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 Leasehold is, in his words, “outdated” and “feudal”, although I know that the noble Lord, Lord Moylan, does not like that word.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.