Leasehold and Freehold Reform Bill

Lord Truscott Excerpts

2nd reading
Wednesday 27th March 2024 Lords Chamber

[Lord Truscott (Non-Afl)]

My Lords, it is a pleasure to follow the noble Lord, Lord Adonis. I will come to ground rents shortly. I declare an interest as a long-standing leaseholder.

The Bill before your Lordships’ House today is, in my view, profoundly disappointing, as one or two noble Lords have said. As the Secretary of State for Levelling Up, Housing and Communities, Michael Gove, said in the other place, leasehold is a “fundamentally unfair system”, and his aim is the effective destruction of the leasehold system. Leasehold is, in his words, “outdated” and “feudal”, although I know that the noble Lord, Lord Moylan, does not like that word. I agree with the noble Baroness, Lady Finn, that leasehold has no place in the 21st century. The Bill falls a long way short of its objective of the destruction of leasehold, as the noble Baroness, Lady Andrews, also said.

As it stands, the leasehold system is virtually globally unique—in a bad way—to England and Wales. It perpetuates a property market where around 10 million leasehold dwellers are at the mercy of freeholders and associated freehold professionals who sponge off them. Leasehold codifies and preserves, in the modern age, the medieval relationship between the serf and the lord of the manor, because that is historically where leasehold comes from. I agree with the noble Baroness, Lady Finn, on this. As a historian with three degrees in history, I can assure noble Lords that it is quite the historic pedigree. There is a gap between those who own property outright and those who do not. This applies not just to the great estates that still own huge chunks of prime London and other areas but our country as a whole.

The Secretary of State, Mr Gove himself, said in the other place that the Government would destroy the feudal leasehold system:

“We will do so by making sure that we squeeze every possible income stream that freeholders currently use, so that in effect, their capacity to put the squeeze on leaseholders ends”.—[Official Report, Commons, 11/12/23; col. 659.]


The noble Baroness, Lady Thornhill, repeated this. We hear that Mr Gove is having trouble fulfilling the Tories’ election manifesto pledge to reduce all ground rents to peppercorns. The noble Lord, Lord Adonis, referred to this. But Mr Gove is being opposed by the Treasury, Downing Street and freeholder interests. Meanwhile, as noted in the debate, the Competition and Markets Authority has ruled that there is no legal or commercial justification for ground rents. Ground rents provide no service and are purely rent-seeking.

I have very little sympathy for the self-serving arguments of vested interests that want not only to water down the Bill further but to emasculate it completely. The effect of reducing ground rents to peppercorns is exaggerated by the pension industry and freeholder lobby groups. I do not agree with the noble Lord, Lord Moylan, on this point. Some are hiding behind the European Convention on Human Rights and the right to property. The noble Lord, Lord Adonis, referenced this. Apart from this making an excellent case for an opt-out from the ECHR, which I would have thought the noble Lord, Lord Moylan, would welcome, I point out that the rights of leaseholders need protecting too.

We were told that marriage value was to be abolished under the Bill—

[Lord Moylan (Con)]

I have never actually argued that we should withdraw from the European Convention on Human Rights. I have an open mind.

[Lord Truscott (Non-Afl)]

I did not say that at all. I said that I would have thought that the noble Lord would welcome an opt-out from the ECHR on this. If that is not the case, I am happy to accept what he says.

Going back to marriage value, I do not think that marriage value should be replaced with a deferment rate that makes lease extensions even more expensive than they are now, because the deferment rate that the Government are talking about setting is merely marriage value by another name, and it can end up with leaseholders paying even more for lease extensions than they pay now, because it depends on the rate. In my view, His Majesty’s Government should completely abolish the outmoded concept of marriage value based not on what a property is currently valued at but on what a freeholder imagines it may be worth in the future. However, I welcome the Government’s commitment to an online calculator, so at least leaseholders know what the cost of extending their lease might be.

I listened carefully to the Minister’s opening speech, and I hope that she can assure the House that, when the Bill becomes law, it will indeed be cheaper and easier for existing leaseholders to extend their lease or buy their freehold. The greater transparency on charges, including insurance, and the end of the unfair presumption of leaseholders always paying all the landlord’s legal costs is a step forward. As it stands, the system is heavily weighted in favour of the landlord or freeholder. Any legal challenge is fraught with risk, uncertain and extremely costly. Very few leaseholders attempt it. As noble Lords have said, the stories of excessive and padded service charges and extortionate insurance premiums are legion and endemic. These abuses must be brought to an end as soon and as far as humanly possible.

The extension of right to manage in residential blocks is long overdue. I do not accept that mixed residential and commercial blocks cannot be managed by right-to-manage companies, or that investments will dry up as those who live or invest in such blocks are given more say over how they are run.

I regret the absence of the regulation of property management agents, as the noble Lord, Lord Best, has repeatedly raised, or even an insistence that they should be trained and qualified. Property agents can control millions of pounds, and the standards of some of them are unbelievably poor. I know of no other body that manages potentially such large sums of other people’s money that is wholly unregulated. Voluntary codes and redress schemes are not enough.

Commonhold is once again being insufficiently promoted by His Majesty’s Government, as mentioned by the noble Lord, Lord Young of Cookham, and others, including the noble Baroness, Lady Taylor of Stevenage. It may be unpopular with developers but I believe it offers a realistic alternative to the flawed leasehold system.

On forfeiture clauses in leasehold, which a number of noble Lords and the Minister mentioned, although I agree that no one should lose their home for service charge arrears of a few hundred pounds—these can be dealt with by the county court and bailiffs—forfeiture clauses can be a useful deterrent to other breaches of the lease that are otherwise difficult to enforce, such as persistent anti-social behaviour. I look forward to these and other issues being fully debated as the Bill progresses through your Lordships’ House.

Leasehold and Freehold Reform Bill

Lord Truscott Excerpts

Committee stage
Monday 22nd April 2024 Lords Chamber

[Lord Thurlow (CB)]

My Lords, I turn to my Amendment 18 in this group. I begin by declaring my interests as both the owner of two buy-to-let investment flats and the occupier of a flat, all on leases. I stand to benefit under the Bill in both situations, which is quite patently wrong.

I thank the right reverend Prelate the Bishop of Derby for articulating my amendment with greater ability than I can. I want to turn specifically to mixed-use buildings and the proposal to move from a 25% threshold for enfranchisement to 50%, and build on the comments of the noble Lord, Lord Sandhurst. Mine is a straightforward proposal: simply that lessees who are not occupiers living there as their primary residence should not benefit from the great wealth transfer that is going to take place through the enfranchisement process. It cannot be an intended consequence of the Bill.

My amendment requires that at least 50% of leaseholders should satisfy the residence occupancy condition for any collective enfranchisement to apply. I remind the Committee that I am thinking of mixed-use buildings. A very complex management expertise is required in looking after mixed-use buildings; the skills are not the same for commercial property as for residential property, and the scope for mistakes and delay is huge. The potential to improve and curate an environment through single ownership of an expansive area has been very clearly described. To expect such behaviour to continue responsibly is almost impossible under the Bill as it stands.

We have also heard that, in London and the south-east, some 50% of tenants are not residents but foreign nationals living elsewhere, with ownership registered abroad. Are they taxpayers? This group often do not want to be identified. They shroud their property in ownership interests in offshore companies, as we have heard. They are very slow to respond, doing so from time to time, let alone to offer up money when required. If the Government do not agree that 50% of leaseholders in a block should be permanent residents, can I have an informed estimate on how many billions of pounds is expected to be paid in compensation to this cohort of wealthy foreign nationals, should they pursue this new enfranchisement entitlement?

[Lord Truscott (Non-Afl)]

My Lords, I declare an interest as a long-standing leaseholder of some 30 years. I have been a leaseholder in apartment blocks in London, Kent and Somerset, and a right-to-manage director in two apartment blocks.

I support His Majesty’s Government’s Clause 28, which seeks to raise the non- residential limit on collective enfranchisement claims from 25% to 50%, as mentioned by the noble Baroness, Lady Taylor of Stevenage. I consequentially oppose the proposal of the right reverend Prelate the Bishop of Manchester and the noble Lord, Lord Moylan, to vote against Clause 28.

Your Lordships have heard how giving more say to leaseholders in mixed blocks of residential and commercial units would be a bad idea and negatively impact on investment and the effective running of these blocks. It has been said that reform would only help some foreign leaseholders and investors and would result in fewer homes being built. That is far from the case. I have lived in two blocks of mixed developments: one was controlled by a residents’ right-to-manage company, with a NatWest bank in the basement, and another contained a number of commercial units and was 100% controlled by the freeholder. I can say categorically that the right-to-manage block was run better and with cheaper service charges. The freeholder-run block exploited the residents, cross-subsidising the commercial units at their expense and giving them no effective say over how the block was run. I point out to the noble Earl, Lord Lytton, that the difference was that the RTM block was actually run by the residents, who were managing their own money, whereas the freeholder block was run by a managing company and the freeholders were profligate with the use of residents’ cash.

Let us be frank: maintaining the 25% cap is about the freeholders retaining control and not about fairness or efficiency. If anyone lives or invests in a flat in a block, they should have a say over how it is run. For that reason, I oppose the amendments in the names of the noble Lords, Lord Thurlow and Lord Sandhurst, which would restrict enfranchisement and further strengthen the position of freeholders by limiting the number of leaseholders who can vote on and manage their own blocks of residents. RTM directors are perfectly capable of managing mixed blocks of developments.

Leasehold and Freehold Reform Bill

Lord Truscott Excerpts

Committee stage
Wednesday 24th April 2024 Lords Chamber

[Lord Truscott (Non-Afl)]

My Lords, I declare an interest as a long-standing leaseholder, as I have done before. I support the expressed view of His Majesty’s Government on abolishing marriage values—I take a somewhat different view from that of the noble Lord, Lord Moylan—so making lease extensions cheaper and easier. I therefore oppose all the amendments in the names of the noble Lord, Lord Howard of Rising, the noble Baroness, Lady Deech, and others, the subsequent amendment in the names of the right reverend Prelate the Bishop of Manchester and the noble Lord, Lord Moylan, plus the amendment from the noble Lord, Lord Borwick, which we will come to later.

All these amendments impact on the issue of marriage value. I know that your Lordships’ House debated marriage value to some extent at Second Reading, but it is clear to me that reform is long overdue. I will not repeat the discussion that we had at Second Reading about the definition of marriage value. I must tell your Lordships’ House that, as a long-standing leaseholder, I have extended the lease of two properties in two different apartment blocks. I do not know how many noble Lords have gone through the process, but it is quite something to go through.

The current process is a farce—a piece of theatre designed to enrich everyone but the leaseholder, who pays all the costs. First, the freeholder comes up with an imagined figure of the future value of a property which bears no resemblance whatever to market reality. Basically, think of a figure and double it, and that is what your freeholder comes up with. The hapless leaseholder then employs a valuer and solicitor, and so does the freeholder, and the negotiation dance begins. The leaseholder ends up paying much less than the original premium—the original figure—but an awful lot of money in fees.

For the leaseholder, the whole process is uncertain, expensive and stressful. For the freeholder and associated professionals, it is lucrative, and their bread and butter. The current lease extension process is designed to protect the freeholder’s long-term interests at the expense of the leaseholder. It is nothing to do with transferring wealth—we keep hearing this figure of £7 billion being transferred—and everything to do with retaining it, as understandable as that may be.

Several of London’s great estates have maintained their property empires over hundreds of years by exploiting the system and making leasehold extension, or enfranchisement, extremely difficult, opaque and tedious. Leaseholders’ insecurity and uncertainty provide freeholder security. The more freeholders keep control of leases, and discourage extensions, the more they can protect their accrued wealth, and that is really what the debate is about today.

I do not intend to repeat what I said a couple of days ago in your Lordships’ House about the Church of England’s feudal property empire, and the work that it does with charities, except to say that it is a multi-billion-pound business, and, like all businesses, the Church will fight to protect its interests as one of the country’s leading landowners. Abolishing marriage value could, of course, affect all that.

I do not accept all the doom-laden warnings that we have heard from, for example, the noble Lord, Lord Howard of Rising. We have heard such dire warnings before about the impact this could have. We heard the same from the pension funds—remember that they were saying that the abolition of ground rent would cost them tens of billions of pounds. Well, just today, the Society of Pension Professionals and its chair have said that this is exaggerated and overplayed. In fact, the scale, relative to total assets, is probably not that significant in the long run. I think we will find the same when it comes to marriage value.

I know that a lot of people, including the noble Baroness, Lady Deech, who is very experienced legally in these matters, mentioned the European Convention on Human Rights. A number of major estates and property owners are citing that. I had a hedge fund lobby me, saying that their human rights would be breached under the ECHR were marriage value to be abolished. I do not think the great British public will be awfully sympathetic about hedge funds’ human rights being breached because some people want to reform leasehold and marriage value. In fact, I heard today from noble Lords, including the noble Lord, Lord Moylan, a wonderful case for an opt-out from the ECHR. If billionaires and hedge funds are going to hide behind the ECHR to prevent reform, I think it is a good idea to opt out—maybe some of the noble Lord’s colleagues in GB News would support that as a proposal.

Some say that there will just be a transfer of wealth from one group of rich people to another. There is obviously a certain amount of truth in that—the properties owned by people in central London, whether they are local or foreigners, are expensive—but if you abolish marriage value you will make the housing market more transparent and bring many more properties on to the market, thereby providing more homes. The problem with short-lease properties—I have found this myself—is that they are often unsaleable and un-mortgageable. That means that they can be purchased only by cash. Often, they remain short-lease properties because, as I have already described, extending the lease is a complicated process, lacks transparency and is prohibitively expensive, so they clog up the market. There are an awful lot of short-lease properties, which could be opened up to the market as a whole.

Leasehold and Freehold Reform Bill

Lord Truscott Excerpts

Committee stage
Wednesday 24th April 2024 Lords Chamber

[Baroness Taylor of Stevenage (Lab)]

My Lords, our amendments in this group go to the heart of one of the current serious injustices relating to leasehold: that of forfeiture. It is quite simply anachronistic, wholly disproportionate and complete imbalance in the relationship between leaseholders and landlords. In some circumstances, a debt of a few hundred pounds can trigger the ability to take possession of the property. What my honourable friend the shadow Minister for Housing in the other place called

“the chilling effect that results from its mere existence”.—[Official Report, Commons, 27/2/24; col. 203.]

puts landlords in a nearly unassailable position of strength in disputes with leaseholders, as I hope I illustrated in my earlier quote from an elderly leaseholder. Unfortunately, the threat of forfeiture is too often used routinely by landlords as a first resort when seeking to recover alleged arrears in payments from leaseholders, and so often invoked to deter leaseholders from disputing any unreasonable costs and defending claims.

Our first amendment is reasonably straightforward: it is basically a matter of disproportionality and consistency. A real estate solicitor summed it up very neatly in his evidence to the Commons committee. He said:

“It is extremely welcome to see the government’s proposed clause 59 and amendment NC4 relating to the abolition of remedies relating to rentcharges. It is also very welcome to see the proposed amendment NC1 which would abolish forfeiture in long residential leases, which is long-overdue. However, there is a key point that does not seem to be addressed: forfeiture in relation to rentcharges. Rentcharge deeds often reserve a right of forfeiture for non-payment which operates in the same manner as a forfeiture clause in a lease. The Committee clearly recognises that the expropriation of somebody’s property as a remedy for breaches of a lease on an extra-judicial basis is entirely inappropriate and unfair. Therefore, it should equally concern the Committee that the same remedy is available in many cases in relation to rentcharges. Therefore, I would ask that the Committee either add to proposed amendment NC1 or propose an additional clause to abolish any right of forfeiture under a rentcharge”.


This amendment would ensure that leaseholders are in no worse a position than anyone else subject to a challenge to ownership would come under. So, while we accept the principle that legal remedies should be available, we do not believe that forfeiture provides adequately for leaseholders to challenge or defend themselves from repossession.

Our other amendments are a bit more complicated on paper, as they would replace Clause 111, which currently provides remedies for arrears of rent charges where the rent charge remains unpaid for a period of 40 days, one of which is the ability for a rent charge owner to take possession of a freehold property in instances where a freehold homeowner fails to pay a rent charge. But in essence it is very simple. It would simply mean that debts have to be sued for, as you would for any other kind of debt. In short, the 1925 Act provides for the power to seize freehold houses for non-payment of a rent charge, even if the arrears are merely a few pounds, and allows the rent charge holder to retain possession or render it, in effect, worthless by means of maintaining a 99-year lease over it.

In our view, the remedies provided in the 1925 Act are a wholly disproportionate and draconian legacy of Victorian-era property law. The 1977 Act prohibited the creation of new rent charges and provided for existing rent charges to be abolished in 2037, but 13 years from now is still a long time away and any lease granted prior to the abolition will remain in force. Rent charges are therefore an area of law in respect of which legislative reform is long overdue and the need to protect rent payers from what amounts essentially to a particularly severe form of freehold forfeiture as a result of the relevant remedies provided by the 1925 Act is pressing.

We understand that the Minister in the Commons called this argument “reasonable” and implied that it could be revisited if the Government were able to consider the potential consequences of such a change, so I press the Minister that, if we are asked to withdraw our amendment today, she will at least consider whether the Government can deliver the effect we all want to see via a government amendment. We feel very strongly about this issue and I hope it will not be necessary to continue to press this point through to Report. I beg to move.

[Lord Truscott (Non-Afl)]

My Lords, I wish to address the issue of forfeiture and support Amendment 55 in the name of the noble Baronesses, Lady Taylor of Stevenage and Lady Pinnock, and Amendment 95 in the name of the noble Baroness, Lady Taylor. I absolutely agree that leaseholders should not be subject to forfeiture in the case of a debt of a few hundred pounds or a temporary breach of covenant. Indebtedness can be dealt with by the county court and bailiffs. For that reason, I support Amendment 95 in the name of the noble Baroness, Lady Taylor of Stevenage. However— I know this may be controversial with some noble Lords—I am concerned that a blanket ban on forfeiture would remove an effective deterrent preventing some leaseholders persistently and wilfully breaching their leases by, for example, anti-social behaviour.

Let me give three practical examples I have come across in my years as a leaseholder. The first concerns a landlord who was letting out his flat on Airbnb, in breach of his lease. He knew he could make more money doing this than letting it on a long lease. As noble Lords know, Airbnb can cause a serious nuisance in blocks of permanent residents, due to excessive noise, wear and tear and lack of security impacting on quiet enjoyment. The landlord/leaseholder in question stopped only when threatened with forfeiture for breaching the lease.

The second involved a leaseholder putting a hot tub under a neighbour’s window, in clear breach of the lease, as only patio furniture was allowed to be displayed on the terrace, and threatening their quiet enjoyment. When challenged, their approach was dumb insolence. “What are you going to do about it?” was their approach. The threat of forfeiture ensured its removal.

The third example is more personal. My wife was attacked in our own garden by a neighbour’s tenant’s large dog, which was in a flat in breach of the lease. The gardens are open, with no boundaries, so dogs wandering around under no control are a problem. Let me be clear, I am a dog lover—I had two dogs as a child—but I am also conscious that there has been a massive increase in dog attacks in recent years. Official NHS figures reveal that, in the year to March 2023, there were 9,277 hospital admissions in which the patient had been bitten or struck by a dog. The number of people killed by dogs has also risen dramatically. In the last 20 years or so, the number of fatal dog bites has averaged about three per year; however, by 2022, it had risen to 10 fatalities and is still climbing. These cases are horrific and worrying.

Many blame the owners, not the dogs. Too many owners seem unwilling or unable to control their dogs and this behaviour is unfortunately widespread, as I have witnessed myself on a number of occasions. The dog in our block stayed, but when the leaseholder/landlord tried to introduce another tenant with another large dog, after the first attack, again in breach of the lease, it was only the threat of forfeiture that resolved the situation. Dogs may be appropriate in many surroundings, but in others they are excluded in leases for a reason.

Thus there are occasions when the mere threat of forfeiture, rarely used in practice, is useful to ensure compliance with lease obligations. Other legal routes can be extremely costly, lengthy and ineffective. So I ask the supporters of a complete ban on forfeiture how they propose to enforce compliance with leases and prevent breaches in the future if this proposal is carried.

[Baroness Pinnock (LD)]

My Lords, I have added my name to Amendment 55, in the name of the noble Baroness, Lady Taylor of Stevenage, because it seems to me, as it does to the noble Baroness, that this is one of the clear injustices in the current leaseholder-freeholder relationship. The amendment is rightly restricted to the abolition of forfeiture of a long lease.

I thought it was straightforward until I heard the noble Lord, Lord Truscott, outline some of the issues that he believed could be addressed only through forfeiture. I was surprised that we have to go to such draconian ends to deal with a fairly straightforward neighbour dispute.

[Lord Truscott (Non-Afl)]

The problem is that, if you try to enforce a lease, what is your route? The only other route would be to go to the High Court, and that would be a very lengthy process. I am saying that the threat of forfeiture is often enough for people to see sense. I have never come across a case in which people have actually gone through the whole process of forfeiture.

[Baroness Pinnock (LD)]

I thank the noble Lord for expanding on that.

It would be interesting to hear from the Minister whether there are any statistics regarding freeholders using the forfeiture system to address not the issues that are normally referenced—failure to pay ground rent or an accumulation of three years or more of debt—but breaches of the lease. It would be helpful to understand all that.

As the noble Baroness, Lady Taylor, has said, if the payment in lieu is more than £350, or is outstanding for more than three years, the freeholder is entitled to claim repossession—and then all the equity in the property is lost, of course. When I first looked at this, I could not see how it could possibly be right. I remember that, at Second Reading—I was just trying to find it in Hansard—the Minister said that the Government were considering bringing forward an amendment to address this issue. It is unfortunate that that has not been forthcoming in the time that has elapsed between Second Reading and Committee. Perhaps in her reply, the Minister can say whether the Government intend to bring an amendment on Report. It would help us resolve what is, on the face of it, a complete injustice. It would be sufficient if the Minister said that that is going to happen, and maybe those of us who have signed the amendments could have a meeting with her to discuss it, if necessary.

[Lord Bailey of Paddington (Con)]

I support this amendment. Although in his intervention the noble Lord talked about how to control peoples’ behaviour when they have misbehaved and breached their lease, it should be taken into account that the threat of forfeiture is held over leaseholders, in a very draconian fashion, for the smallest infraction. More importantly, it is used to enforce such things as the flagrant and inequitable boosting of service charges. If you are in dispute in this situation, you are told you will end up having to pay court fees. You are told that, if you do not pay—

[Lord Truscott (Non-Afl)]

To clarify, I said specifically that people should not have their leases forfeited as a result of rent arrears. The threat of forfeiture can ensure that lease compliance occurs. If you remove the threat of forfeiture, how do you achieve compliance with other terms of the lease?

[Lord Bailey of Paddington (Con)]

There are ways and means within our court system to reclaim any money that may be owed to the freeholder for service charges, ground rent and so on. Let us be very clear that forfeiture is used as a tool to threaten, bully and cajole leaseholders into compliance. When your freeholder invents a new reason as to why you have to pay more, you are warned that, if you do not do so, you could be taken to court for forfeiture. You are then told by the system that, if you do pay more, it is seen as agreeing with the bill that was presented to you.

[Lord Truscott (Non-Afl)]

I am not talking about freeholders taking action against other leaseholders; I am talking about how one leaseholder may want to enforce a lease against another leaseholder. In that case, you are saying that they would have to go to the High Court to enforce the lease, and that is a very lengthy and protracted process. I am not talking about the relationship with the freeholder or indebtedness; I am talking about how to enforce the lease between leaseholders, and I gave the example of Airbnb using a block of flats.

[Lord Bailey of Paddington (Con)]

It would be extraordinary, though possible, if fellow leaseholders could invoke forfeiture but the freeholder could not. That would be incredible, and I am sure it would have all its own problems.

The point remains that, if you keep some kind of forfeiture, freeholders will want to keep hold of that power, because it is exactly that: an unfettered, threatening power, which leaseholders speak about as though it is mythical, like a dragon that will burn you if you stand up to the freeholder. Words fail me when I try to describe how forfeiture must go. We have had many conversations in which the word “feudal” has been bandied about. This is one occasion where it has real meaning. Forfeiture should and must go.

--- Later in debate ---

Even though the news that is floating about in the media is welcome, it seems that the Government have gone backwards. I would like to press the Minister on the transition period and how that will play out in future. I look forward to her response.

[Lord Truscott (Non-Afl)]

My Lords, I support Amendments 63 and 65 in the names of the noble Baronesses, Lady Taylor of Stevenage and Lady Pinnock, who outlined again the position on pension funds. I wanted to support what has been said by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Khan of Burnley. There has been a lot of scaremongering recently about the impact on pension funds, and I wanted to reinforce that with the Minister. Quite frankly, all this talk of pension funds and pensioners being hammered by low or peppercorn ground rents is rubbish, and it should be called out for what it is.

[Baroness Scott of Bybrook (Con)]

My Lords, I shall take Amendments 63 and 65 together, if noble Lords do not mind, as they both concern ground rents. Amendment 63 would require a report to be laid before Parliament, and Amendment 65 would require the publication of the Government’s response to the recent ground rent consultation and the laying of a Statement before Parliament. Before I move into what I am going to say, I want to say that I am not making any comment on any media speculation, as I said on Monday.

These amendments relate to the issues considered in the Government’s recent consultation entitled Modern Leasehold: Restricting Ground Rent for Existing Leases, which was published on 9 November 2023 and closed on 17 January this year. It sought views on limiting the level of ground rent that residential leaseholders can be required to pay in England and Wales. 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. There is no requirement for ground rents to be reasonable, and they can cause problems when people want to sell, buy or mortgage their properties.

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 mis-sold “doubling” ground rent leases, securing commitments from freeholders to remove these costly terms, benefitting more than 20,000 leaseholders.

It is not right that many existing leaseholders are still facing these charges for no discernible service in return, which is why we have just consulted on a range of options to cap ground rents for existing residential leases. The Government are currently considering the responses to the consultation and we will set out our policy in due course. I hope noble Lords will understand that it would be inappropriate for me at this point to comment on or pre-empt any decision of the Government before a formal response to the consultation has been published, and that, given where we are, it would be premature to impose the requirements proposed in these two amendments.

The noble Lord, Lord Truscott, is right: we do not think it is appropriate that many leaseholders face these unregulated ground rents for no clear service in return. We recognise that our proposals would have some impact on the freehold market and explored this impact through our consultation. This impact is obviously being factored into the considerations of the options and is being taken into account in reaching our final policy position. The noble Lord has some very clear views on this, which I think we agree with.

At this late hour, I therefore ask the noble Baronesses, Lady Pinnock and Lady Taylor, for their continued patience as we consider what is a very complex issue. I trust that, in the light of the assurances I have given, they will be content not to press their amendments.

Leasehold and Freehold Reform Bill

Lord Truscott Excerpts

Committee stage
Wednesday 1st May 2024 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I will add a very brief footnote to the excellent speeches made by the noble Lord, Lord Best, and the noble Baroness, Lady Hayter.

The point I want to make is that the market is changing. We are moving away from a position where the freehold of blocks of flats was owned by the Grosvenor estates, Cadogan Estates, the Portman Estate —professional freeholders—and they were well able to choose responsible managing agents and keep an eye on them. We are moving away from that to a position where more and more of the blocks of flats are owned by the leaseholders. It is a trend that I that I welcome—indeed, the Bill accentuates that trend—and eventually we will end up with commonhold. Against that background, it becomes even more important that the managing agents should be professional. The background is changing and the need for this is now much more urgent than it was a few years ago.

I very much hope that the Government will be able to respond to the eloquence of the noble Lord, Lord Best, and introduce regulation of managing agents. However, if they cannot, he hinted at two intermediate steps, which I think the Government might be able to take. One is requiring mandatory qualifications. As the noble Lord said, these have already been introduced for the social housing sector and could be expanded to protect leaseholders and private tenants. The second thing the Government could do, which the noble Lord also mentioned, is to introduce the mandatory code of practice, drawing on his working group on the regulation of property agents—this case was well made by the noble Baroness, Lady Hayter.

The Government could do one final thing which has not been mentioned so far. There is a government document called the How to Lease guide, and they could make that a mandatory document to be shared with consumers who purchase a leasehold property, in exactly the same way in which landlords and agents must provide the How to Rent guide to tenants. Therefore, if my noble friend cannot go the whole hog, I very much hope that she can smile warmly on intermediate steps, which might then pave the way to the final introduction of regulation of managing agents in the very near future.

[Lord Truscott (Non-Afl)]

My Lords, I am pleased to follow the noble Lord, Lord Young of Cookham, and I agree with the comments that he just made. I remind the Committee that I have been a leaseholder for around 30 years, and over that time I have dealt with several property management companies.

I wholeheartedly support Amendment 94 in the names of the noble Lords, Lord Best and Lord Young of Cookham, and the noble Baronesses, Lady Hayter of Kentish Town and Lady Taylor of Stevenage. I pay tribute to the dogged determination of the noble Lord, Lord Best, in pursuing the reform and regulation of property agents over a number of years, and, of course, to the sterling work of the noble Baroness, Lady Hayter of Kentish Town.

I fail to see why His Majesty’s Government should not support this amendment in full. I also fail to see why the Government have failed to bring forward their own measures to regulate property agents, which, as we have heard, are long overdue. I know that the Minister will say that this is all very complicated and requires detailed and thoughtful legislation, that she will describe how property managing agents are making voluntary strides to improve their standards and operation, and how there are redress schemes in place. However, I do not really buy that argument. This amendment gives His Majesty’s Government two years to lay down regulations to regulate property agents. That is enough time even for this Government, and if not them, then certainly for the next one.

No other sector I know of handles potentially millions of pounds of other people’s money but is unregulated by statute. The City of London looks at property management companies aghast given the lack of oversight. I will give some practical examples of why property management companies should be effectively regulated, following the comments of the noble Lord, Lord Best.

Leasehold and Freehold Reform Bill

Lord Truscott Excerpts

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

[Lord Bailey of Paddington (Con)]

My Lords, I will speak to Amendments 51 and 52. I will not rehearse the arguments that I made in Committee, but I still have a major concern around the removal of any criminal sanction against bad landlords for service charge abuse. I want to be quite clear that this is not a crusade against landlords; landlords are often small family businesses, which are very good and want to help their tenants. However, a significant number of landlords have their leaseholders by the short and curlies, to coin a term that was sent to me by a suffering leaseholder. He was trying to get across just how powerless leaseholders are in this situation.

At a time when we have the likes of Alan Bates and sub-postmasters actively considering bringing private criminal charges against the Post Office, why would we remove that tactic from another set of people in our society who are roundly abused all the time? It is very simple: all this, for me, is about control. We need to give people who have paid this money control over their own future and their own money.

On Amendment 52, if a landlord does not pay back their overcharging within two months, they should face interest charges. This is to incentivise a landlord who has lost in an open, professional tribunal, who then drags their feet and forces leaseholders to launch other legal proceedings to reclaim money that they are rightfully owed. Again, this comes down to letting the little man or woman in the street have some control over their future. Perhaps my noble friend the Minister will comment on why the Government would not support these two reasonable, necessary measures, and send a signal to the country that the law is on the side of the small person who has ploughed all their savings into their home and who has no recourse.

[Lord Truscott (Non-Afl)]

I will speak in support of my Amendment 66. In doing so, I remind the House of my interest as a long-standing leaseholder. At the outset, I thank the Minister, the noble Baroness, Lady Scott of Bybrook, who is not in her place, for her diligence and engagement on the Bill. I also thank noble Lords who have worked so hard to improve the Bill as it has progressed through your Lordships’ House.

I welcome the Bill, even in its current form, as it at last heralds the beginning of the end of the outdated feudal leasehold system. Despite a determined rearguard action, we leaseholders have seen exploitation for hundreds of years. Enough is enough. In that sense, I agree with the noble Baroness, Lady Fox.

I must admit that, like many noble Lords and Members of the other place, I was rather taken aback by this cut-and-run election, which leaves so many pieces of legislation up in the air. My wife’s reaction was that Mrs Sunak has simply had enough and wants to have a good, long, normal family holiday. There seems to be no other, political logic for it.

Like many noble Lords, I would have liked to have seen further improvements to the Bill, especially clarity—ensuring that leases were truly faster, cheaper and easier to extend. The situation in which it is left to the discretion of the Secretary of State to set the deferment rate, replacing marriage value, remains unsatisfactory. In that sense, I agree with the noble Lord, Lord Moylan.

Incidentally, I see no type of exploitation taking place in this Bill. Pension representatives have already said that the proposals in the Bill will not significantly impact them or their members.

Similarly, I would have liked to have seen ground rents reduced to a peppercorn which, as was mentioned by the noble Lord, Lord Kennedy of Southwark, we were initially promised. For that reason, I support Amendment 45 in the name of the noble Baroness, Lady Pinnock.

On my own amendment on forfeiture, I believe it is unacceptable that people should lose their homes for sometimes minor rent or service charge arrears. The figure of £300 was mentioned and there are recorded cases of it being a pittance. However, rents and service charges are necessary for building maintenance, fire safety, cleaning and other services, so they should be paid.

--- Later in debate ---

[Lord Moylan (Con)]

I am grateful to my noble friend Lord Young of Cookham for giving me a breather. I entirely agree with his amendment in relation to forfeiture, which is clearly a completely over-the-top response. Landlords and managers should be entitled to recover their costs, but not at the expense of the tenant having their home seized or taken from them. Other ways must be found of doing that. If they made an effort, the Government would be able to find such ways. It might be through attachment of earnings or whatever, but forfeiture is clearly completely over the top and should go. I do not see why the Government cannot simply agree with what my noble friend Lord Young has said.

[Lord Truscott (Non-Afl)]

I think the noble Lord misunderstood to a certain extent what I was saying. Forfeiture actually happens; that is the point. It is merely the threat of forfeiture that ensures that people abide by their leases, and at the moment, as he mentioned, there is no system in place to ensure that people abide by those leases unless you go to the High Court, which is a very lengthy and expensive process. Without some such system, you will increasingly have anti-social behaviour and bodies such as Airbnb installed in residential blocks, and at the moment, there is very little recourse.

[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.