Leasehold Reform (Ground Rent) Bill [ Lords ] (Third sitting)

Mike Amesbury Excerpts

Committee stage
Thursday 9th December 2021 Public Bill Committees

[Mike Amesbury (Weaver Vale) (Lab)]

I beg to move amendment 10, in clause 26, page 15, leave out subsection (4).

This amendment aims to ensure that the provisions apply to retirement properties from the time at which they come into force for other types of property, whereas at present the Bill will prevent those provisions coming into force for retirement properties before April 2023.

It is a pleasure to serve under your chairmanship once again, Ms Elliott. With my final amendment—not including new clauses—I want to raise something that was raised repeatedly in the other place: the question of retirement properties. I understand that, after a review, the Government have dropped their plans to exclude retirement homes and they will be included after a period of transition. I am glad to see that the Government and Ministers have moved forward on this. However, like Members of the Lords, I see no reason why those living in retirement properties should not be given the same rights as those in other types of leasehold property, at the same time. In the spirit in which we have tabled other amendments, this amendment’s aim is to ensure that all leaseholders are treated equally and that the 50,000 or so leasehold owners of retirement properties are not subject to unjust costs while other leaseholders are free from them. That is something that Members from across the Committee have raised.

Should the Minister not want to accept the amendment, I would be grateful if he outlined why exactly retirement property has been given this longer transition period. Given that this is a growing market and we should certainly be encouraging our senior citizens who want to rightsize—freeing up family homes for those who need the space, while living somewhere that suits their needs—what assessment has the Minister made of the number of leaseholders who will fail to benefit from the new system should they purchase somewhere before 1 April 2023? What will he say to them? The stories about retirement housing and fees are some of the worst in the housing market. They have been very well documented, and I know that the Minister is familiar with them. Can the Minister outline what he intends to do about that in the transition period right up until April 2023?

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Eddie Hughes)]

It is a pleasure to see you back in the Chair, Ms Elliott.

As hon. Members will know, it is our intention to protect leaseholders from unfair practices through the Bill by ensuring that future regulated leases are restricted to a peppercorn rent, unless excepted. The Government believe that those who purchase retirement homes should benefit from the same reform as other future leaseholders. Although we would like the provisions of the Bill to come into effect as soon as possible, we have decided to give the retirement sector additional time to prepare for these changes. The hon. Member for Weaver Vale has tabled amendment 10 to remove this provision and do away with the transition period entirely. I am grateful for his consideration of this point and would like to explain the reasoning for including a transition period for retirement properties, and why I believe that that is the right thing to do.

The plan for peppercorn ground rent was announced in 2019, following the Government consultation entitled “Implementing reforms to the leasehold system”. At the time, we also announced that we would proceed with the proposal to exempt retirement properties from the peppercorn ground rents policy. That decision was made on the basis that developers of retirement properties incur additional costs as a result of the communal spaces that are characteristic of these kinds of development. However, having reviewed this in further detail, we concluded that the argument in favour of an exemption did not outweigh the benefits of ensuring that those purchasing retirement homes can take advantage of reform in the same way as any other leaseholder could.

The Government believe that it is a matter of fairness that those buying retirement properties should be able to realise the benefits of this legislation. It was therefore announced in January 2021 that the exemption for retirement property would no longer apply, and we have offered the transition in recognition of that change of policy. As such, the Bill will come into force no earlier than 1 April 2023 for retirement homes. This transition period will allow developers of retirement properties time to adapt to the forthcoming changes. We believe the transition period in the Bill has been fairly granted in balancing the needs of developers and fairness to leaseholders.

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[Eddie Hughes]

It is based on when we expect the Bill to come into force in its standard form, and then allowing a subsequent transition period. Assuming that the Bill comes into force quickly after Royal Assent—we have committed to that happening within six months—with the transition period following on from that, we anticipate the provisions coming into force in April 2023. On that point, I ask the hon. Member for Weaver Vale to withdraw the amendment.

[Mike Amesbury]

I thank the Minister for his response, and I thank other Members for their contributions. This measure would be a step forward. Martin Boyd of Leasehold Knowledge Partnership has consistently expressed concerns about the matter in the past. I know that Members and stakeholders have lobbied for these properties to be exempted completely, which would have been the wrong course of action. I concur with the hon. Member for Cities of London and Westminster in hoping that the market responds positively to the changes. In the interests of minimalist legislation and in the spirit of co-operation as we march towards Christmas, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Eddie Hughes]

The clause makes provision for the commencement of the Bill. The substantive provisions of the Bill will come into force on a day appointed by the Secretary of State in regulations, but Members can rest assured that we intend there to be no unnecessary delay in implementation. I thank the hon. Member for Garston and Halewood, who is not in her place, for her question on Tuesday regarding the commencement of the Bill following Royal Assent. We understand her concerns about the commencement date, but setting a hard date right now would mean no flexibility should other issues arise making it difficult to achieve.

I assure the Committee that we will press ahead at full steam to bring the legislation into force, but we must also be practical and allow for contingencies, should they arise. That is why we think it is right to have a contingency period for us to implement the provisions within six months of Royal Assent. For completeness, I reiterate what I said in relation to amendment 10: the clause also provides that the Bill cannot be brought into force any earlier than 1 April 2023 with regard to retirement property. We are keen that leaseholders of retirement properties get the same benefits from the legislation as other leaseholders, but we also want to ensure that the sector has time to prepare for the change.

Question put and agreed to.

Clause 26 accordingly ordered to stand part of the Bill.

Clause 27

Short title

Amendment made: 8, in clause 27, page 15, line 25, leave out subsection (2).—(Eddie Hughes.)

This amendment removes the privilege amendment inserted in the Lords.

Clause 27, as amended, ordered to stand part of the Bill.

New Clause 1

Ground rent for existing long leases

“Within 30 days of the day on which this Act comes into force, the Secretary of State must publish draft legislation to restrict ground rents on all existing long residential leases to a peppercorn.”—(Mike Amesbury.)

This new clause aims to ensure that the Government introduces further legislation to remove ground rent for all leaseholders, whereas the Act currently only applies to newly established leases.

Brought up, and read the First time.

[Mike Amesbury]

I beg to move, That the clause be read a Second time.

Today is the last day of the Committee—I know people will be disappointed about that—and my last day sitting opposite the Minister. Indeed, it is my last day shadowing the housing brief, a role I have thoroughly enjoyed. I hope that I have made some difference with challenge and scrutiny in the building safety crisis and on leasehold reform. I wish the Minister and his departmental team well, and I urge them to be bolder in their response to the crisis. Ultimately, of course, Opposition Members and I want to secure a Labour Government in the not-too-distant future, although I know that not everyone in Committee shares that objective.

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[Eddie Hughes]

I thank my hon. Friend for his endorsement and will turn to him for advice and support as we formulate that policy. However, we do need to take time to get the reforms right. Hon. Members can rest assured, though, that reforming the leasehold system is a high priority for the Government. I therefore ask the hon. Member for Weaver Vale to withdraw the motion.

[Mike Amesbury]

In this case, I am going to agree to disagree. The measures in the new clause are a fundamental aspect of legislation. We have spoken about how all leaseholders should be equal, and indeed collectively we want to ensure that the feudal leasehold system is left in the history books once and for all.

On Second Reading, the former Secretary of State, the right hon. Member for Newark (Robert Jenrick), said that the Bill was

“the appetiser for the main course”

while I referred to the desire of Opposition Members and, importantly, the desire of the constituents we represent, for an

“all-you-can-eat buffet of reform.”—[Official Report, 29 November 2021; Vol. 704, c. 714-33.]

We have waited long enough. Indeed, we have had this nonsensical, unjust system for hundreds of years in England and Wales, and I know that none of us is proud of it, so I will not withdraw the motion. The Minister has examples on his patch where existing leaseholders will be trapped in the current system, but over the road or in another phase of a development, properties will be ground rent free. That is wholly unjust and has real consequences. I encourage all members of the Committee to support the new clause.

Question put, That the clause be read a Second time.

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[Mike Amesbury]

I beg to move, That the clause be read a Second time.

Our system of leasehold is unfair, unfit for purpose and a hangover from a time that should be consigned to history, as I have stated throughout the Committee and throughout the journey of the Bill. The best answer to fixing the issues with leasehold is to move to a system that most of the world moved to a long time ago. That system is commonhold.

Current levels of commonhold are very low, so the new clauses asks the Government to understand the impact the Bill will have on levels of commonhold. In the other place, the Minister claimed the Bill would level the playing field, and it would be useful to have that information once the Bill comes into force. This Minister will be aware, I hope, that the Mayor of London has committed to furthering commonhold and pledged in his manifesto to start further trials in our capital. Will the Minister tell us how much longer the rest of the country has to wait to learn what is the Government’s policy on increasing commonhold uptake beyond the claim made in the narrative about the Bill?

Will the Minister update the Committee on how the Commonhold Council is coming along, what progress is being made and when we can begin to expect concrete change to take place? Commonhold should be the default tenure; that is something hon. Members across the House have spoken about for a number of years, and this is a real opportunity to turbo-charge that change. I look forward to the Minister’s reply.

[Eddie Hughes]

The hon. Gentleman’s new clause 2 would require the Government to produce an assessment of the legislation’s impact on the level of commonhold ownership. The impact assessment would have to be published within 60 days of the Act’s passage. However, as he said himself, the problem with commonhold in this country is that, despite its name, it is not a common tenure at all. Fewer than 20 developments have been created since the Commonhold and Leasehold Reform Act 2002 Act came into force.

We want that to change. We want to see the benefits of freehold ownership extended to more homeowners. The change brought about through this legislation will help to create the conditions for more commonholds. It will level the playing field, as it will remove an incentive for developers to build leasehold rather than commonhold homes. However, we also need further to lay the groundwork for greater use of commonhold, which is why we have established the Commonhold Council—a partnership of industry, leaseholders and Government—to prepare consumers and the market for the widespread take-up of commonhold. It is also why we asked the Law Commission to recommend reforms to reinvigorate commonhold as a workable alternative to leasehold, for existing and for new homes. We are reviewing those proposals and will respond in due course.

The new clause looks at the interaction between the Bill and commonhold. We have of course considered that interplay, and believe that the Bill and our work to increase uptake of commonhold are consistent with our aim of more fairness and transparency for homeowners. The Bill and our commonhold reform programme are complementary and we do not believe it necessary to conduct a specific impact assessment as the new clause demands. As hon. Members will know, such exercises also take up considerable resources. I think we are all agreed that we should avoid delaying further leasehold reform, and I am afraid that would be the effect of the new clause.

The hon. Member for Weaver Vale asks about progress on the Commonhold Council. All I can say is that work is ongoing. I am sure the chair of the council, Lord Greenhalgh, will continue to push forward, and we will be publishing more information on its work early in the new year.

I am sorry that the hon. Gentleman felt it necessary to table the new clause, but I hope he will consider withdrawing it.

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[Mike Amesbury]

I thank the Minister for his detailed response. It would be useful to have an update from the chair of the Commonhold Council for shadow Ministers, and to all members of the Committee. That would be appreciated. In the spirit of co-operation, it was important to table the new clause as part of the narrative and to get the detail on the record. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Service charges

“Within 2 years of the passage of this Act, the Secretary of State must publish an assessment of the impact of the Act on the level of service charges and other costs charged to holders of long residential leases.”—(Mike Amesbury.)

This new clause aims to ensure that the Government publishes a report on the impact of reducing new ground rents on other costs incurred by leaseholders.

Brought up, and read the First time.

[Mike Amesbury]

I beg to move, That the clause be read a Second time.

This final new clause addresses a point made to me by a number of stakeholders and members of the Committee over the past few weeks. It would ensure that the Secretary of State published an assessment of the impact of the Act on the level of service charges and other costs charged to leaseholders.

Ground rents have been a convenient way of pushing up the costs of leasehold, and an easy way of making more money off leaseholders, but they are not the only way. As we have said, new ground rents are tapering off in number, but other charges have begun to crop up and are starting to take their place—ground rents for parking spaces, rather than residential units, is one example. We are already beginning to see a number of these charges emerge. The Leasehold Knowledge Partnership gives several examples on its website. I encourage Members to look at them.

In an earlier debate, I raised the point that service charges are increasing as freeholders exploit other income streams. Those freeholders do not seem to care about the financial pressure they are putting on leaseholders, or that these are people’s homes, where they deserve to live without being exploited by whatever organisation has bought the freehold or chosen to manage their property.

The clause would require details of charges to be published within two years of Royal Assent. That, frankly, is because we face greater reform, and so I expect that we might see these trends emerging before the Government introduce more legislation. Developers looking to explore other avenues of income will bide their time until they feel the coast is clear.

I tabled the new clause in the hope of raising with the Minister again that we risk playing Whac-a-Mole with leaseholder costs; we could ban one stream of income only to find that freeholders have discovered another. I ask the Minister to outline exactly how he expects to prevent that.

[Eddie Hughes]

As we draw towards the end of the Bill Committee, I thank Members on both sides of the room for their considered input. We work best when we work collaboratively. As I have said a few times, this is an issue I started to champion as a Back Bencher, so it is an incredible privilege to be the Minister leading the discussions. I thank everyone for their time.

New clause 3 brings us back to the issue of service charges, and to concerns about freeholders using such charges to charge ground rent by another name. The Government believe that all fees and charges should be justifiable, transparent and communicated effectively. Service charges that have been artificially inflated to make up for lost ground rent income would not meet those requirements. If any landlord seeks to recoup what they consider to be lost ground rent or other funds through service charges or any other charge, the wide definition of the term “rent” in the Bill will allow a tribunal to take the charge into account when deciding if it is actually prohibited rent. That is why the Bill has been drafted as it has, and why we have adopted a flexible definition of rent. As I explained in a previous sitting on Tuesday, the definition relies on its naturally understood meaning and includes anything in the nature of rent, whatever it is called. Where a freeholder has attempted to get around these provisions, the definition allows the tribunal to consider, in each case, whether such a charge actually represents a prohibited rent, even if it is not explicitly called a ground rent.

As was discussed earlier in the week, the penalties for landlords who charge a prohibited rent are significant —a maximum of £30,000 per lease. If a landlord had a block of 10 flats, then the penalty they would be risking would reach a significant amount.

We have provided a robust system with not only a serious deterrent, but a route for challenging freeholders who act this way. That is all relevant to the new clause, which asks for an impact assessment. I understand the concerns that motivated the new clause, but hopefully the hon. Member for Weaver Vale can appreciate that the drafting of the Bill is intended to specifically guard against service charges being used in the way that he mentions.

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[Eddie Hughes]

I thank the hon. Lady for that intervention. There are two sides to that story. The fact that this legislation is being enacted, and the attention that will be drawn to that, will hopefully inform a good number of leaseholders. Also, the possible financial penalty—up to £30,000—should act as a significant deterrent for the freeholders, who are much more likely to be well informed and will hopefully be severely deterred by that. As the description of rent is so wide-ranging—it includes anything in the nature of rent—they will well understand that, should they be challenged at tribunal, they would likely be found out.

Given the two sides of that equation, there is good reason for us to be confident that nobody will try to introduce rents through the back door. On that note, I once again ask the hon. Member for Weaver Vale to withdraw the new clause.

[Mike Amesbury]

I thank the Minister for his detailed response, and all those Members who made powerful and informative interventions. Undoubtedly this is a live issue. I said, in relation to an earlier clause of the Bill, that any one of us could set up as a management agent and apply some interesting service charges. We have seen evidence of that weekly—daily. I urge the Minister, and certainly the Department—he spoke about keeping a serious watching brief—to respond to the problem. This Bill is the appetiser, we are told, but they should certainly respond to it in the main course. Opposition Members and, indeed, Government Back Benchers will rightly hold their feet to the fire.

In the spirit of co-operation, and given that this will be my last input today, we will withdraw the new clause. I genuinely thank everybody for giving their valuable time to consideration of the Bill so far. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Bill, as amended, to be reported.