Leasehold and Freehold Reform Bill (First sitting)

Marie Rimmer Excerpts

Committee stage
Tuesday 16th January 2024 Public Bill Committees

[Matthew Pennycook]

Q Martin, thank you for coming to give evidence to the Committee. I have two questions to start off with.

[Ms Marie Rimmer (St Helens South and Whiston) (Lab)]

Excuse me, Chair. Is the loop system on? No? Can we arrange to have it on, please? [Interruption.] Oh, we cannot; I understand.

[Matthew Pennycook]

One of the aims of the Bill—certainly in the terms of reference handed to the Law Commission, whose recommendations frame a lot of parts 1 and 2—was to provide a better deal for leaseholders as consumers and increase transparency and fairness. In your view, to what extent does the Bill as a whole do that? Are there any specific clauses or elements of the Bill that we might seek to tighten up to further improve the experience for leaseholders as consumers? I am thinking of the fact that leaseholders are still liable to pay certain non-litigation costs and that right-to-manage companies are still liable when claims cease.

Mr Martin Boyd: As you may recall, when the Law Commission originally looked at this area of the law, it suggested to the Government that a consolidation Bill was warranted. However, there was not the budget at the time, so it was then given the three projects on right to manage, enfranchisement and commonhold to look at. The enfranchisement proposals and some of the right-to-manage proposals, but none of the commonhold proposals, have been brought forward in the Bill. The difficulty with the Bill is that there is an almost endless list of things that could be added. In removing the one-sided costs regime, the Bill does quite a lot to balance the system during the enfranchisement process. It also attempts to address the problem of the costs regime at the property tribunal. In the current system, the landlord is in a win-win position. Even if they lose the case, they are able to pass on some of their legal costs under most leases. The Bill tries to address some of those issues.

We still have a whole set of problems in the way that resident management companies and RTMs operate. They do not have a legitimate means of passing on their company costs within the service charge. There are still sites where they effectively have to cook the books to pass on the legitimate costs to the service charge payers. There are still many more things to add to the Bill. Clearly, we will continue to have problems with multi-block right-to-manage sites as well. They do not operate effectively anymore, and unfortunately the Bill does not address that element of the problem.

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[Rachel Maclean (Redditch) (Con)]

Q Mr Boyd, it is good to see you. You have talked about commonhold. Would you mind just being quite succinct and clear on your view about commonhold? There are proposals from various groups who are active in the sector to make it mandatory to sell all new leasehold flats as commonhold. Would that be a good idea, and if not, why not?

Mr Martin Boyd: I am proud to say that it was LKP that restarted the whole commonhold project in 2014. At the time, we were told, “The market doesn’t want commonhold.” The market very clearly told us that it did want commonhold; it was just that the legislation had problems in 2002. One of our trustees, who is now unfortunately no longer with us, was part of a very big commonhold project in Milton Keynes that had to be converted back to leasehold when they found problems with the law.

I think the Government have been making it very clear for several years that they accept that leasehold’s time is really over. I do not see any reason why we cannot move to a mandatory commonhold system quite quickly. What the developers had always said to us—I think they are possibly right—is that they worry that the Government might get the legislation wrong again, and they would therefore want a bedding-in period where they could test the market to ensure that commonhold was working, and they would agree to a sunset clause. They had fundamentally opposed that in 2002, and we managed to get them in 2014 to agree that, if commonhold could be shown to work, they would agree to a sunset clause that would say, “You cannot build leasehold properties after x date in the future.” I think that that is a viable system.

[Ms Rimmer]

Q Good morning, Mr Boyd. How will the Bill impact on your work as an advisory service and the advice that you give to leaseholders?

Mr Martin Boyd: As some of you may know, I have been very critical in the past of the organisation that I now chair, because I thought that it was doing the wrong thing. The Government took what some might see as a brave decision in asking me to take on the role as chair. LEASE is going to become a much more proactive part of the system, and, as far as I see it, we now have several roles rather than one. While we are predominantly there to help advise consumers about the legislation and how to use it—and hopefully when not to use it—we will also have a role in helping to press Governments to make sure that they improve the legislation. That was not a remit that we had, but it will be very much part of our remit going forward.

[Ms Rimmer]

Q Thank you. Will the provisions of the Bill lead to many more leaseholders seeking advice, and, if so, do you feel adequately resourced to provide that service?

Mr Martin Boyd: As I said to the all-party parliamentary group yesterday, the organisation does not currently have the budget. The Government have said that they will give us the relevant budget. If they do not give us the budget, I will not be staying, so I am very hopeful that we do get the budget.

Some aspects of the Bill do quite a lot to reduce the amount of time that leaseholders would need to spend asking for help. If the enfranchisement process goes through and we get to an online calculator system, where you simply feed in your data and it produces the answer, that will make that whole system much easier. That will reduce not only the amount of work that comes to us, but the amount of work that goes to various solicitors and surveyors in that field.

[The Chair]

That is the end of our allotted time for this session; I think we got everybody in who wanted to ask questions. Thank you for coming to talk to us today.

Examination of Witnesses

Sebastian O’Kelly and Liam Spender gave evidence.

9.50 am

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[Alistair Strathern (Mid Bedfordshire) (Lab)]

Q I could not agree more about the challenges you set out around people finding new ways to extort homeowners and the moves towards charging for the maintenance of public space. In my constituency of Mid Bedfordshire, many estates suffer from this issue. Mr Fuller will have similar ones on his estates in North East Bedfordshire. I completely agree that it feels shocking for lots of people that they are essentially paying twice for services: once for council tax and once for a charge that they have little control over and where there is often little guarantee of good services.

There are many estates in my patch where you can literally see where it becomes private because the condition of the road is shocking compared to 2 feet away, or the condition of the public space completely deteriorates. What measures would you like to see added to the Bill to help address that? Would you agree that ultimately we need mechanisms to ensure that a stated object can happen in a way that everyone can have confidence in?

Katie Kendrick: In an ideal world, the local authorities would be adopting these areas. I do not think there should be a private management at all. Local authorities used to, and they can charge the builders more for the land at the start.

Cath Williams: I agree.

Katie Kendrick: Adopt the lot.

[Ms Rimmer]

Q Katie, it seems to me that you and your team should be congratulated—you are the agony aunts. Believe you me, people look to these ladies and groups of people as their saviours rather than the Government. Already, leaseholders are saying, “Well, perhaps we can make this peppercorn. If we all go for this peppercorn, perhaps we can work then to get that peppercorn and get in there, and get shut of it that way.” Really, this is the opportunity. We should be listening to them—granted—and I genuinely believe there is listening going on with this Bill.

We have to tie it down and not let the situation become like the one we have seen with the post offices. It is an obstacle course. People have committed suicide. Managers have broken down. Homes have been lost. Jobs have been lost. The management charges are unbelievable, and I do not think people understand that. I have not seen it anywhere, but a leaseholder has to write if they want to change the carpet; they then get charged a couple of hundred pounds for that, they get charged for the answer, and they get charged when somebody comes to have a look at it. That is how it goes on. The management charges are as big a fear as the lease, because leaseholders do not know where they are going.

The Government simply have to step in. It is the biggest money-making racket in this country now—and it is a racket. It is said that people have sat down and designed this system, and we should not leave these people to do the fighting on their own. I genuinely believe that there is desire to do so from both the Minister and our shadow Minister. Please come forward with your thoughts; do not give up. I do not believe for one minute you will give up.

Katie Kendrick: I believe there is political will to do this from across the House; there is unanimous agreement and there is no dispute. If there is no dispute, we just need to get it done.

[The Chair]

Right, that is probably it then—[Laughter.] Thank you.

Examination of Witness

Amanda Gourlay gave evidence.

Leasehold and Freehold Reform Bill (Second sitting)

Marie Rimmer Excerpts

Committee stage
Tuesday 16th January 2024 Public Bill Committees

[Mike Amesbury]

Q Have the Government spoken to you about why they have seemingly rowed back on the direction of travel on commonhold?

Professor Hopkins: Since we published our reports in 2020, we have been supporting the Government as they work through the reports and develop their legislative plans, but I cannot speak for what decisions they have made and what has led them to make those decisions on what is and is not in the Bill.

[Ms Marie Rimmer (St Helens South and Whiston) (Lab)]

Q Good afternoon, professor. You have provided several recommendations to the Government on leasehold enfranchisement. Do you believe that the provisions in the Bill will make it easier and cheaper to buy a freehold or extend a lease?

Professor Hopkins: Yes, they certainly will, and I will draw attention to a number of provisions. First, those that deal with the price that leaseholders will pay will ensure that it is cheaper. For the first time, how that price is calculated is mandated, and it is designed to identify the value of the asset that the leaseholder is receiving. At the moment, the focus is on compensating the freeholder for the asset they are losing. The price will consist of two elements. There will be a sum of money representing the terms and buying out the ground rent, but that will be capped so that onerous ground rents are not taken into account in calculating that sum, and a price representing the reversion, which would be the value today of either a freehold or a 990-year lease that will come into effect at the end of the current lease. In calculating those elements of the price, the deferment and capitalisation rates will be prescribed, so that will remove the current disputes.

The price is mandated and the price is cheaper, and there are other things in the Bill that will help, such as the ability of leaseholders to require the landlord to take leasebacks of property when they are exercising a collective enfranchisement so that, for example, they do not have to pay for the expense of commercial units that they do not want responsibility for. There is a lot in there. There is reducing price and also reducing the ability for disputes to arise.

I will also refer to the provisions on costs that will generally ensure that parties pay their own costs in relation to a claim. Leaseholders will not be paying the costs of freeholders.

[Ms Rimmer]

Q Is it fair to say that you are content with the provisions that the Government have put in the Bill?

Professor Hopkins: It is fair to say that what the Bill does will be of substantial benefit to leaseholders.

[Rachel Maclean (Redditch) (Con)]

Q Thank you for all your work. Can you remind the Committee how many recommendations you made in total?

Professor Hopkins: Across enfranchisement, right to manage, and commonhold, we made around 350 recommendations.

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[The Chair]

Finally, we have two minutes left—Marie, please.

[Ms Rimmer]

We need to be careful on this. Councils are constantly picking up bills from other people, and these costs are the costs of poor developers. There are different ways of dealing with different aspects of this. One is safety development. To take a leaf out of the Health and Safety at Work etc. Act 1974, you design, you develop, you construct—for use, maintenance and everything. Why not do the same for future housing developments, so that we do not have estates built without roads or pavements or these nice park features that would be lovely for children to play out on?

Nobody’s going to maintain them and they end up like a rubbish tip. People tip there, because nobody cleans it up. And what happens? More people tip there. No developer should be allowed to develop things that cannot be put right. They should pick up the costs on development, so people know what they have got. Then you have the old properties—I call them asset-rich and purse-poor. The properties are worth a fortune. They are beautiful big old houses—you would give your right arm for one of them—but when it comes to maintaining all this and their paths, the older people cannot do it. To bring that up to standard is a cost. It is not a cost for the council to pick up.

[The Chair]

Marie, is there a question?

[Ms Rimmer]

No, I was picking up on that point. The lady present understood it. She was saying that it is not that the councils are paying twice for something; everybody looks—

[The Chair]

Order. I am afraid that brings us to the end of the allotted time to ask this panel questions. Apologies, Marie. On behalf of the Committee. I thank all our witnesses for coming in.

Examination of Witnesses

Mr Andrew Bulmer and Angus Fanshawe gave evidence.

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[Ms Rimmer]

Q If there were to be amendments to the Bill on regulation of estate management and so on, what would be the most important thing to keep in mind to avoid any unintended consequences?

Mr Andrew Bulmer: First of all, let us be clear that we—

[Ms Rimmer]

Q Could you speak up a little, please?

Mr Andrew Bulmer: Sorry—yes. I am afraid that I do not have a voice that projects, but I will do my best.

We warmly welcome regulation of managed estates; it is an anomaly that the management of those estates is unregulated. I was in the room earlier and I heard some eloquent discourse around the fact that some of these estates exist at all as managed areas and that those common areas are not adopted. I have personal experience of managing estates where there are two grass strips, a couple of gullies and a little piece of road, for which you need to set up a limited company, find directors, get them insured, do a health and safety risk assessment and a whole load of other stuff—a whole load of on-costs—for what amounts to, as I say, two strips of grass and a couple of gullies. Clearly, for that kind of small estate, that is utterly disproportionate and I strongly recommend that those areas are adopted by the council. There has to be a way through it, through planning legislation, section 106 agreements, commuted sums and so forth. I would strongly make that point.

On the regulation of those estates that either exist and cannot be adopted or alternatively perhaps are part of a much more complicated scheme and it is therefore inevitable that they will be managed areas, then, yes, absolutely bring them in. I would recommend that you align the regulations and the processes for reporting and service charge accounts, or charge accounts, as closely as you possibly can to the reformed leasehold regime so that there is consistency.

[Barry Gardiner]

Q Mr Bulmer, would it not be easier for your members to just pursue a claim in the county court, rather than go through the whole business of forfeiture in order to recover what are sometimes actually quite trivial sums?

Mr Andrew Bulmer: Would it be easier? I am not entirely sure. A substantive point was well made earlier. At the very minimum, there was a call for the equity that is left in a forfeited property to be returned to the leaseholder.