Leasehold and Freehold Reform Bill

Neil O'Brien Excerpts

Report stage
Tuesday 27th February 2024 Commons Chamber

[Lee Rowley]

My hon. Friend has been a campaigner for many years on the importance of this matter, and I know how strongly he feels and how much he acts on it on behalf of his constituents. We are absolutely committed to making progress on estate management. The Bill demonstrates a significant step forward in doing that, and we will see what else we can do in the future.

[Neil O’Brien (Harborough) (Con)]

rose—

[Lee Rowley]

I am going to wind up so as to give others the opportunity to speak. To sum up, property ownership has been described as one of the bulwarks of individual freedom, and the measures I have described today are designed to give all homeowners, particularly the younger generation, the chance to gain a proper stake in our democracy. The Bill seeks to bring greater fairness, transparency and accountability to the system, and to give millions of people across the country a more secure foundation to get on in life, a stronger stake in our society and a solid platform for the future. I am grateful for all Members’ efforts to improve the Bill and for the scrutiny and debate it has received so far, and I look forward to hearing the further discussions to that effect this afternoon.

--- Later in debate ---

He was right. This Bill does not do that. It will be left to a future Labour Government.

[Neil O'Brien]

There are a lot of good things in this Bill. I give credit to the Minister and previous Ministers for introducing it, and my hon. Friend the Member for North East Bedfordshire (Richard Fuller), who has played a massive role in bringing it to the House. It effectively bans the sale of new leasehold houses through new clause 42 that we have been discussing, extends leaseholders’ rights in various ways and increases transparency over service charges.

However, there are two big things that still need to be strengthened in the Bill, which we have spoken about in Committee and on Report. The first is to end the fleecehold estate model. New clauses 1, 2, 6 and 7 are relevant to that. I was glad to hear the Minister, who understands this issue, talking about going away and considering this further, but for the benefit of the Whips, what my constituents want is not for the Minister to consider it further but to ride in like a new sheriff on a white horse and sort out the fraudsters, scam artists and various cheats who are making their lives a misery. That is what we want on the Government Benches.

The fleecehold estate scandal is just like the Post Office scandal, except that it affects more people. In considering the Post Office scandal, many people have asked, “How could we not have known about this injustice? It ruined so many people’s lives for so long, yet nothing was done.” It is the same in this situation.

My constituency has lots of these new estates. Often, the first people know of the problem is when they receive a massive bill that they did not know was coming and that was not mentioned in the notes they were given when they bought the house. And, funnily enough, it was not drawn to their attention by the lawyers of the housebuilder, whose services they are often encouraged to use. Some of these bills are a really scary size and often escalate quickly over time. A huge number of people—more and more every day—are now affected. About 20,000 estates are affected, involving between 1 million and 1.5 million homeowners and potentially 3 million or 4 million people. According to the Competition and Markets Authority, over the past five years 80% of the freehold properties built by the 11 biggest builders have used this fleecehold model.

A lot of my residents describe it as being like paying a second council tax, except that if a local councillor is not doing a good job, they can be kicked out, but it is not possible to do that to a fleecehold landlord, no matter how badly they perform. New clause 6 would address that, and I hope that the Government will address it as the Bill progresses.

I think that everyone now knows how the fleecehold scam works. Back in the good old days, the builder would build a new estate, make sure that all the roads and so on were up to spec and pay a section 106 charge. The council would then take it over and run it, and if there was a problem, people could contact their local councillor. Under the fleecehold model, it is not so simple. In effect, there is collusion between the council and the developer. The developer agrees to hand over to a different company—it might own that company itself or hand it over to the residents—the running of many parts of the estate, be it the roads, the verges or other facilities. That means that the developer pays less in section 106, the council does not have to maintain the road and effectively they split the profits while the residents and the new tenants get the new, massive bill.

It is extremely inefficient to run things in that way in the real economy. Usually, the council goes from road to road with its verge-cutting lawnmowers—it uses one simple system. On one fleecehold estate, however, a guy drives down from Oldham, which is more than two hours away, mows a tiny bit of lawn and then leaves. It is economic madness. A lot of the charges that people are hit with involve opaque management fees for nothing. It is inefficient to run things in this way in the real world. There is a ticking time bomb here. In addition to the number of people affected by the fleecehold estates scandal, the second problem is that when things are not adopted, they do not go through a gateway where we can check whether they are up to scratch. I know from the experience of my constituency that a lot of things are done badly and then a huge bill will land on the people on these poor estates to sort out the problems in the future.

We heard all about this in Committee. I pay particular tribute to Harry Scoffin, the work of the group Free Leaseholders and the residents group HORNET—the Home Owners Rights Network. They all made a powerful case to abolish the fleecehold estates model entirely. As one witness told the Committee:

“This is my property. It is my hard-earned future…normal homebuyers are not qualified to manage estates. If we are given the right to manage, if we are looking at a development of over 100 homes, it is really hard to get in touch with 100 people who will agree and be on the same page. It is not workable.”––[Official Report, Leasehold and Freehold Reform Public Bill Committee, 16 January 2024; c. 54-55, Q133-134.]

I will give a few examples from my constituency. Karen is a brilliant lady who does lots of work for her community. She moved into a new Barratt home because she was bored of doing loads of DIY every weekend on her old home. She now finds herself spending massive amounts of time fighting a fleecehold company called FirstPort, a company so notorious that a national action group has been set up against it—the details can be found on Facebook—whose work I commend.

Karen explains:

“Barratt’s encouraged us to use their nominated conveyance solicitor for which in return we got £500 towards our legal bill. We were fools to do this, but money was tight…FirstPort didn’t do or arrange any grass cutting or anything by way of a service in the first two years.”

At first the bill was £35, and this year it will be £74. Karen continues:

“Our bill for the year includes: Property Damage & Public Liability Insurance…Terrorism Insurance…Grounds Maintenance…General Maintenance…FirstPort’s Management Fees”—

the most expensive item—

“Audit/External Accountant’s Certificate and Fee…General Reserve…Health and Safety Risk Assessment…This comes to £74.64 per house.”

She says:

“In the months of December, January and February each year I must spend more than a couple of days a week working on this. It’s like having a part time job. I didn’t move house to face the possibility of having to be a director of a residents’ ‘Right to Manage’ company. I want adoption…by the local council…as it used to be.”

She is right. Members may be asking, “Why are residents of this estate having to pay terrorism insurance for a fence?” That is a very good question, to which I do not know the answer.

Let me introduce Members to James—a brilliant, hard-working constituent of mine, who has had to do tons of work on the estate where he lives. He says:

“Councils should be adopting new estates”.

He says that he has done

“about 50 days’ work…over the first couple of years. We moved in in 2018 and it wasn’t really sorted until 2021—in fact it is still going on.

Had I not been proactive we would have ended up being short-changed.”