Leasehold and Commonhold Reform

Debate between Mary Glindon and Peter Bottomley

Thursday 21st December 2017 Westminster Hall

[Mary Glindon (North Tyneside) (Lab)]

It is an honour to speak under your chairmanship, Sir David. I congratulate the hon. Member for Worthing West (Sir Peter Bottomley) and my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) on securing this debate. Notwithstanding the announcement that was made today, like other hon. Members I have a number of constituents who have been adversely affected by the vexed issue of leasehold versus freehold ownerships.

Many people in north Tyneside have purchased homes where freeholds have subsequently been sold to a third party that puts extortionate prices on the purchase of leases. One couple who bought their new home five years ago were told that they could buy the freehold for about £4,000, but the sales rep discouraged them, saying that they would not have to worry about it for a couple of years. It was already an expensive time for them so they decided to take just the leasehold option. Since then, they have been informed that their freehold has been sold on twice. They contacted a specialist solicitor, but could not afford the fee to ascertain the cost of enfranchisement. They fear that they may never be able to buy the freehold and that they will be left with an unsaleable property.

Another constituent is caught in what is known as the “fleecehold” situation. She is a freehold owner of a new build house but has received an invoice for service charges from the estate management company on behalf of the developer. She was a first-time buyer and vaguely remembers something being mentioned about a rentcharge. When she queried it, she was told that she was buying the freehold and that that was an estate management charge towards the upkeep of the estate. She paid the amount via her solicitor for the first year and heard nothing about it after that, until she received an invoice a couple of months ago.

Subsequently, she looked at her responsibilities regarding the fixed rentcharge. She found that it had now doubled, with 43% of fees to be paid to the management company. What concerns her most is a statement in her transfer document that says that the rentcharge is associated with rights of re-entry and that if it falls into arrears, the rentcharge owner can repossess her property and enjoy the same rights as if the transfer had never been made. That was never made clear to my constituent. If she had known, she would not have bought her so-called freehold property.

My constituents are right to be concerned about finding themselves in such a position in relation to the biggest and probably most important purchase they will make in their lives. I am glad that 20 hon. Members, some of whom are here, supported my recent early-day motion on fleecehold, which asks the Government

“to investigate this practice as a matter of urgency and with a view to first clarifying the law and then outlawing this practice.”

I hope the Minister will make reference to that.

[Sir Peter Bottomley]

The hon. Lady’s early-day motion is very important. The Government should consult on whether it is possible to refer the matter to the Competition and Markets Authority and have that kind of clause struck out as unfair, unreasonable and unenforceable.

[Mary Glindon]

I am grateful for the hon. Gentleman’s straightforward statement.

It cannot be right that sales reps quote prices for the freehold but do not deliver, or that a freehold can be sold to a third party without telling residents. Nor can it be right that solicitors do not inform home buyers of the pitfalls, or that residents find themselves with charges and restrictions far beyond the original agreement.

The list goes on, but in the end, like my constituents, current home buyers are left worrying about what that means for reselling their houses. Although the Government’s announcement is welcome for future home buyers, I hope they take note of one of the country’s leading building societies, Nationwide—of which I must declare that I am a customer—which has changed its lending policy to protect people who buy new build leaseholds. It wants the Government to take action by preventing the Help to Buy equity loan being available for sites where new houses are being sold on a leasehold basis.