Leasehold Reform (Ground Rent) Bill [Lords] (Second sitting)

Maria Eagle Excerpts

Committee stage
Tuesday 7th December 2021 Public Bill Committees

[Mike Amesbury (Weaver Vale) (Lab)]

It is a pleasure to welcome you to your place, Ms Elliott. I welcome the Minister’s and the Government’s response to some of the debates on the Bill in the other place about the maximum level of fine. Given that a number of landlords and freeholders have deep pockets, it will act as a more effective deterrent.

On multiple breaches, I am making an assumption that an element of sense will be applied, so that someone with multiple breaches would be looking at the maximum fine. I know that that will be a judgment call for the enforcement authorities and trading standards, which will be well resourced—we have had the assurance from the Minister today.

The clause picks up on several earlier points made on both sides of the Committee. It is essential that people are informed from the outset of the duties that will be not only implied but overt as a result of the Bill. Residents and leaseholders will be particularly keen to ensure that where they have been wrongly charged and levied—essentially, ground rent should never have happened in the first place—they will be able to retrieve that quickly. I welcome the clauses but there are still a number of questions for the Minister.

[Maria Eagle (Garston and Halewood) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Elliott. I have a couple of points for the Minister. There are extensive provisions on the recovery of prohibited rent, which I generally welcome. I notice that on page 14 of the explanatory notes, under the heading “Financial implications of the Bill”, it says:

“An Impact Assessment has been prepared for the Bill and covers the implications on private sector bodies and home purchasers… The Impact Assessment illustrates a de minimis impact of less than £5m.”

It then says that there is an assumption

“that the number of enforcement cases will be very small.”

One would hope that that would be the case, because one would hope that landlords will not seek to charge and benefit from ground rent in the interim between the Bill coming in and peppercorn becoming payable, when it becomes commenced, by putting provisions into new leases that charge ground rent. One hopes that that is a correct interpretation. The explanatory notes then say:

“Over and above the use of the proceeds arising from the enforcement action, a further amount of expenditure will be required to provide additional capacity within the National Trading Standards function to support local weights and measures authorities. Leasehold law is a complex area, and it is felt that a central support function will aid the effective introduction of the provisions of this Bill. The cost estimate of this support function is £29,000 per annum”,

which is very precise. It is sort of a round figure, but it is quite a small sum. I wonder whether the Minister could explain the assumptions underlying the explanatory notes.

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[Mike Amesbury]

With regard to the excess that could be generated, and terms of the clause and the amendments, there could be a transfer to the Welsh Secretary. Does the Minister envisage that happening in reality, given the situation that many local authority trading standards have faced over the past 11 years? That point has been echoed across the Committee today. Could the Minister elaborate on the discussions that he has had with the Welsh Government, because there are elements of a tidying up exercise here? The Minister said that he had further discussions of other mechanisms that would help trading standards effectively conduct and resource their enforcement role. What are those mechanisms and sources of other potential income?

[Maria Eagle]

I have a couple of probing questions. There is no doubt that it is good to see some enforcement provisions. Given the range of penalties from £500 to £30,000 and given that trading standards have to effectively obtain their costs from the proceeds when undertaking the enforcement activity, is the Minister concerned that that might offer an incentive to trading standards—the enforcement authority—to pitch their fine or notice at a higher level than perhaps might otherwise be the case? Does he agree that going through this administrative fining arrangements, with all the appeals that we see in the schedule, would probably not be worth it for an enforcement authority if it were only going to get £500 at the end of the day, given the difficulty of understanding all the nuance of landlord and tenant law and leases? Is it therefore much more likely that there will not be much enforcement activity?

One of the other concerns for such an officer and an enforcement authority, might be that if there is an appeal to the administrative tribunal by the landlord against the amount being levied by way of penalty, that might be reduced from what the authority originally set out to cover its costs, say, to a much lower figure, closer to £500, which would perhaps most certainly not cover its costs. Is there an incentive in part for the enforcement authority to pitch the fine high, but any tribunal that considers an appeal may cut the fine to such a level that the enforcement authority might not be able to obtain its costs back from the proceeds? Perhaps, therefore, the overall impact will be that the enforcement authority thinks better of engaging in enforcement if it does not have resources it can guarantee will be used to do that. I would be interested to know what the Minister and his Department have considered in respect of the incentives built into the system in the Bill.

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[Maria Eagle]

Will the Minister give way?

[Eddie Hughes]

I think it would be helpful if I conclude my contribution, and then the hon. Lady can come back in. [Interruption.] Well, it might be helpful if the hon. Lady let me respond to the points she made first. As I said, if the fine is set at a level that is appropriate to the crime, that might be in excess of what is necessary in order to cover the costs incurred by the authority. In that case, as it is not meant to generate revenue, the money would go back to the Secretary of State or the Welsh Minister, as appropriate.

The natural equilibrium of things will be reached by ensuring that the money generated covers the costs of administering the programme. If it does not, the Government will need to be mindful of that. As I have said, we are in conversation with the Local Government Association and we will see how that progresses. The hon. Lady is wise to raise that point. We do not want to see anything that disincentivises authorities from prosecutions because they do not think their costs will be covered. That is a really important point, and we will need to be mindful of it.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Amendment made: 9, in schedule 1, page 19, line 16, leave out from “paid” to end of line 17 and insert—

“(a) where the penalty was imposed in relation to a lease of premises in England, to the Secretary of State, and

(b) where the penalty was imposed in relation to a lease of premises in Wales, to the Welsh Ministers.”—(Eddie Hughes.)

This amendment provides that penalty proceeds not used by the enforcement authority to meet enforcement costs must be paid to the Secretary of State, if the penalty was imposed in relation to premises in England, and the Welsh Ministers, if the penalty was imposed in relation to premises in Wales.

Schedule 1, as amended, agreed to.

Clause 14

Recovery of prohibited rent by tenant

Question proposed, That the clause stand part of the Bill.

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[Eddie Hughes]

I think it simply represents the fact that, in reality, we will ensure that we pursue these things more quickly. We should not be in a position where the two are of equal level. I understand the hon. Lady’s point and will consider this further as the Bill progresses.

[Maria Eagle]

The difference between these clauses and the previous clauses we discussed is that the organisation that will in the first instance decide the size of the fine is the tribunal, rather than the enforcement authority—I think I am right about that—because the tenant will make an application to the tribunal for a fine to be levied and to get back the money they have wrongly paid. Do the Government intend to give some guidance to the tribunal as to how to set that fine? There is quite a wide range; it is between £500 and £30,000. Does the Minister expect that the tribunal, in making such a determination, will follow the same kind of guidance as the enforcement authority would follow were it initially setting the level of fine? Has he given any thought to consistency between the two ways of getting to a fine in this instance—whether through the tribunal or the enforcement authority?

[Eddie Hughes]

It would absolutely be our intention, through guidance or otherwise, to ensure consistency across both approaches.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clauses 15 and 16 ordered to stand part of the Bill.

Clause 17

Assistance

Question proposed, That the clause stand part of the Bill.

[Mike Amesbury]

The clause seems fairly proactive, essentially hand-holding through the process, which in one dimension is most welcome. However, I still question the incentives for people to go down the enforcement authority route—trading standards—rather than the tribunal route for cost recovery. I am curious.

[Maria Eagle]

I have a similar concern to my hon. Friend’s. The clause states that, “An enforcement authority may,” not “must”, which means that it may not. It may decide that it does not wish to. If it were to take enforcement action itself, it can retain the proceeds of any enforcement that occurs, but there is no indication that the costs of assisting a tenant, which may be just as an extensive as if it were to carry out the enforcement action itself, are recoverable in any way. Does that not suggest that the relevant enforcement authority may choose not to?

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[Eddie Hughes]

Clause 20 makes two amendments to the Housing Act 1985. Specifically, they amend part V of the Act on the right to buy. The purpose of the amendments is the same: they update the 1985 Act to ensure that requirements in it relating to ground rent are aligned with the provisions in the Bill.

Clause 21 gives the Secretary of State the power to make provision that is consequential on the Bill through regulations, including provisions amending an Act of Parliament. We do not take such a power lightly, and in drafting this legislation we have sought to identify and make all necessary consequential amendments on the face of the Bill. The changes to the Housing Act 1985 in clause 20 are a good example of this.

However, long residential leasehold is a complex and interdependent area of law. Therefore, we consider it prudent to take the power in clause 21 to ensure that, should any further interdependencies be identified at a later date, these can be addressed appropriately. There are various precedents for such provisions, including section 92 of the Immigration Act 2016, section 213 of the Housing and Planning Act 2016 and section 42 of the Neighbourhood Planning Act 2017.

The Delegated Powers and Regulatory Reform Committee considered the powers in the Bill, including this one, and noted that there was nothing in the Bill that it would wish to draw to the attention of the House.

[Maria Eagle]

Clause 21(2) states that

“the provision that may be made by regulations under subsection (1) includes provision amending an Act (including an Act passed in the same session as this).”

Can the Minister tell the Committee why that is? What Act being passed in this Session could possibly need to be amended as a consequence? Is there another Bill that has provisions about such things? Why is that part in parentheses included?

[Eddie Hughes]

My understanding is that consideration has been given and we do not think there is anything, but we need to be prepared should the circumstance arise. That is my understanding of the requirement.

[Eddie Hughes]

As I said in my speech, the law is complex and there are interdependencies between various Acts. The provision makes sure that there is nothing that we have missed in terms of another piece of legislation that would be relevant and would have an impact; it gives us the opportunity to make an amendment appropriately. That is my understanding.

[Maria Eagle]

I am sorry to press the Minister on this, but clause 21 says,

“including an Act passed in the same session as this”.

What other Bill or Act in this Session could possibly have a provision that may need amending as a consequence of the Department overlooking something? This is complex housing law. What other Bill that is being passed through Parliament in this Session has complex housing law in it?

[Eddie Hughes]

I can only say again that we do not know the answer to that, otherwise we would obviously have made the necessary amendment at this point.

[Maria Eagle]

This is ridiculous.

[Eddie Hughes]

I appreciate that the hon. Lady is not happy with the answer, but unfortunately that is the circumstance.

Clause 22 makes provision relating to regulations under the Bill. Subsection (1) is a standard provision that enables consequential, supplementary, incidental, transitional, saving or differential provision to be made, if necessary, in connection with the exercise of powers under the Bill. As is usual, subsection (2) provides that regulations under the Bill must be made as a statutory instrument. Subsections (3) to (4) relate to the procedure for making regulations under the Bill. Regulations under the Bill will follow the negative procedure, unless they make provision under clause 20 amending an Act. As we have discussed, for provisions under clause 20, the affirmative procedure will be followed, requiring active approval from both this House and the other place.

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[Dr Hudson]

I take on board that comment, but a key theme for leaseholders is having more of a sense of belonging, ownership and ability to make decisions such as whether to keep a pet. I realise that this is a tightly worded Bill, but can the Minister say whether we will consider that issue in future?

[Maria Eagle]

I have every sympathy with the hon. Gentleman’s plea that homeowners—leaseholders think they are homeowners, but they do not own everything—should have the right to do things such as own pets. The Minister will tell me if I am wrong, but I think that the regulations and consequential amendments that we are discussing relate only to the power to deal with landlords seeking to continue ground rent, other than peppercorn rent, in the interim period between Royal Assent to the Bill and when the regulations are brought in to commence it properly, which we understand might be in six months’ time.

Talking about these provisions is a bit like dancing on the head of a pin. I know I have been contributing significantly to that, but they apply in a very narrow range of circumstances that relate to landlords who seek to continue to charge ground rent, or put clauses into leases that come into existence after Royal Assent but before the commencement of the provision seeking to get ground rent payments from their leaseholders-to-be. We are dealing here with a very narrow range of circumstances in what one hopes would be a very short period. The Minister has suggested a period of six months until commencement. I suppose that if a landlord were then to continue to try to have leases with provision for ground rent that was other than peppercorn, these provisions could apply in those circumstances. We are talking about badly behaved landlords after the commencement of the legislation that keeps ground rent as peppercorn. Can the Minister confirm that the regulations that we are talking about do not relate to anything other than that?