, there have been at times strongly held views about measures in the Bill. I am acutely aware that not everyone will be entirely satisfied with everything, but I remain encouraged and inspired by the passion that is felt across the House and by what has been evident yet again: the breadth, knowledge and experience of this House.

I am particularly grateful to all noble Lords across the House who have taken the time to engage directly with me and my noble friend Lady Scott of Bybrook. I thank both Opposition Benches for their sustained interest and engagement. In particular, I thank the noble Lords, Lord Truscott and Lord Best, the noble Baronesses, Lady Andrews, Lady Thornhill and Lady Fox of Buckley, the right reverend Prelate the Bishop of Manchester and the noble Earl, Lord Lytton. On our Benches, I thank my noble friends Lord Moylan, Lord Young of Cookham, Lord Bailey of Paddington and Lord Howard of Rising for their sustained engagement and helpful contributions during the debate. While we may not have been able to reach total agreement, I appreciate the concerns they are representing. Their careful examination of these measures has enabled the Government further to consider our policy and reinforce that our approach is correct. I am for ever grateful for their constructive scrutiny.

Speaking of my own Bench, I am sure it will not come as a surprise that today I feel a bit like Debbie McGee as there is one notable absence. I pay particular tribute to my noble friend Lady Scott. It has been a privilege to watch her work throughout the passage of the Bill and to work closely alongside her on much else. I am inspired by her impressive capacity to pick up technical issues and to work at pace and for her dedication to public service. My noble friend has done all of this and tolerated me with good humour.

I thank His Majesty’s loyal Opposition and the Front Benches opposite. I thank the noble Baronesses, Lady Taylor of Stevenage and Lady Pinnock, and the noble Lords, Lord Khan of Burnley and Lord Kennedy of Southwark, for their constructive interest in and engagement with these measures. I have been grateful for their willingness to work with this side on any matters of disagreement. It is both the first time and the last time in this Parliament when I am speaking to the noble Lord, Lord Kennedy, across this Dispatch Box. I would like to say something specific about him, if I may. While this may not necessarily be career-enhancing for both of us, in all the exchanges outside this Chamber, both formal and otherwise, he has been characteristically robust while courteous, approachable and friendly. As the new kid on the block, it has been appreciated.

I conclude by mentioning all the expert and extraordinarily comprehensive work that has gone into this legislation by the Law Commission, the Bill team and the officials behind the Bill, many of whom have been working on this legislation for many years, not to mention the extraordinary amount of work I imagine they have done over the past 24 hours due to wash-up. I spoke to the Minister first thing this morning, and on behalf of the Minister and myself, I thank them for their tireless support and professionalism.

Finally, as this is my last time in this Parliament to speak at the Dispatch Box, I say that my family were not political at all, so being a Member of your Lordships’ House alone is the honour of a lifetime, yet to be in His Majesty’s Government and to have played a small part in this Parliament has been beyond a privilege. I am grateful to everyone who has helped and supported me over the recent months in this Chamber, across the House and beyond. With that, I beg to move.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I thank the government team that worked on this Bill, particularly the noble Baroness, Lady Scott of Bybrook, and the noble Lord, Lord Gascoigne. I appreciate their generous remarks very much. I thank all the government officials for their work on the Bill, and noble Lords across the House who worked on it at every point. I thank the staff of the Opposition Whips’ Office. I pay particular tribute to my noble friends Lord Khan of Burnley and Lady Taylor of Stevenage. They took over doing the local government brief when I became the Opposition Chief Whip and did a far better job than I did. Sometimes I sit in my office in awe at how excellent they are—and how much better than I was.

I pay tribute to Lord Rosser and Lord McAvoy, who are missed by the whole House. They were always very kind to me when I arrived here. Lord McAvoy knew me for many years beforehand, and knew my mum very well as well; he always spoke very fondly of the time she was in the Members’ Tea Room in the House of Commons.

I thank the Labour Front Bench and the Labour Whips. They have done a fantastic job, and it has been an absolute privilege to serve as part of the Labour Front Bench over the last 14 years, and as one of the Labour Whips. I was privileged to arrive in the House 14 years ago. I am a kid from a council estate in Elephant and Castle, and I never thought I would end up here. To get here was a great thing, but to be the Opposition Chief Whip is something I have been immensely proud of, and I have tried to do my best in the last three years.

I pay tribute to the noble Baroness, Lady Williams of Trafford. We have followed each other around the House—when she was the Local Government Minister, I was the same over here, and then I went to the Home Office, and now we are against each other—or working with each other—in the usual channels. It is an absolute pleasure working with her in the usual channels: sometimes we agree and sometimes we do not agree, but it is all done in good humour, and usually over some chocolate in the noble Baroness’s office.

[A noble Lord]

Bribery!

[Lord Kennedy of Southwark (Lab Co-op)]

Absolutely. We get on really well together, and I have always appreciated the way she deals with things. That is the best way for the House to work. At the end of the day, this House works by relying on the conventions, doing things properly and agreeing things properly.

Whoever forms the next Government—that will be decided by the people on 4 July—will have to deal with these big issues around leasehold. Whatever side of the House I am sitting on, whether on the Front Bench or the Back Bench, I will do my best to make sure that whatever the Government do, they deal with these issues properly.

It has been an absolute privilege to be here and to do the job of Opposition Chief Whip, and to come back today and do it for the last time. With that, I wish everyone a happy election—let us hope the best party wins.

Bill passed and returned to the Commons with amendments.