Leasehold and Freehold Reform Bill (Third sitting)

Mike Amesbury Excerpts

Committee stage
Thursday 18th January 2024 Public Bill Committees

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

My wife is the joint chief executive of the Law Commission, whose work on leasehold reform we have regularly touched upon.

[Mike Amesbury (Weaver Vale) (Lab)]

I am a member of the all-party parliamentary group on leasehold and commonhold reform.

[Andy Carter (Warrington South) (Con)]

On that basis, I am also a Member of the all-party parliamentary group.

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[The Chair]

I am sure I will have time to come back to you, but I just want to get the first batch of questions in.

[Mike Amesbury]

Q Good morning. Paula, you also said that ground rents have not been tackled by this Bill; could you elaborate? What changes would you like to see?

Ms Paula Higgins: I think that was a statement put out at the time of the King’s Speech, when it was not clear. It sounded like the Government were going to consult on the ground rents, which is what they are doing now; it closed yesterday and we welcome that. I think at that time I was concerned that the King’s Speech said the Government were going to consult on how to limit ground rents. At the moment, there is no justification to have a ground rent payment for nothing; any payments should be as part of the service charge.

I welcome the Bill, and I fully support the ground rent being a peppercorn, if you cannot have the legal challenge. If you cannot have it as a peppercorn, then having it as a set amount makes it clean and clear. What we want is that when people are doing lease extensions, there is a calculator so they do not need to get valuers and have lots of negotiation; there is a lot of cost in that. You want to make it a process that is as simple as possible for people to extend their lease and get rid of their ground rent.

[Mike Amesbury]

That is great. Bob and Sue, do you have anything to add to that?

Sue Phillips: I just want to flag that one of the distinctions between shared owners and leaseholders is that shared owners cannot eliminate a ground rent via statutory lease extension, and that is a huge problem. My understanding is that there may have previously been an expectation in Homes England guidance—although it was not mandated—that shared owners would not be subject to ground rent. There is massive inconsistency in the shared ownership sector on all kinds of aspects, but it includes the imposition of ground rent, the nature of that ground rent, and whether you encounter it at the point it is staircasing to 100%. Ultimately, the key point is that shared owners do not have that resort to lease extension to eliminate ground rent at present.

[Mike Amesbury]

Thank you.

[The Chair]

If anyone has not asked a question and wants to come in, please just indicate. Matt, Barry and Andy want to come back, so I come to you, Matt.

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[The Chair]

Thank you very much. We have 10 minutes left. Mike Amesbury wants to come in, and then I will call Matt and Barry.

[Mike Amesbury]

Q This question is to both witnesses. Are you satisfied with the provisions in the Bill to regulate what is commonly known as the “fleecehold” phenomenon, where what leaseholders pay for communal areas—in the broadest sense—maintenance, service charges and administration charges is uncapped? Is it strong enough at the moment?

Professor Hodges: I do not really think that is a question I can answer, because it is a policy question within which economics and other factors are relevant. Technically, as a regulatory system, I do not see anything wrong with it.

[The Chair]

Professor Steven, do you have anything to add to that?

Professor Steven: I do not.

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[Andy Carter]

Q That leads me on to the regulation of managing agents and the property sector. Is that an area that your members have any views on? Is it something that you would welcome?

Paul Broadhead: Yes, we believe that managing agents should be regulated. We think the fees—where the service charges money is spent—should be made clear to the borrower. I think that, at the very minimum, short of regulation, they should be forced to be a member of an alternative dispute resolution scheme.

[Mike Amesbury]

Q That point is very interrelated to this. A considerable number of leaseholders are excluded from provisions to remediate the buildings. An example is people in buildings that are below 11 metres, or it might be people who have more than three flats. How has the market been responding to that?

Paul Broadhead: There have been well-documented issues about building safety post the Grenfell tragedy. We did see some real difficulty about people being able to get mortgages where there was cladding on the building. Progress has been made there. I think that now, in most cases—particularly above 11 metres, as you suggest—the market is open, because it is clear that there is recourse to either the developer or the Government scheme to fund the work. Our starting position, when this came out with the amended Government guidance note in 2020, was that no leaseholders should be responsible for making good the combustible cladding, if it was now inappropriate, because they have gone into this, they have been advised by their legal advisers, and they should not be forced to put their hand in their pocket.

We are not there yet on properties below 11 metres, because the Government have chosen to exclude them from the support scheme. I have had a number of meetings with consumer groups, looking at cladding and at leasehold, and I think we are on the same page here. We are trying to find a solution from a mortgage-lending perspective, because we want that market to open up, but what seems to be more and more frequently coming out is that the cladding issues and other building safety issues are being conflated. It is really difficult then from a mortgage lender’s perspective, because if the cladding itself does not need replacing because it is safe, but there are other defects in there, there may still be some comeback that leaves leaseholders with quite a large unexpected bill that is at the moment unquantified and would affect the affordability of that borrower, going forward. We continue to meet with these groups and with Government to seek a solution, but it certainly is not operating perfectly.

[Mike Amesbury]

Q Would you welcome amendments to the Bill to try to capture that by regulation, by legislation?

Paul Broadhead: Yes. Anything that makes it clearer and gives lenders confidence and consumers confidence that their building is safe and they are not going to face an unexpected bill has to be welcome.

[Eddie Hughes (Walsall North) (Con)]

Q I am slightly confused. I thought it was now the case that properties did have to be advertised as leasehold or freehold. Has that changed?

Paul Broadhead: Well, often the advert will say that a property is leasehold but that that will be confirmed by the conveyancer, so you do not know 100% whether it is leasehold or what the terms of the lease are.