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

Neil Hudson Excerpts

Committee stage
Thursday 9th December 2021 Public Bill Committees

[Eddie Hughes]

The hon. Gentleman said that I would respond by saying there will be more reforms in due course, and I think this should be something to be welcomed. What is sad, following what he said, is that he will not necessarily be part of the discussions, because I have found it incredibly helpful to work with somebody who is pragmatic, challenging and reasonable—it has been a real privilege.

New clause 1, which was tabled by the hon. Gentleman, would require the Government to produce draft legislation within 30 days of the Bill coming into force to restrict ground rents on all existing residential leases to a peppercorn. He will know that that is beyond the scope of the Bill. The Government share his concerns about the substantial difficulties that some existing leaseholders face, including burdensome lease terms and high premiums to extend their lease and buy the freehold.

The scandal of high and escalating ground rents is a serious concern, too. Indeed, that is a big part of why we are here today to debate the Bill. Some existing leaseholders are faced with high charges, which is why we asked the Competition and Markets Authority to carry out an investigation. As hon. Members will know, the investigation of potential unfair terms and mis-selling is ongoing, and my Department follows it closely. Indeed, I met the CMA last month to receive a progress update. It might benefit the Committee if I expand on the investigation and the progress we have seen so far.

In early 2020, the CMA’s report identified a number of serious concerns, including high and increasing ground rents. Following that report, it opened enforcement action involving four leading housing developers. I know that hon. Members will join me in welcoming the progress that the CMA has made since then. The CMA’s work is not to be underestimated. It has secured settlements with two leading housing developers and an investor in the leasehold sector, which have committed those parties to changes that will benefit thousands of existing leaseholders. The developers have agreed to refund homeowners who saw their ground rents double, and to allow leaseholders to buy the freehold of their property at a discount. Those landmark commitments will ensure greater transparency for the affected leaseholders, helping future buyers to make informed decisions without feeling pressured by time constraints. The CMA has made excellent progress, and that is just the start. We support the ongoing investigation and believe it will send a clear signal to others in the sector to follow this lead.

I referred earlier to the problem that some leaseholders face: a very high premium to buy their freehold—a process known as enfranchisement—or simply to extend their lease. The hon. Member for Weaver Vale will be aware that, earlier this year, we announced a package of reforms of the valuation process that is used to calculate those premiums. Our changes to the enfranchisement valuation process, including abolishing marriage value and prescribing calculation rates, will result in substantial savings for some leaseholders, particularly those with less than 80 years left on their lease. In fact, existing leaseholders can already buy out their ground rent when they extend their lease.

Importantly, we have announced that we will cap the treatment of ground rent in the premium calculation. This means that, in effect, the cost of buying out the ground rent will be reduced for many leaseholders, particularly those with onerous ground rents. We have also committed ourselves to enabling all leaseholders to buy out the ground rent without needing to extend their lease. That will be the case for houses and for flats.

I appreciate the urgency in wanting to address issues faced by existing leaseholders—indeed, I campaigned on that as a Back Bencher—and I reassure hon. Members that the Government are working at pace to bring forward wider leasehold reforms. However, I must once again state that I do not think that the arbitrary deadline in new clause 1 would be useful in that context. As members of the Committee will know, and indeed as, the hon. Member for Garston and Halewood, who is not in her place, said this earlier this week, leasehold law is extremely complex.

[Dr Neil Hudson (Penrith and The Border) (Con)]

I echo the Minister’s comments and thank the hon. Member for Weaver Vale for his service in his Front-Bench role. I also thank Opposition Members for the constructive approach they have taken to looking at the Bill; we have moved together positively. I also echo the Minister’s comments in saying that this tightly worded Bill is an attempt to address future wrongs, but I am encouraged to hear that the Government will take comments on board and look at existing wrongs as they move forward with leasehold reform.

[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.