Leasehold Reform (Ground Rent) Bill [Lords]

Matt Rodda Excerpts

Report stage & 3rd reading
Monday 24th January 2022 Commons Chamber

[Sir Mike Penning]

I refer the House to my entry in the Register of Members’ Financial Interests. On new clause 1, I do not think there is any argument that we need to look at historical leaseholds. However, my constituency has lots of new build and regeneration going on, and a lot of leasehold properties being built, and I am not convinced that that investment would come forward if the developers did not see where that income stream would come from, including pensions and so on. A lot of evidence is going back and forth, but I disagree just on that point.

I completely agree on the historical leasehold issue. The real problem is in the myriad different leases that are out there and have been for many years. I read the Select Committee report referred to by its Chair, the hon. Member for Sheffield South East (Mr Betts), a moment ago, and I found some of the things that lawyers were doing astonishing. It fascinates me how they ever got insured and how they have not been struck off—I know that other investigations are going on. This is about not just ground rent but service charges and buildings insurance, which is an issue we must address, whether in this Bill or another measure.

I own a freehold property with a mortgage, and I have contents and buildings insurance. In my buildings insurance, I have legal protection of the sort that we would expect our constituents to benefit from when they pay for buildings insurance. However, those in leasehold properties must pay buildings insurance to the freeholder or their management company and have no choice whatsoever about the company, what the premium is or what the coverage is. I use an example from my own constituency of what happens when a claim is made. We had a large sinkhole in a housing development where there were leaseholders: I sat in a meeting with the insurance representative, the freeholder and my leaseholder constituents, and the insurance company said straight to me, absolutely deadpan, “Your constituents may well have paid the premium, but the policy is not theirs. They have no cover whatsoever—the cover is for the freeholder.”

There has to be something morally wrong about that. Insurance has developed over the years; it used to cover very few things, but these days nearly all buildings insurance worth its salt has legal protection. That is what it says on the tin. The Bill does not cover that in the way I think it should. Sometimes it is wrapped into the service charges and everything else, and the ground rent is part of that package, but at the same time we have houses with historical freeholds, some of them from the old military estates where people have bought properties on what used to be Ministry of Defence property, and they are paying leasehold rents on what everybody assumed was a freehold property. Something is structurally wrong.

There was an allusion earlier to looking forward rather than back. I say to the Minister that looking forward is fantastic—we need some dates and some targets that our constituents can look forward to—but we should not rule out looking back just because it is difficult. As I said on the Building Safety Bill in this House only last week, looking back because it is difficult is what this House is supposed to do. It will be more difficult to look back and bring in those leaseholders, our constituents, who feel left out of this legislation and still very vulnerable, as my hon. Friend the Member for Warrington South (Andy Carter) said, but it can be done.

This is not a case of, “It’s impossible”, because we are doing it retrospectively in the Building Safety Bill. We are going back 30-odd years retrospectively on that Bill. Can the Minister explain, when he sums up on new clause 1, why the Government feel that that is so difficult, when we are doing it on a separate piece of legislation that is going through the House today?

[Matt Rodda (Reading East) (Lab)]

It is a pleasure to speak in this important debate. I express my support for new clause 1; I am grateful to the right hon. Member for Hemel Hempstead (Sir Mike Penning), and to others across the House, for their words tonight and for pointing out the enormous imbalance between powerful developers on the one hand and people buying a property for themselves, who possibly do not have all the information before them that ideally they should, on the other.

I refer to an issue in my own constituency, an attractive modern development on the edge of the town of Woodley, which is part of my Reading East constituency. The Loddon Park development is relatively recent, but there is a clear need for action to be taken. This development is in the south-east of England, a different part of the country from many of the developments mentioned tonight, and while there are some similarities there are also some differences.

Loddon Park is an attractive new estate, built in the past few years in parkland on the edge of Woodley. There are several hundred properties, a mixture of owner-occupied and some social housing. There are many attractive ponds and features, including meadowland, in the development. Unfortunately, when the whole development was given planning permission, the local authority—mistakenly, I believe—allowed the site developer to charge upkeep for those common areas in perpetuity. There is no limit, as I understand it, to the charge that can be made. It is deeply unfair for normal householders—many of them have young families, are commuters who work locally and are facing, like many people across the country, significant rises in the cost of living—to face in addition ongoing costs for maintaining the landscape around their homes. Frankly, that is wrong.

I hope the Minister will consider new clause 1. We have heard arguments from many MPs across the House and from different places around the country, whether in the south or the north of England; we have heard from the Chair of the Select Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), who set out some powerful legal arguments for why this action should be considered. I hope the Minister will look at it again, even at this stage, and will consider further action by the Government and our new clause.

[Jim Shannon (Strangford) (DUP)]

It is always a pleasure to make a contribution in such debates, and it is nice to be here. When we look at amendment 1 and the reasons why the right hon. Member for New Forest West (Sir Desmond Swayne) tabled it, as he expressed in his contribution, it is hard to say that we should not support it.

We must make sure that there is financial fairness for leaseholders, especially long leaseholders who plan to hold a lease for more than 21 years. The issue of ground rent payment has been brought to my attention by my constituents, and the hon. Member for Warrington South (Andy Carter) rightly gave an example of his constituents. An elderly couple in my constituency, who paid their mortgage off more than 15 years ago, are still paying ground rent of more than £50 a year. Although that is not much, I am pleased that the need to abolish this has been recognised. We already changed the legislation in Northern Ireland, so I understand why this Minister and Government are looking forward to making these changes tonight. Many Members have stated that many people have long leases with higher ground rents at the start of their lease, with shorter ground rent review periods. As a result, leaseholders face unsustainable ground rents, so there is a real need to change this, as hon. Members have said.

Leaseholders with high or escalating ground rents will often struggle to remortgage or sell their houses, leaving them in greater financial distress. The Bill aims to restrict ground rents on newly created long residential leases, with some exceptions, to a token of one peppercorn a year. That effectively restricts ground rents to zero financial value. The intention is to make leasehold ownership fair and more affordable for leaseholders. We should support that purpose.

In Northern Ireland, individuals can apply to the Land Registry to buy out their ground rent. In some cases, the individuals cannot afford to pay the substantial sum outright, so I am pleased that the Bill has assurances for long leaseholders and that Government have protected householders. If ground rent is demanded in contravention of the Bill and any payment received is not returned in 28 days, the landlord will face a fine ranging from £500 to £30,000 per qualifying lease. The fines are clear and hopefully prohibitive.

However, there is one substantial problem with the Bill, as others have said: it will apply only to new leases and will not assist existing leaseholders faced with high and escalating ground rents. I feel that they should not be left behind and I would be grateful if the Minister clarified this matter, looked at it again and considered the impact that the situation has not only on finance, but the possibility of remortgaging or selling property.

The Bill’s commencement date has also raised concerns across the House, so I would be grateful if more clarity was given about that. A Bill on broader leasehold reform is expected in the third Session of this Parliament and I would encourage discussion and a closer look at how the situation can be improved to make circumstances easier for leaseholders. Others have said that we just need a wee bit more movement, and perhaps that can be done in the next Session.