Leasehold Reform (Ground Rent) Bill [Lords]

Mike Penning Excerpts

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

[Andy Carter (Warrington South) (Con)]

It is a pleasure to follow the hon. Member for Ellesmere Port and Neston (Justin Madders). I share his concerns and those of the hon. Member for Weaver Vale (Mike Amesbury), because a significant number of new homes built in the north-west of England, particularly in my constituency and in theirs too, have been on leasehold contracts. Although I recognise the aim of the new clause, I am not completely sure that it will resolve all the issues for my constituents, and I want to talk through some of the issues that they have told me about over the past couple of months.

I welcome many of the proposals set out in the Bill and recognise the important role that they will have in protecting leaseholders moving forward. I am, though, concerned that, as the hon. Member for Ellesmere Port and Neston said, they will offer little comfort for the thousands of homeowners who have become trapped in historical leases, which I am afraid many were even unaware they were purchasing when they signed for their new home. That includes an number of constituents in Warrington South who have spent the past 12 years trying to resolve a situation that they were inadvertently drawn into when they were mis-sold their properties on the Steinbeck Grange estate in Chapelford village by David Wilson Homes.

My constituents believed they were purchasing their properties freehold, and many were not disabused of this position until several months after they moved in, when they received an invoice. One might rightly ask why their lawyers did not make them aware when they were signing the contract. It has become clear that most of them used a legal firm recommended by the developer—by the house builder’s sales team—and those lawyers failed to point out the tenure under which the properties were being sold, and failed to make Steinbeck residents aware of the important clause in their contract documents. By using their first names in dealings with clients, they made sure they could not be traced by dissatisfied customers once they became aware of the situation. The law firm went into administration within days of the estate being completed.

I note with interest that the Law Society’s response to the Bill states that it is not the solicitor’s place to dissuade a client from entering into a particular transaction; their role is to ensure that the transaction is legally sound and efficiently completed. I agree with that, but I believe that every lawyer has a responsibility to their clients, and in this case the client was not the developer but the homeowner, or prospective homeowner. They should have made clear all the elements of the contract and their clients should have been advised accordingly. I am aware of one Warrington solicitor who, when looking at the contract that was brought to him, advised the purchaser not to proceed because of the leasehold situation, and has come forward to give me all those details.

As hon. Members have mentioned, the Competition and Markets Authority is currently investigating several issues surrounding the potential mis-selling of leasehold properties. I thank the CMA for its endeavours in addressing this poor practice. It has been to Warrington and engaged with my constituents, and I am incredibly grateful for the work that it is doing there. These investigations have looked at four developers—Persimmon, Countrywide, Taylor Wimpey and Barratt Homes, which is the parent company of David Wilson Homes. To date, the CMA has reached agreements with the first three. I therefore encourage the management of Barratts to recognise the harm that has been caused by its past sales polices and agree a way forward with the CMA as soon as possible to put things right.

Many hon. and right hon. Members have raised these issues in this House, but progress is also down to the tenacity of the men and women trapped in unfair leasehold contracts across the country who have continued to fight for their rights. I particularly praise my constituent Mr Mike Carroll, who has refused to take no for an answer and is continuing to work tirelessly with me and his neighbours to achieve the right and just outcome for them.

Ministers also need to look again at how consumer bodies around the country, particularly trading standards, should be working in the interests of homeowners, to help them resolve some of these issues. In the case of homeowners in Warrington, trading standards appear not to have been interested and have done little to involve themselves in any investigations. That is not the case in other parts of the country, where resolutions have been reached. I note in particular that Cardiff trading standards got involved and looked very closely at some of these practices.

[Sir Mike Penning (Hemel Hempstead) (Con)]

I congratulate my hon. Friend on his tenacity in looking after his constituents. All of us across the House try to do that, and he has done a brilliant job. On other areas that need to be addressed, the solicitors that have gone into administration were insured. The big companies have liability insurance sitting in pots, so leaseholders could simply say to the insurers, “You’ve had the premium, and now we want to see some help from you.”

[Andy Carter]

My right hon. Friend is absolutely right. The greatest challenge that my constituents face is that they cannot find the people who did the work—the lawyers no longer exist as a company body. My constituents are working to try to find some recompense, and I hope that the situation will be resolved by the CMA.

Will the Minister consider what actions his Department can take to tackle the problem faced by residents on Steinbeck Grange in Warrington and elsewhere who are locked into leaseholds and did not expect to be in this situation? I hope he will look very carefully at what the CMA says. I know that he has been working with the CMA to try to find solutions, and I hope that he will continue to do that, so that a satisfactory outcome can be found. Having met residents and constituents on Friday evening, I know that the impact that this has had on their lives cannot be overestimated. They have been living through a genuine nightmare, having bought what they thought was their dream home. I urge the Minister to think about the impact that this has had on those individuals.

It is time not only for us to protect those who will be looking to buy a new home in the future, but to secure justice for those who have been mis-sold properties in the past and are still paying a heavy price through unreasonable management fees and escalating ground rents. I am pleased to support the Government’s efforts, but I urge them to go further.

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Finally, I still want a little more reassurance on the costs of the Government’s proposed measures. The Minister has exchanged correspondence with me, as Chair of the Select Committee and, as I understand it, there will be a new burdens agreement with the Local Government Association—although that has not been published yet—and there will be some money to help with enforcement, with other money coming from fines when people misbehave and charge ground rents in the future that are not compliant with the law. That is all well and good, but the problem is that, in the same letter, the Minister says that the Government do not expect many breaches to occur, so I worry that the enforcement teams will be another burden on councils’ already overstretched budgets. Given that fines will clearly not cover all the costs involved, what will be the new arrangements?

[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.

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[Eddie Hughes]

As I have said, the Bill is narrowly drafted, so the pitch fees do not apply. However, the Government are committed to making the changes for which my hon. Friend has been campaigning, and we will make those changes when legislative time allows.

Although the Bill is narrowly focused, it is understandable that Members—including, just now, my hon. Friend the Member for Runnymede and Weybridge (Dr Spencer) —have raised broader issues relating to the leasehold system. We understand that many leaseholders feel trapped in a system that is not working for them, and we are determined to provide greater protection and support for all leaseholders. The Government are committed to undertaking an ambitious and far-reaching programme of reform of the leasehold system, and I can assure the House that we are working apace to bring about those reforms.

[Sir Mike Penning (Hemel Hempstead) (Con)]

I thank the Minister for giving way to me, because it saves me a speech.

The most important aspect of the legislation to which the Minister has just alluded is that “far-reaching” should not mean “far away”. It is really important for leaseholders that it should be introduced as soon as time is available, and any help that the Minister may need in cajoling other parts of Government to introduce legislation as soon as possible to protect leaseholders in a way that this Bill does not will no doubt be extremely welcome.

[Eddie Hughes]

I strongly suspect that my right hon. Friend will be catching up with the Secretary of State next time they walk through the Lobby together, and will be making exactly that point to him.