Leasehold and Commonhold Reform

Matthew Pennycook Excerpts

Thursday 21st December 2017 Westminster Hall

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bone. I want to add to the praise that has been heaped on the hon. Member for Worthing West (Sir Peter Bottomley), my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick), Leasehold Knowledge Partnership and everyone involved in the all-party group. As we have seen, the debate encompasses an extremely wide range of issues—not least the scandal that so many of my hon. Friends have spoken so passionately about. There are many issues that affect my constituents, from the need for greater transparency about service charges to the huge problems many leaseholders face when trying to rectify damage caused by accidents such as flooding—which might be thought a relatively simple thing.

Today I want to focus on just one pressing issue that is of great concern to hundreds of my constituents—and, in doing so, build on the comments of my constituency neighbour, my hon. Friend the Member for Poplar and Limehouse, and my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury). The issue is liability for the costs associated with interim safety measures and remedial fire safety works on private freehold developments. In the wake of June’s horrific Grenfell Tower inferno, three private freehold developments in my constituency failed cladding tests arranged through the Department—the Babbage Point development on Norman Road and two blocks on the New Capital Quay development, all in west Greenwich. I shall run through the latter case in a little detail, to show a wider problem.

New Capital Quay is a new-build development that was completed in 2013-14. It comprises a total of 980 mixed- tenure homes, 658 of which are private. The freeholder is Roamquest Ltd, but the immediate parent company is Galliard Holdings Ltd, and the ultimate holding company is Galliard Group Ltd, so despite the somewhat opaque nature of the ownership structure it is a Galliard development, as both the company structures and all the publicity around it indicate.

In the immediate aftermath of Grenfell, a 24/7 waking watch fire marshal patrol was instituted across the whole development on the basis of consultation with and guidance from the London fire brigade, and in September a notice of deficiency was issued. Although I have no accurate figures for the total cost associated with both measures, I estimate that it is likely to run into the hundreds of thousands, if not ultimately millions, of pounds.

Residential leaseholders and shared owners on the development, scores of whom have contacted me over recent months, are extremely concerned that Galliard will simply pass those costs on to them, and they have good reason to be worried. With a normal leasehold flat or house, leaseholders are required to pay for the repairs that the lease says they are responsible for, and the freeholder is responsible for structural repairs, but the ACM cladding is not actually in need of repair; it is just incredibly dangerous. There is therefore every reason to believe that its replacement on private freehold developments will be categorised not as a repair but as an improvement or a renewal. That is the position that Galliard has adopted. By happy coincidence, it replied yesterday through its legal representatives to my representations on behalf of residents, which I submitted some time ago.

I am not a lawyer, but I think it is plain as day that, given the unique circumstances post-Grenfell, there is going to be legal complexity surrounding the recovery of costs associated with the interim safety measures and any long-term remedial works on those developments. In each case, it will clearly depend on the lease in question. I think that, in many cases, freeholders will simply attempt to recover the costs from leaseholders. Where they cannot, they will find ways of avoiding paying the costs entirely—for example, by creating a dormant company with no assets and then simply throwing up their hands, as happened in Slough.

As my hon. Friend the Member for Brentford and Isleworth mentioned, some freeholders, to their credit, are shouldering the costs of the post-Grenfell remedial fire safety works themselves as a gesture of goodwill, but as she rightly said, that is the exception, not the rule. I suspect that most will not follow Legal & General’s lead, despite the Government’s urging that they do so. Although that is disappointing, it is entirely unsurprising, because Legal & General’s action is voluntary. Why would any developer or private landlord voluntarily give leaseholders a gift—from their point of view—or cover their costs if they are in a position to evade that responsibility? In the case of New Capital Quay, Galliard maintains that it was fully compliant with the building regulations at the time the development was completed, that the construction was signed off by an approved inspector, and that, as such, it should not be liable for the fact that it is now not compliant. The whole situation is a complete and utter mess.

The important point at a human level is that the cost of the works resulting from what has emerged in the wake of Grenfell, which could run into tens of thousands of pounds for each individual leaseholder, cannot justifiably be recovered from them. The 658 leaseholders and scores of shared owners on New Capital Quay bought their properties in good faith and bear no responsibility whatever for failures in the building regulations regime, but as things stand they are going to be absolutely clobbered. Some are no doubt affluent enough to afford the costs that might come down the line, but many are not and will suffer real hardship as a result. In either case, it is neither fair nor reasonable. From what I have seen, there are no effective means of redress, either through claims to the National House Building Council or through the advice and support that LEASE is offering. This is a serious problem, and the Government have not yet grasped the extent of it. Ministers need to give it more consideration and thoughtful attention than they have given it so far. I look forward to hearing the Minister’s advice to my constituents who are affected and are extremely worried about what the future holds for them.

[Several hon. Members rose—]