Leasehold and Freehold Reform Bill

Matthew Pennycook Excerpts

2nd reading
Monday 11th December 2023 Commons Chamber

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

I start by declaring an interest: my wife is the joint chief executive of the Law Commission, whose work I intend to cite in my remarks.

It is a pleasure to close this Second Reading debate for the Opposition, and I thank all right hon. and hon. Members who have participated in it. I echo what so many others have said and add my own tribute to all the individuals and organisations who have campaigned for so long for reform in this area.

As a number of contributors to the debate have pointed out, we have waited a long time for this Bill. It was just under six years ago that the then Secretary of State, the right hon. Member for Bromsgrove (Sajid Javid), announced that the Government intended to introduce a series of measures to end unfair and abusive practices within the leasehold system, including—I quote here from a Government press release in December 2017—

“legislating to prevent the sale of new build leasehold houses”.

That 2017 announcement was developed three years later, during the tenure of the right hon. Member for Newark (Robert Jenrick) as Secretary of State. In a written ministerial statement dated 11 January 2021, he announced

“seminal two-part legislation to implement leasehold and commonhold reforms in this Parliament”.

The first part of that two-part legislative agenda duly followed, in the form of the Leasehold Reform (Ground Rent) Act 2022. Although we—and in particular the shadow Minister for homelessness and building safety, my hon. Friend the Member for Weaver Vale (Mike Amesbury)—pressed Ministers to use that Act to implement further reform, we nonetheless supported the Government in passing it. In the 17 months since the Act came into force, successive Ministers have made all manner of extravagant promises about what the second part of the “seminal two-part legislation” would entail. Indeed, the current Secretary of State, in an interview with The Sunday Times in January this year, even went so far as to declare, without qualification, that he intended to abolish the leasehold system in its entirety.

Leaseholders across the country, whose daily lives are often made miserable by the unjust and discriminatory practices that our archaic leasehold system facilitates, took Tory Ministers at their word. They expected the second part of the promised two-part legislative agenda to live up to the weighty promises made by the Government. They have been badly let down. Having waited so long and had their expectations raised so high, they are understandably disappointed at the limited Bill that we are considering today. And it is a limited Bill, and no amount of bravado from the Secretary of State can alter that fact. They are also perplexed, as we are, that legislation that the Government claimed would end leaseholds on newly built houses in England and Wales does not actually contain any provision to end such leaseholds.

When the Minister responds to the debate, he will no doubt attempt to brush that criticism aside, as he did in oral questions last week, on the grounds that it is entirely normal for key provisions of a Bill to be added in Committee. Sadly, as my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) mentioned in opening the debate, it is common practice for this Government, and this Secretary of State in particular, to significantly expand the size and scope of Bills by incorporating swathes of Government amendments in Committee and on Report in a way that limits the ability of hon. Members to ensure that full scrutiny takes place. However, the Minister is fooling no one in attempting to suggest that the omission from the legislation of key provisions was always the Government’s intent.

I remind the House, as my hon. Friend the Member for City of Chester (Samantha Dixon) did, that the right hon. Member for Bromsgrove committed the Government to legislating to prevent the sale of new build leasehold houses nearly six years ago. The Government have no excuse whatsoever for failing to include in the Bill the provisions necessary to enact that commitment in order for the House to consider them properly today. That they failed to do so no doubt owes more to hurried drafting, and to the wrangling between the Department and No. 10 that has taken place over recent months in respect of this Bill, than to any considered design. However, for all the confusion that surrounded it, the legislation before us has answered one important question: how ambitious do the Government wish to be when it comes to leasehold reform? Because this unambitious piece of legislation makes it clear that proponents of caution and restraint have won out over those who want to lay claim to a legacy of bold reform in this area.

That criticism cannot simply be brushed aside as carping on the part of the Opposition. The Government’s poverty of ambition has real implications for leaseholders being routinely gouged by freeholders under the present system. Take flats, which are the overwhelming majority of new leasehold properties being created and the source of most of the leasehold-related complaints that I receive from constituents. The Government’s stated solution for them, as made clear by Baroness Penn in the other place just last week, is reinvigorating commonhold, yet the Minister of State made it clear on Monday that the Government do not intend to incorporate into this Bill any provisions whatsoever relating to commonhold, despite the clear commitment they made in 2021. Instead, it remains part of their “long-term approach”. In other words, the Government’s offer to swathes of leaseholders across the country is jam tomorrow.

The hon. Member for Redditch (Rachel Maclean), known affectionately as No. 15 on these Benches, gave the game away. She said that all the work has already been done on commonhold, so it is not a matter of complexity; it is a political choice on the Government’s part not to introduce commonhold provisions in this legislation. What is so galling about the position that Ministers have adopted is that there is clearly widespread support across the House for the more ambitious leasehold reform that could have been incorporated into the Bill, and this debate has demonstrated it. However, in the dying days of this Government, we are where we are.

While we deeply regret the Bill’s lack of ambition, we have no intention of voting against Second Reading this evening. We support the intent of the provisions in the legislation before us and the principle of the Bill as a whole. The measures it contains will give homeowners in England and Wales some greater rights, powers and protections over their homes. That is not to say that we do not have concerns about the efficacy of some of them; we do, and we will seek to strengthen the Bill in a number of ways in Committee. For example, we believe that clauses 12 and 13, which are intended to protect leaseholders from covering the legal and valuation costs associated with lease extensions, require tightening if we are to prevent, in practice, freeholders recovering litigation and non-litigation costs. To take another example, we believe that clause 23, which seeks to replace the existing costs regime for right to manage claims, is flawed and needs overhauling if it is to protect, in practice, RTM companies from cost claims by landlords.

We also believe that this limited Bill can be improved in ways that will give future leaseholders more control over their future. For example, we think there is an iron-strong case for adding to the Bill provisions that would abolish forfeiture for leases entirely and replace it with a more equitable means for freeholders to recover costs in a dispute that does not involve a windfall. I was pleased by the signal that the Secretary of State gave on that front in opening the debate. To take another example, we think there is merit in adding to the Bill provisions that would ensure that leases on new flats include a requirement to establish and operate a residents’ management company responsible for all service charge matters and associated works, with each leaseholder given a share.

We will seek to convince the Government of the merits of those and other measures when we go into Committee in the new year, and we will engage constructively with the Government if they decide to introduce other bold measures into the Bill at that stage—for example, if Ministers are minded to implement the Law Commission’s proposals on the right to manage, covering both flats and houses.

However, we recognise that there is only so much that we can do with the legislation before us. Given the paucity of the Bill’s ambition and the fact that it does not contain so many of the commitments that successive Secretaries of State have made, not least in relation to the promised widespread introduction of the commonhold tenure, it is clear that it will now fall to a Labour Government to fundamentally and comprehensively reform the leasehold system, including the reinvigoration of commonhold to such an extent that it will become the default and ultimately render leasehold obsolete.

We are pleased that the Bill will progress today. It will provide some limited relief to leaseholders. We will seek to improve it with a view to extracting from the Government any extra measures that further empower leaseholders and disturb the historical iniquity on which the present system rests. Leaseholders across the country who remain at the mercy of arcane and discriminatory practices, to their detriment and to the benefit of freeholders, rightly expect nothing less. But leaseholders across the country expected so much more from the Government. We are clear that, in due course, Labour will have to finish the job and enact all the Law Commission’s recommendations on enfranchisement, right to manage and commonhold in full. We are determined to do so.

--- Later in debate ---

[Matthew Pennycook]

The Minister touched on building safety. In the briefing notes on the Bill that accompanied the King’s Speech, under the heading “Improving leaseholders’ consumer rights”, reference was made to:

“Building on the legislation brought forward by the Building Safety Act 2022”.

Is it the Government’s intention to incorporate building safety measures in the Bill?

[Lee Rowley]

We are looking at what may be possible. We recognise that, while the Secretary of State for Levelling Up, Housing and Communities has brought forward a very solid prospectus, tweaks can always be made. We see real momentum in this area. I know that that is not good enough for buildings that have not yet had their remediation or for leaseholders who are hugely frustrated by the inability or unwillingness of freeholders to make progress, but we have made significant changes and steps forward in the last year or so, and we are committed to doing more in the coming months.

I am grateful to the hon. Member for North Shropshire for meeting me earlier to talk about specific points about assets. We will look at those points and come back to her.

I can confirm to my right hon. Friend the Member for Aldridge-Brownhills that we intend to tackle ground rents. I am grateful to her for highlighting exceptions in leasehold houses. We intend that to be a very narrow element. She sought an example. One example I can give is that of National Trust land where freeholds cannot be sold and a small number of leasehold homes may therefore be required.

The hon. Member for Liverpool, West Derby talked about his disappointment with, I believe, the consultation on ground rents. We must consult on that because we must ensure that we are listening and that we take a decision based on the broad range of evidence in front of us, to ensure that it is legally sound when the decision is made. He encourages me to speak to the Law Commission. I can tell him that I have spoken to the Law Commission probably more regularly than any other external organisation outside the Department in the past three or four weeks.

The hon. Members for Walthamstow, for Battersea and for Brentford and Isleworth are seeking to push a narrative—if I may say that very gently to them, with the best of intentions—that this is not a significant intervention with regard to flats. I gently encourage them to continue to engage with the Bill. They will see long and cheap extensions, easier enfranchisement, service charge transparency, easier redress, lease extensions, standard forms, annual reports and many, many other significant measures that will have salience for those living in flats.

Before I conclude, I would like to thank the hon. Member for Greenwich and Woolwich (Matthew Pennycook) for his constructive comments. I look forward to meeting him in Committee to talk about them more. While I may disappoint the right hon. Member for East Ham, I would like to turn to some of the comments made from the Opposition Front Bench.

The right hon. Member for Ashton-under-Lyne (Angela Rayner), despite acknowledging that the Government have brought forward important legislation, despite confirming that Labour would not be opposing it and despite advancing the most enthusiastic compliment I have ever heard her give a Conservative—that the Secretary of State has reached the lofty heights of being a “functional cog”; heavy praise indeed!—showed that, as ever, she deals in rhetoric rather than reality, and in politics rather than policy. She called the Bill “empty”. This is a Bill with 65 clauses, eight schedules and 133 pages, and there are 67 pages of explanatory notes. Given its comprehensive reform of enfranchisement and extensions, its comprehensive reform of redress, and its comprehensive reform of service charges, estate management and valuation, that is a funny definition of “empty”.