Leasehold and Freehold Reform Bill

Marsha De Cordova Excerpts

2nd reading
Monday 11th December 2023 Commons Chamber

[Michael Gove]

My hon. Friend is completely right. I will be looking at the responses to the consultation, and I am sure that some of London’s finest legal firms and most eloquent solicitors will be putting in some very thoughtful contributions, but the question will be: who is paying for them and how much are they being paid? To my mind, people can buy silver-tongued eloquence, but what is far more important is actually being on the right side of justice.

[Marsha De Cordova (Battersea) (Lab)]

Will the Secretary of State give way?

[Michael Gove]

I believe that most of the people in the House are on the right side of justice, especially the hon. Lady.

[Marsha De Cordova]

On ground rents, shared owners who have staircased their way up to 100% and become leaseholders obviously have a long lease of 999 years, but face the issue of having their ground rents doubled every, say, 20 years. Clearly, that is an unfairness in the system, so will the Secretary of State’s consultation address that point?

[Michael Gove]

I believe it will. I must now make progress because I know a number of people want to contribute, so I will try to run through the other arguments about why we are taking the approach that we are.

I mentioned service charges, and one other example, to which the Father of the House has of course persistently drawn our attention, of where those who have been managing properties on behalf of the ultimate owners have abused their position is that of insurance commissions. We will be taking steps in the Bill to make sure that insurance charges are transparent and that fair handling fees are brought in. The fact that I can list all these examples just shows hon. Members the way in which freeholders have operated. Many who have got hold of such freeholds have been thinking, “Right, okay, we can jack up the ground rent, great! We can have service charges, keep them opaque and add something. Tell you what—insurance; let’s try to get more out of that.” It is a persistent pattern of behaviour that does require reform.

Another pattern of behaviour is the way that lease extensions and the whole question of enfranchisement have been going. If someone’s lease goes below 80 years and they want to enfranchise themselves, they have to pay what is called marriage value. That is the principle that, by bringing together the ownership of the freehold and the leasehold in one by enfranchising themselves—bringing those two together in a marriage—people are enriching themselves. Again, however, it has been used by freeholders to bilk leaseholders overall, which is why the approach we are taking will in effect eliminate marriage value. It is also why, when we talk about lease extension, instead of people having to extend and extend again generation after generation, we are saying that leases can be extended to 990 years. In effect, as I say, this will make sure that one of the approaches that freeholders have taken to extracting more cash from leaseholders will end.

--- Later in debate ---

[Marsha De Cordova (Battersea) (Lab)]

It is a pleasure to follow the hon. Member for Dartford (Gareth Johnson). He is absolutely right about management companies needing more transparency and more accountability.

Today’s Second Reading of the Leasehold and Freehold Reform Bill is long overdue for my Battersea constituents. Many are trapped in the exploitative leasehold system, which denies them control, safety, security and a future in their home. Unfortunately, the Bill falls short of what the Secretary of State committed to when he said that the Government

“will maintain our commitment to abolish the…system of leasehold. We absolutely will.”—[Official Report, 30 January 2023; Vol. 727, c. 49.]

This is yet another broken promise by the Tories.

We all know that everyone deserves to live in a safe, decent and affordable home, and that means abolishing the unfair and outdated leasehold system. In London alone, leasehold accounts for more than 30% of homes. Some 74% of homes sold in Battersea in 2022 were leasehold transactions, making Battersea the 18th highest constituency in the country for leasehold. So this Bill really matters to the people of my constituency.

I have been in this House for only six and a half years, and we have debated leasehold reform continuously. Indeed, we have passed legislation, by way of the Fire Safety Act 2021 and the Building Safety Act 2022, which followed the awful, awful tragedy at Grenfell Tower. However, we know that even with all that legislation and despite all these debates, the system is still flawed and not all leaseholders are protected. In England and Wales, our approach has not been in keeping with that of the rest of the world, because many countries have chosen to do away with this feudal system or have reformed it; we are still in this state of stalemate. The Law Commission’s proposals back in 2020 had cross-party support. Everybody was in favour of them all, so it is disappointing that the Bill does not include all of its proposals and recommendations. That is sad because the Government have missed an opportunity to make some positive change that would protect our leaseholders. The Government’s inaction and delay in tackling the extortionate costs associated with being a leaseholder have had an impact, not least on people’s finances, as well as on their mental health and wellbeing. Many of my constituents regularly tell me about the range of problems they face: surging ground rents; high service charges; a lack of transparency over charges; poor customer service; excessive administration charges; charges for applications to extend lease agreements or enfranchise; and a lack of knowledge and information about their rights and obligations. The leaseholders in Battersea do not receive value for money on service charges, which can be increased at the last minute; they can go up drastically, with little warning. In one case, someone had their service charge increased by 30%, without any breakdown of costs or transparency as to why that had happened. At that time, the management company was—I am not sure of the best way to describe this—not forthcoming. In addition, it was abrasive, belittling and rude in its responses to us. So it is important that the role of these management companies and the way they are handled is addressed.

I am pleased that the Government are introducing long overdue measures to improve home ownership for many leaseholders. The Bill will make it cheaper and easier to extend a lease or buy the freehold; and it will increase the standard lease extension term from 90 years to 990 years, with the ground rent reduced to a peppercorn—obviously, upon payment of a premium. That is good and I welcome the fact that the Secretary of State said today that the Government will be consulting on grounds rents. Sadly, he did not address my point about shared ownership and those who staircase to 100% and then become leaseholders, so I hope the Minister will clarify whether the consultation will seek to address that issue as well. We need more transparency on things such as service charges, and it is right that the Bill will provide that. It will also provide for a right to request information about those charges.

However, as was mentioned by my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) and many others, despite multiple assurances from Ministers, the Government have U-turned on their commitment to end the leasehold system. After all that they had been promised, my constituents would have expected the Government to go further and end this outdated system. The Bill does not even contain provisions to ban the creation of new leasehold houses, as was promised in the King’s Speech. I understand that that will be brought forward in Committee, but why on earth was it not in the Bill today? There is never going to be enough time to really go into detail about the challenges with the Bill, but it is important to note that housing is a human right. Everybody should be able to live in a safe, decent, warm and affordable home. Homeowners should be able to have security and have the power of their own home, regardless of the type of tenure. If you buy your home, you expect it to be yours; you do not expect there to be a freeholder who owns this aspect of it. The Government could take some lessons from Labour, as we will protect leaseholders through making commonhold the default tenure for all new properties and by overhauling the system so that existing leaseholders can collectively purchase more easily and move to commonhold if that is their wish. We are also committed to supporting house building, in order to deal with the housing crisis that the Tories have created and not addressed. That is why we need this leadership on housing; we do not need any more broken promises and failed policies from this Government, which have really left this country in a mess.