Leasehold Reform (Ground Rent) Bill [HL]

Lord Naseby Excerpts

Committee stage
Wednesday 9th June 2021 Grand Committee

[Lord Stunell (LD) [V]]

My Lords, I shall speak in particular about Amendment 1, and the consequential amendments tabled by the noble Lord, Lord Blencathra. It was great fun to listen to him on Second Reading, with his eloquent flow sweeping away the whole caboodle of leasehold legislation and starting again from square one. That was spoken like a true reformer and radical, which, in his heart, I know he is.

Today the noble Lord was a bit more circumspect, but no less radical, with amendments that would not just reform the system but abolish it completely, starting on day one. That is an attractive proposal, especially to leaseholders—but even more so to lawyers. If implemented as drafted, it would leave a trail of wreckage that should keep lawyers employed for many a long year.

However, I suspect that, as befits a former Chief Whip in the other place, the noble Lord has carefully done his homework behind the scenes. No doubt he has had a word with the Minister and secured a commitment to bring back a government-led amendment on Report to comprehensively reform the entire leasehold regime and implement the recommendations of the Law Commission, and in the meantime to freeze the granting of lease extensions on grossly inequitable terms. If that is so, my noble friends and I will be ready add our names to that amendment, when it comes along.

However, perhaps the noble Lord’s quiet chat with the Minister did not go quite as well as he had hoped, and no such agreement was forthcoming—which may be why today he deferred to the amendments tabled by the noble Lord, Lord Young. Among those, Amendment 12, in particular, sets out in impressive detail a somewhat equivalent plan, as the noble Lord, Lord Young, has just spelt out. At first reading, that amendment would seem to provide less of a free lunch for lawyers than Amendment 1 would, and it is sensible, measured and proportionate, as one would expect from the noble Lord.

In his explanatory statement, the noble Lord describes Amendment 12 as a probing amendment. We certainly welcome that probing of the Government’s position and intentions. We too are concerned by the slow pace of reform, and the fact that the current Bill does nothing for existing leaseholders. Instead, the Government are offering jam tomorrow—or possibly the day after tomorrow—for current leaseholders. At least the noble Lord’s amendments offer us a sniff of jam today. I would encourage the Minister, in his reply, to explain fully to us exactly when he will come back with clear plans to achieve the reforms that the noble Lord has already drafted for him. I thoroughly endorse the noble Lord’s concerns about the gaps that could open up.

We should remember that leaseholders’ organisations desperately want this Bill in place, and the Liberal Democrats support their intentions. There should be no delay in its passage. But the Minister owes it to those leaseholders to commit to delivering a comprehensive reform in the shortest possible time. That is not only the right and equitable course of action, but the best way of avoiding disruption to the market.

The noble Lord, Lord Young, referred to the Law Society’s briefing on the Bill. I draw noble Lords’ attention to the Law Society’s belief that leasehold purchasers and their mortgage providers will, understandably, steer clear of taking out leases under the existing legal framework if they can find a much more favourable lease elsewhere in the market, under the new terms in the Bill. That means that existing leaseholders who are trying to sell will be put at a double disadvantage—not only having to pay outlandish charges but having more difficulty in selling their homes than if they had benefited from the new terms.

That risk to a stable market gets worse the longer the second stage of the reform is delayed. Perhaps the fact that that the noble Lord, Lord Young, referred to hereditary Peers’ legislation speaks to that foreseeable risk of endless delay. Two experienced senior members of previous Conservative Governments have tabled amendments in very similar terms to try to pre-empt that delay—which may be some kind of hint that they lack trust in the Government’s commitment to deliver on the second stage. In the Minister’s reply we need to hear exactly when he, as the responsible Minister, and the Government he represents, will bring forward that follow-up legislation, which we believe is now a pressing priority.

[Lord Naseby (Con) [V]]

My Lords, I apologise that I was not able to take part at Second Reading. Some of your Lordships know that my wife was taken very ill with Covid—in fact, we nearly lost her—and I decided to take her away for a rest. I am pleased to say that she is now pretty well.

There are a couple of interests that I ought to declare. I am a vice-chairman of the Shared Ownership Housing APPG. I have taken a particular interest in care homes, so I will be addressing the Committee on Amendment 4. My friends know that I was chairman of the housing committee in the London Borough of Islington from 1968 to 1971, when there was a fair number of lease challenges. Finally, I say to my noble friend on the Front Bench that I welcome the principle behind the Bill and thank Her Majesty’s Government for actually moving things forward.

I do not want to speak for very long on any of the amendments. I understand my roommate’s enthusiasm, which he has for everything in life, and he does cut through the rubbish, usually. It is nice to see someone cut through, bearing in mind that this is a pretty revolutionary Bill to start with. That is one end of the spectrum, and that covers Amendments 1 and 2. The noble Lord, Lord Young of Cookham, went into it in great detail. I read with great care what he said at Second Reading and the Government would do well to do the same—I am sure they must have done. He covered what might well be in the next Bill. It should be looked at extremely seriously.

I am concerned—I wrote it down before the noble Lord spoke this afternoon—about the position of existing leaseholders when they come to sell. I think that is a fair question, which the Labour Front Bench raised. That problem will be there unless some action is taken. It certainly cannot wait until the second half of this problem is dealt with in another Bill.

One other area concerns me: the situation, which is not uncommon, particularly in the provinces—I am speaking today from Sandy in Bedfordshire—where a landlord offers a 25-year lease on a residential property at a market or rack rent. That is pretty common in mixed-use scenarios; for example, a shop with a flat above, where the owner wants the commercial and residential parts to be leased out concurrently. In those sorts of circumstances, it seems—some would say absurd but that might be going too far—unusual and strange to expect just a peppercorn rent when a lessee is getting the benefit of living in or renting out the property.

The amendments in this group are absolutely crucial and I too look forward to the Minister’s response.

[The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)]

I call the next speaker, the noble and learned Lord, Lord Mackay of Clashfern. Lord Mackay, could you unmute, please? I will move on to the next speaker, the noble Baroness, Lady Grender.

--- Later in debate ---

[Lord Mackay of Clashfern (Con) [V]]

My Lords, I very much admire the detailed knowledge that the noble Lord, Lord Best, has of this and many other areas of importance. I heartily agree with him. Your Lordships will appreciate that I may have a special interest in this area, in view of my years.

As a matter of interest, I wonder how the age of 55 was chosen. I hope he may be able to give me a short explanation of that, because it is of interest to me.

[Lord Naseby (Con) [V]]

My Lords, I too pay tribute to the noble Lord, Lord Best. I am in my 80s and, from talking among friends, I am aware of at least two couples who are beginning to think about retirement homes. The noble Lord, Lord Best, is quite right. We discussed this issue before I even knew it was coming up in the Bill.

This sector of the market is, first, growing—that in itself is very encouraging—and as a country we have been a bit slow in this area compared with other countries. Secondly, it is growing in the sense that it was clear, back in my days as an MP, that there was a scepticism about retirement homes with all these extra facilities, but now it is taken as the norm and people are particularly fussy. If, as the noble Lord, Lord Best, says, a number are caught by this time dimension, it seems sensible that any business that started by the dates he puts in his amendment should be exempt.

I do not understand why 55 was chosen. The retirement age is still going up, so 55 seems a bit generous, frankly. Another 10 on top of it would not have gone amiss, but that is a minor issue. I hope Her Majesty’s Government take the points made by the noble Lord, Lord Best, very seriously; they need addressing.

[Baroness Grender (LD)]

My Lords, developing adequate housing stock for an ageing population is a significant challenge for this and future Governments. The work of the noble Lord, Lord Best, and the publications by his APPG for Housing and Care for Older People have been essential reading in this area. While we recognise that what is now in the Bill is a compromise achieved following a total exemption for retirement homes in the original consultation, and in spite of the arguments of the noble Lord, Lord Best—whose expertise in this area is significant—when the Minister responds, I still want to understand where the essential difference lies between retirement and other leaseholders, in his or the Government’s opinion. If the straight answer is money required to be spent on common parts, surely a more honest and transparent way to do that is in either the original price or the service charges. However, I hear what the noble Lord, Lord Best, has said today and will study his explanation.

Given that ground rents appear to serve no purpose, as we have already discussed several times and at Second Reading, other than profit for the freeholder or security to borrow to develop more properties, why is this different when applied to retirement homes? I am sure that noble Lords are familiar with the Times investigation into this in November 2019, but it bears revisiting. It uses the example of one retirement property bought for £197,000, in 2009, from the FTSE 250 development company McCarthy & Stone, which was sold for only £26,000 six years later. By the time the flat owner died, she was paying the management company almost £8,000 a year.

The Times went on to say:

“Housebuilders such as McCarthy & Stone argue that without the money they make selling the freehold to management companies they could not afford to provide communal areas for their properties. Yet this is a poor excuse when there are far more transparent ways to raise revenue, such as simply selling their properties for a higher price.”


They often cover that in the service charge. The article continued:

“They insist, moreover, that the majority of their homes have increased in value.”


However, the Times then went on to find that

“one McCarthy & Stone property had lost £45,000 between 2015, when it was bought,”

and 2019. The same investigation found that, as with other leaseholders, elderly relatives are persuaded to use a solicitor who the developer has recommended, who turns out to be the very opposite of an advocate on behalf of the retiree. As the noble Lord, Lord Best, has explained, this group can often be exploited and manipulated.

For those reasons, we are minded to support the amendments in the names of the noble Lords, Lord Kennedy and Lord Lennie, but look forward to hearing the arguments in the closing stages of this debate.

--- Later in debate ---

[Baroness Grender]

This group has two purposes. The first would be to remove Clause 6 altogether to ensure that informal extensions come under the regulations proposed in the Bill; the second, less dramatic amendment would increase transparency in both formal and informal renegotiations or extensions of the existing lease. I shall deal with Clause 6 stand part first.

We see informal leasehold extensions as a significant potential loophole and the next obvious area to exploit for the “something for nothing” industry in this area. Therefore, we wish to ensure that informal leasehold extensions are regulated in the same way. I appreciate that there may be extenuating circumstances where there is a need for an informal extension—for example, if someone inherits a home and needs to make a relatively quick sale on a very short lease—but those circumstances should be the exception, not the rule. I fear that this will become standard practice unless the Government find a comprehensive way to restrict its use. If noble Lords who speak after me in this debate have concerns and examples of the advantages that an informal leasehold extension provides, I am more than happy to hear suggestions of better solutions than this, but the key question for this debate is how to prevent informal extensions being used, as they currently are, to exploit leaseholders and how that can be reflected in the Bill.

I will be using, in particular, specific examples provided in a detailed blog on this issue by Louie Burns. Sadly, he died a year ago. He was a trustee of the Leasehold Knowledge Partnership and an expert practitioner in the area of leasehold extensions. I have taken the liberty of sharing the link to his blog with noble Lords participating in the debate on this group of amendments.

Louie Burns called such offers “Trojan horse offers”. He described an offer from a real case he dealt with, made by a large London-based freeholder, on a property valued at £230,000 with a ground rent of £75 a year, doubling every 33 years, and a current lease of 75 years. The cost of extending the lease using statutory legal rights would be a total of £13,250, securing a lease of 165 years with zero ground rent.

Often, the freeholders in this scenario are professional money makers. They make money from licensing fees hidden in the lease, through claiming a finder fee for the building insurance, when people have no choice as to who building insurance is provided by, through service charges and ground rent—and, of course, through money paid to extend the lease.

The freeholder writes to the leaseholder offering to extend the lease back up to 99 years—which means that, 17 years later, the lease will need extending again —for £10,200, plus VAT of £1,000, with ground rent at £250 doubling every 10 years, with a short deadline of 30 days to make a decision offered by the freeholder. In the small print, of course, the leasehold is extended only to 99 years—or the freeholder may offer 125 years, without explaining that the extension is from the date that the lease was originally granted, not the date of the extension offered.

Louie Burns went on to explain how the costs described, over a 24-year period, added up to more than £100,000, which will go to the freeholder. Please remember that this is a specific real case, which he provided as an example. When compared, unfavourably, with the statutory route, costing about £13,000, with zero future ground rent, that is beyond shocking. We need to bring this sharp practice under some form of regulation.

The other option is to accept Amendment 13, which would impose an obligation to explain. If leaseholders had the full picture and knew both their statutory rights and the full costs over 24 years, say, they would have much greater control. The alternative is an informal extension to 99 years—which, as I said, would have to be renewed 17 years later, and then in turn makes the flat impossible to sell, and prohibitively expensive to maintain, with the ground rent alone.

An informal extension of a lease also means that the leaseholder is not protected by the law, and the freeholder can make changes by saying things such as:

“We are not looking to amend your lease in any way, we will only modernise the terms of your lease.”


Louie Burns, in his blog, told people to beware of the term “modernise” as used here, because it means “amend”. An informal leasehold extension is a quick route for a freeholder to add additional payment. It is also a quick route for a solicitor to receive a fee—which may explain why, often, solicitors do not give a warning.

The statutory route is slower. With banks and building societies now showing reluctance to lend for such leasehold arrangements, yet again, the person who suffers the most, and is caught between freeholder and lender, and cannot sell, is the leaseholder, who has received minimal information. Sometimes Ministers like to solve such transparency issues through guidance. But if the aim is to ensure that the freeholder complies with the law, I suggest that the transparency approach should be in the Bill. I beg to move.

[Lord Naseby (Con) [V]]

My Lords, the noble Baroness has done us a great service. We have all read about these situations. I am not aware of the details of any of them, but there has been enough coverage in the responsible media for me to see that this is a problem. I hope my noble friend on the Front Bench will be able to address it.

I assume that in this group we are also dealing with my noble friend Lord Young’s Amendment 12, although I notice that it is not listed. It says “After Clause 6”. Is that after this debate?

[The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)]

It was in the first group.

[Lord Naseby (Con) [V]]

We have dealt with that one, have we?

[The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)]

Yes, we have.

[Lord Naseby (Con) [V]]

I apologise. I very much support what the noble Baroness said. I need do no more than ask my noble friend on the Front Bench to take it really seriously.

Leasehold Reform (Ground Rent) Bill [HL]

Lord Naseby Excerpts

Committee stage
Monday 14th June 2021 Grand Committee

[Baroness Grender (LD)]

My Lords, this group of amendments is an attempt to ensure that enforcement bodies have sufficient financial long-term sustainability. It also ensures that there are appropriate deterrents in the Bill to incentivise freehold landlords to understand just how serious a breach will be and the impact it will have on their current portfolio of properties. The additional aim is to create an incentive for local authorities to pursue financial penalties.

Today, of course, is the fourth anniversary of the Grenfell Tower fire where 72 people lost their lives, and I am sure that we are all thinking of those bereaved families, survivors and residents as they remember their loved ones. That tragedy underlines just how important it is that homes are safe and secure, and one of the first lines of defence is the enforcement authorities.

In addition to moving Amendment 14, I will speak to Amendment 15. While we appreciate that the Minister stressed at Second Reading that the fines would be for each individual lease, the danger remains that an enforcement authority will receive only £5,000. Indeed, Clause 9(3) states:

“Where the same landlord has committed more than one breach of section 3(1) in relation to the same lease, only one financial penalty may be imposed on the landlord in respect of all of those breaches committed in the period”.


Several noble Lords at Second Reading raised the issue of enforcement and resources to enforce. Local authorities’ trading standards departments have experienced staff cuts of at least 50% since 2010. It is not unusual for skilled and experienced—and therefore more expensive—staff to have been replaced with less skilled and lower-salaried staff. Sometimes trading standards has been contracted out to third parties completely. Local authority trading standards departments need greater sustainable long-term resource and that means generating greater levels of income.

Therefore, there should be a wider range for the fines and a higher start point for the penalty. The amount should be consistent with the Tenant Fees Act 2019 where landlords breach Sections 1 and 2 of the Act on more than one occasion. If you are a leaseholder, you are not a home owner, and therefore the levels of potential fines should surely be similar to those for rogue landlords in the Tenant Fees Act. The Bill relies on local weights and measures authorities—namely, trading standards departments—to oversee this new law. The Government will already be well aware of the sluggish approach to fining and banning rogue landlords under the Tenant Fees Act 2019. When originally launched, the Government predicted that there were 10,500 rogue landlords; so far, only 43 have been registered. Speak to many local authorities and they will report that an operation of this nature requires early up-front investment, but other priorities such as social care with chronic records of poor funding will inevitably come first. As Liam Spender, a trustee of the Leaseholder Knowledge Partnership, points out:

“It is likely most local authorities will decline to get involved, as they do in most private sector housing disputes now, on the grounds that leaseholders have civil claims they can use to recover any prohibited ground rent.”


Waiting for the next local government settlement is a short-term solution and, frankly, unlikely to solve this problem given other competing demands on local authorities. Now the Government are adding another task with too limited financial reward: as the fines currently stand in the Bill, the incentive to take the necessary action to fine a freeholder will not be worth the effort.

Amendments 14 and 15 would raise the minimum financial penalty from £500 to £5,000 and the maximum financial penalty from £5,000 to £30,000. The potential of greater fines would give local authorities an opportunity to invest in this operation, charge rogue landlords and freeholders and therefore sustain a longer-term, fully budgeted operation. If the Government are opposed to this increase, perhaps the Minister could share what level of financial penalty would make it worth while for a local authority to pursue a freeholder. If the argument is that this will have an impact if it is a penalty on a developer across several leases, what level of fine do the Government anticipate?

On Amendment 16, in my name and that of my noble friend Lord Stunell, the arguments are similar. It contains a new clause that would be inserted after Clause 12 that would extend the banning order regime under the Housing and Planning Act 2016, with an exception for rent recovery orders. It would ban landlords who received three or more penalties in any six-year period from collecting some or all of the monetary ground rents arising under pre-commencement leases. That should be a clear signal to persistent offenders that, under Clause 9 of the Bill, if the maximum penalty has been charged three or more times against the same landlord or a person acting on their behalf, there will be restrictions and penalties.

We recognise how significant the failure is of this part of the Housing and Planning Act 2016. On 9 January 2018 the then MHCLG Minister, Jake Berry MP, said the Government’s estimate was that

“about 600 banning orders per year will be made”.—[Official Report, Commons, Fifth Delegated Legislation Committee , 9/1/18; col. 12.]

In April, the Housing Minister, Christopher Pincher MP, confirmed that just seven landlords had so far been issued with a banning order. As the National Residential Landlords Association says of this failure:

“The Government needs to work with local authorities to understand the true extent of the pressures faced by environmental health departments responsible for enforcing many regulations”


affecting this sector.

“Too often, government has introduced initiatives to crackdown on”,


for instance,

“criminal landlords without properly understanding whether councils have the resources and staff to properly enforce them. In short, regulations and laws to protect tenants”—

and to protect leaseholders from bad practice—

“mean nothing without them being properly enforced.”

When we look at the level of these fines, we must remember that this industry is vast. The MHCLG’s own estimate is that, of the 4.5 million leasehold properties in the UK, approximately 2.5 million are owner-occupied. All these people are likely to be paying some level of ground rent. The companies behind the freehold interests receiving these ground rents are huge undertakings. They are more than a match for any local authority seeking a £5,000 fine. For example, Proxima GR, a key company in the Vincent Tchenguiz freehold portfolio, reports in its most recent accounts that it expects to receive £2.4 billion in ground rent between 2019 and 2080. It is believed to control a portfolio consisting of freehold interests over hundreds of thousands of leasehold properties. The same accounts report cash income of £24 million in the same year. A fine of £500 or £5,000 for multiple breaches is no disincentive to any organisation of that scale. Information on other ground rent investors is hard to come by but, from the limited information available, there are many other substantial operators out there. For example, in 2016, leasehold properties worth £64.8 billion were sold. Of these, new-build properties were worth £13.7 billion, leasehold house numbers doubled, and developers made £300 million to £500 million a year from ground rent sales. Looked at from that perspective, £5,000 seems a very small sum to put as a maximum. Has the Minister considered an industry-funded redress scheme to support enforcement?

To conclude, there should be greater detail in the Bill about how to resource penalties and sanctions to sustain longer-term planning and funding. These are large industries with significant levels of income and profit: they need to be aware that their days of exploiting leaseholders are over and failure to recognise that will cost them dearly. I beg to move.

[Lord Naseby (Con)]

My Lords, I am delighted to support the noble Baroness on Amendments 14 and 15. I was just reflecting on how important this issue is: hundreds of thousands, maybe millions, of families are affected. The problem probably goes back over half a century. It is to the great credit of my noble friend on the Front Bench that the Bill is before the Committee now, and I say to him “Well done.” In 1968—I see my noble friend Lord Young sitting opposite me—I had the privilege of being elected, somewhat against the odds, as the potential leader of the London Borough of Islington. We won 57 out of 60 seats; we did a deal with the other three, because they were a local community group. I was then elected to be leader and chairman of the housing committee. Sitting here this afternoon, I still remember working really closely with the officers of that authority, from the town clerk down. It was not entirely to do with leaseholds, but it was to do with property and rogue landlords. Two in particular come to mind: a local one called De Lusignan and the one whom we all remember, Rachman. Those rogues and their successors have not gone away—the noble Baroness is absolutely right; they may well have multiplied for all I know. They were a huge problem even in those days.

There is another element, which I can talk about, though some noble Lords might have more difficulty. I have lived and worked in Pakistan, India and Sri Lanka. I have the greatest respect for those countries. I would go as far as to say that I love them dearly; I know them extremely well. As far as I can see, there is a rogue element, particularly in the poorer parts of our country, which exploits vulnerable migrants. That is wrong, and we know that it is wrong, but some local authorities appear to be slow, resistant, unwilling or too conscious of the social situation. In my view, as someone who has taken a deep interest in housing all my political life, that rogue element has to be addressed—it does not matter who they are.

The noble Baroness is right about the figures that are in the Bill. In today’s world, £500 is absolutely no deterrent to anybody: you only have to see what is happening out there in the market. She is right that £5,000 is the beginning of a reasonable deterrent. Personally, I would do a multiplier by five, because £25,000 somehow—perhaps it is the advertising man in me—sings out as even stronger than £30,000. I do not know why that is, but I thought about this when I was working on it over the weekend. I agree with the noble Baroness that £5,000 is the beginning of a proper deterrent, and I think that £25,000 should be the maximum.

Of course, it is for my noble friend on the Front Bench to decide what Her Majesty’s Government believe is appropriate, but all I say to him is that this area needs dealing with, and here is an opportunity to do it. I again congratulate my noble friend and his colleagues on bringing this Bill forward. Let us make a really good job of it.

--- Later in debate ---

After the very disappointing outcome of the G7 meeting, and following so many broken government promises, can the Minister please give us some hope that the Government are listening and will improve this Bill?

[Lord Naseby (Con)]

My Lords, I think most legislators would agree that there should always be a review of legislation. Unfortunately, that has not always happened in the past, and I have put down a number of amendments to certain Bills to say that there should be a review. But quite frankly, to have a review within 30 days is totally unrealistic; it is far too fast. Given that we have Christmas holidays, Easter holidays and bank holidays—and even the occasional pandemic, with people working at home—I am sorry to say that proposed subsection (1) in Amendment 19 is not the least bit viable.

However, when we move on to Amendment 20, we come to a more realistic basis: that within six months of the Act being passed a review of its financial impact on leaseholders must be carried out. That is eminently sensible and a reasonable length of time. The Minister may have a different view, but looking at it from the outside—again, I speak as someone who has been involved in housing matters—I would have thought that it was a reasonable length of time.

Whether proposed subsection (2) in Amendment 20 is correct, I am not sure. It says:

“The review must make a recommendation”.


I do not think it is the point of a review that it “must” do something. The whole point of a review is that it should look at all aspects of whatever it is reviewing and then make recommendations. That is a technicality, but it seems a more sensitive way of doing it.

I make one further point on the fire remediation work. I think Her Majesty’s Government, and this Government in particular, have tried very hard to get a grip on this very difficult area. One sees daily the outbreak of fire because of cladding, and each one seems to be different. I do not have the experience or the wisdom to know whether Her Majesty’s Government are doing enough in this area. I would appreciate from my noble friend, as would Parliament, a regular update on exactly what is happening on cladding. There is a great deal of confusion out there and clarity would help us all.

I was fascinated by Amendment 21A from my colleague the noble Lord, Lord Berkeley. I am conscious of having visited the model village that was formed in the Duchy of Cornwall—I cannot remember its name but I think it is in Dorset.

[Lord Young of Cookham (Con)]

Poundbury.

[Lord Naseby (Con)]

Yes, thank you so much.

I declare an interest in that I happen to own 40 acres around my home. Somebody suggested the other week that maybe a small bit of this—say five acres—might be a help to the housing market. I certainly would not think of having it on a leasehold basis. If I am going to build houses in the interests of the community in Bedfordshire, they will be sold, because if something is sold the family involved have real ownership. When they own their home it is not a disincentive but an incentive to do something good for their home; it is in their interests. I suspect that it is a disincentive to do so for most leaseholders.

I think the noble Lord is right to ask the question. I think he said that he sent three letters to the Duchy. The least that the Duchy should do is come back to the questions he asked. I hope that will go on the record. I say to my noble friend on the Front Bench that none of these are black and white, other than the fact that there should be a review within the six-month period.

[Lord Stunell (LD) [V]]

My Lords, this has been a very interesting debate. Everybody has spoken with a sense of understanding and concern, remembering that today is four years since the Grenfell tragedy. It should be a matter of particular regret in the kind of debate that we are having that, four years on, so few of the deep issues that have been revealed subsequent to that fire have yet been fully dealt with or accounted for. It is a matter of regret to me that the building safety Bill is still somewhat on the distant horizon, and that we have not yet solved at all the question of who will pay for the costs of this tragedy, since it affects households right across the country.

Noble Lords would expect me to focus particularly on Amendment 20 in the rest of my remarks. Before I do, I will comment briefly on Amendment 19 from the noble Lords, Lord Kennedy and Lord Lennie, which calls for a review. I will skip the number of days and focus on the four issues that they have said need urgent reform and which every speaker in this debate and anybody who has considered the issue would agree on: lease forfeiture, transfer fees, redress schemes and enfranchisement. The Bill does not deal with those four issues. It is time that the Government face up to that and present to Parliament—preferably in the form of legislation, but if not a published report—precisely what their view is on those issues.

The move of the noble Lord, Lord Berkeley, to clarify where Crown exemptions come into play for leaseholders raises an issue that he has brought to your Lordships on a number of occasions. I would be very interested indeed to hear whether the Minister is brave enough to accept his challenge to write to the Duchy of Cornwall and get it to answer the noble Lord’s letter. Your Lordships certainly deserve to hear from the Duchy precisely how it intends to proceed. If the legislation needs change and reform to take account of that, we need to hear the Minister say that he is ready to do that and to make sure that Crown exemptions are used with appropriate discretion and not in any way at all to put residential leaseholders of Crown land in a more disadvantageous place than those holding leases where the freeholder is a private body.

On Amendment 20, my noble friend Lady Pinnock set out, as she has done many times before to your Lordships, the grievous burdens placed on leaseholders across the country as a consequence of the remediation made necessary following property inspections post Grenfell. Before I go on, I remind noble Lords that I served as a Minister in the Department for Communities and Local Government, as it then was, with responsibilities for building regulations between 2010 and 2012.

The Grenfell inquiry has been hearing evidence of failures at many levels: building owners, building managers, designers, materials suppliers, on-site contractors, inspection teams and enforcement bodies. No one has escaped damning evidence of their failures. What there has not been is any evidence at all of failure by residents or leaseholders. On the contrary, it was the residents of Grenfell Tower who repeatedly warned of the dangers that other people chose to ignore. That led to the terrible tragedy, the deaths and the unmeasurable impact on so many lives of families in and around Grenfell Tower who survived that night.

It also led to the discovery that this was not an isolated case of many unfortunate things coming together in a sequence of horrible coincidences to make a one-off dangerous, combustible building. We now know that more than 400 other residential blocks have been found to have similar dangerous cladding, and the enforced inspection of those blocks has brought to light many other fire safety defects, costing billions of pounds in total. Many of those blocks are occupied by blameless leaseholders who find that they now live in a dangerous and unsaleable home and are being presented with enormous bills for remediation under the terms of their leases.

The Minister will say that this is not the place to insert a proper compensation scheme—nor does Amendment 20 do that—but he needs literally to take stock. That is what Amendment 20 tabled by my noble friend Lady Pinnock does. It asks for a taking stock of the impact of this Bill on leaseholders who live in those defective properties.

Time after time your Lordships have pressed the Government to come forward with a proper scheme of compensation for leaseholders all over the country who have been unwittingly caught up in the Grenfell scandal. Every time your Lordships have pressed Ministers—this Minister in particular—we are told, “Not here and not now”. Meanwhile, as my noble friend Lady Pinnock spelt out, leaseholders are being sent five-figure bills with 28 days to settle or face the forfeiture of their lease. They cannot raise finance on their now-worthless properties, and the Government still have not issued the vital information on how they can even access the loan scheme the Government announced months ago.

Will the Minister tell your Lordships today when those missing loan scheme criteria will be published and what the distribution system of those loans will be? Please can he assure us that it will not be administered via an outsourcing company such as that in Virginia, USA, which earlier this year was the nemesis of the green homes grant fiasco? Let this piece of work be started soon, carried out efficiently and delivered to the benefit of leaseholders as quickly as possible.

Secondly, will he urgently bring forward a proper compensation scheme and lift the threat of forfeiture and bankruptcy from innocent leaseholders trapped in these blocks? Will he, as an earnest of good intent, accept my noble friend Lady Pinnock’s amendment today so as, at the very least, to commit to take stock of the impact that a ground rent ban could have on those affected leaseholders and tenants?

--- Later in debate ---

[Lord Stunell (LD) [V]]

My Lords, I address my remarks to Amendment 26, just spoken to by the noble Lord, Lord Blencathra. I strongly support what he said and the arguments that he put forward in support of his amendment.

One key risk of separating out the legislation for all new domestic leases from those of the 4.5 million existing domestic leases is that a gap will open up in the market between homes traded under existing leases and those traded under the new regime. As the noble Lord, Lord Blencathra, has just said, the existing leases are very disadvantageous compared to those that will be formed under the new Bill. In many respects, existing leaseholders will be under a double disadvantage. They will have a home that may be identical in every respect to one that is subject to the new Bill, with a lease signed a week after Royal Assent—or maybe in two years, when it is finally implemented. The existing leaseholder will be at a permanent long-term disadvantage up to the point when stage 2 of this reform comes into force.

This amendment would bring the Bill into force immediately. It would mean that the long tail behind the existing leaseholder system would be cut off. There would be no new leaseholders stuck with the old system, with a Bill that has had Royal Assent but not been brought into effect. It would, as quickly as possible, create a bigger market of those with new leases rather than old leases.

In its turn, that will throw up disparities between the two categories of leaseholder resident. Those who have an existing lease—particularly those with an informal lease extension, which might have huge escalating charges written into it—will find that the gap between them and their near neighbours under the new system widens and widens. Inevitably, that will lead to a two-tier market; perhaps at first only at the margins but, over time, as the number and proportion of new leases on the market increase in relation to the number of existing leases, that gap will widen. The disadvantage suffered by those holding existing leaseholders will also widen and will be twofold: first, they will find it harder to sell their leases on, because they will be less attractive to purchasers than those leases available under this Bill; and, secondly, in the meantime, they will be stuck with paying through the nose the exorbitant terms of their existing lease.

Amendment 26 from the noble Lord, Lord Blencathra, is a good step forward in the absence of any real commitment by the Government to bring much closer together this Bill, stage 1 of reform, and the next Bill, stage 2 of reform. The noble Lord is absolutely right to press the Government and to express his concern that that announcement has not yet been forthcoming. Indeed, Ministers have been very reluctant to make it. We need to know when stage 2 will be before your Lordships’ House. We need to know how soon it will be that the follies, injustices and oppressions of the current system will be stopped. We need to make sure that as few people as possible find themselves in the unenviable position of hearing, “Take it on these terms or take it on no terms.”

In an earlier debate we debated the four things that the noble Lord, Lord Kennedy, thought should be reviewed. The Government did not accept that. In our first day’s work we tried to make sure that there was some definite timetable for future reform. The Government were not willing to accept that. Today’s amendment from the noble Lord, Lord Blencathra, would, unfortunately, still not achieve it, but it might be a powerful lever to force the Government toward bringing these two stages of reform closer together, cutting off the tail of existing leases being signed as quickly as possible, and, as soon as possible, reforming the whole system.

[Lord Naseby (Con)]

My Lords, I do not want to be repetitive because much has been said by those who have taken a particular interest in the Bill—and indeed the market, which is why we are taking an interest in the Bill. I have little to add, but if I was sitting in my noble friend’s position, as the Minister responsible, I would see merit in the timeframe of six months from the noble Lord, Lord Kennedy. That would be the maximum break.

I declare an interest in that I share an office with my noble friend Lord Blencathra. He is very clear on his views in life and he is more often right than wrong. My noble friend on the Front Bench needs to reflect on this.

We know that this has been a very difficult area and I have sympathy with my noble friend on the Front Bench. But we cannot have a situation where phase 1 happens—I think we all have confidence that it will, whether immediately, as my noble friend Lord Blencathra says, or along the lines of the amendment from the noble Lord, Lord Kennedy—but the second half is to happen only sometime in the distant future. I again reflect on the period when I was chairman of the housing committee in Islington. You could not have had a situation where people in one section of society had their problems sorted out but those in another section—almost identical, except that they are a bit earlier in life—did not, and their problems were kicked into the long grass. My dear friend on the Front Bench has to come back, maybe not today but on subsequent sittings on this Bill, with a firm commitment that the second stage will happen and with a timeframe for it to happen.