Leasehold and Commonhold Reform

Peter Bottomley Excerpts

Thursday 21st December 2017 Westminster Hall

[Sir Peter Bottomley (Worthing West) (Con)]

I beg to move,

That this House has considered leasehold and commonhold reform and leasehold abuses.

May I first say that we are grateful for your chairing the debate, Sir David? We hope that the next time we debate this issue, it will be on the Floor of the House. The all-party parliamentary group on leasehold and commonhold reform, which now has more than 130 members from both Houses, is probably one of the largest and most active all-party parliamentary groups that there is. One reason for that is that leasehold abuse is a desperate problem, which I am grateful to the Minister for recognising through his presence in the Chamber.

We have been able to be so active because of the work of two people in particular, Martin Boyd and Sebastian O’Kelly, from the Leasehold Knowledge Partnership—LKP. They also help run the good cause campaign, Better Retirement Housing, which was once known as Carlex—the Campaign Against Retirement Leasehold Exploitation. The debate will not focus primarily on the elderly, although it could, as their exploitation is a big problem. It will also not focus primarily on park homes, another form of tenure through which people can be exploited by scoundrels, crooks, rogues and those who exploit the law by making those who are badly off even worse off; through some legal stratagems, they can manage to take away the last assets that some people have.

Leasehold is a form of residential tenure that has been abolished in most places around the world and should be ended in this country. When I say this country, I basically mean England, or England and Wales; the situations in Northern Ireland and Scotland are different, and it needs to change here. That was recognised by Martin Boyd and Sebastian O’Kelly when they started asking Parliament about the plans to bring in commonhold ownership, which should have taken away half the opportunities for exploitation. It should have eliminated the problem; it would not be a question of a small fix —it would be solved.

As it happens, since Parliament passed the Commonhold and Leasehold Reform Act 2002, things have gone wrong. We have not had the growth of commonhold, which in Australia might be called strata title. The reason for that is that the responsibility for it was left with the Ministry of Justice, and of all its concerns, the condition of people living in leasehold homes was not one.

In the years since Parliament last gave serious attention to this issue, we have had a succession of Governments from both parties, and a coalition Government, and we have had Housing Ministers who I think have not been properly advised, because their officials did not actually understand the scale of the problem. At one stage, people thought there were about 2.5 million residential leasehold premises in the country. It is quite clear from the work Martin Boyd and Sebastian O’Kelly have done —with the help of Sir Nigel Shadbolt, Sir Tim Berners-Lee and the Open Data Institute, to whom I pay credit—in getting information that is publicly available and putting it together that the actual number of residential leasehold premises is between 5 and 6 million.

I do not want to get myself too involved in some figures in the Department’s announcement at one minute past midnight today. I do not think they have the number of new leasehold houses right, but that is immaterial to the debate. What matters is that what was an anomaly in the north-west—selling houses as leaseholds when they could be sold as freeholds—began to spread. To those who say that the leasehold house was sold at a lower price than the freehold house, LKP’s work shows that that is not correct. It was just a way of exploiting leaseholders, who thought that it was a normal way of taking on a home.

Of course, when the ground rent on a leasehold was a peppercorn, there was no problem at all. When it is £10 a year and doubles every 20 years, from £10, to £20, and to £40, people cannot see the problem. However, when it starts at more than £200 and doubles every 10 years, that is a 7% increase per year.

[Mark Tami (Alyn and Deeside) (Lab)]

I praise the hon. Gentleman for all the work he has done on this; I think we have moved a long way from where we started. He is absolutely right that this is a scam, and it has spread. It is not only about the ground rent issue but all the other onerous requirements. If people want to change the flooring, they have to apply and are charged a ridiculous fee. It has also spread to the management costs of looking after the ground around the premises. It is a scam, and it needs to be treated as such.

[Sir Peter Bottomley]

I think people will accept that. I ought to say that we are not trying to solve all the problems with all forms of housing in one short debate. I will try to limit my remarks and leave space for others to bring up issues, although we do not expect the Minister to answer every point today. The Government’s announcement was welcomed by most people in the field as a step forward that is less than is needed but is dramatically more than anyone had expected.

[Hilary Benn (Leeds Central) (Lab)]

I join my hon. Friend the Member for Alyn and Deeside (Mark Tami) in congratulating the hon. Gentleman on the work he has done on this and on securing the debate. While the legislation the Government have announced to ban the practice in the future is, of course, very welcome, many people have already been caught by the scam, including constituents of mine who purchased leasehold homes from Miller Homes in my constituency, in Hunslet. They have found that the company that the freehold has been sold on to is now asking for unreasonable charges in order to buy out the freehold, which they cannot afford. Does he agree that, as well as the original housebuilders being asked to set up compensation schemes, as the Government propose, they should be required to do so? Otherwise, people can find themselves in a home that they cannot actually sell.

[Sir Peter Bottomley]

That matches the problems of some park home owners. If I had the time, I would get into the activities of Barry Weir, the Smart family and various others who have ruined people’s lives.

On solving the doubling of ground rents for residential properties, whether houses or flats, it is quite clear that there are three approaches that will work. The first is trying to deal with the problem with the first buyers. I congratulate Taylor Wimpey and Countryside on trying that, and pay tribute to them and their shareholders for making that decision. The Minister will write to the other companies to ask what they will be doing. I am grateful for that. However, that does not solve the problems for the second-hand buyers.

The second is changing the unfair terms, which are in either leasehold or some freehold contracts, where people cannot make changes without getting permission, which can be expensive. That is added to by the problem that, when a leaseholder or interested resident tries to challenge something, the property tribunals have not always worked properly.

The cost of a leasehold valuation tribunal was supposed to be limited to £500. However, as Mr Dennis Jackson discovered, he was about to lose £600,000 of equity after he and another elderly leaseholder challenged some costs. They were awarded three quarters of their claim, but then the costs went out of control. His home was going to have to be forfeited, and the surplus after the costs were paid would not go to him or his mortgage company—it would have gone into the hands of the freeholder. That cannot be right, and it has to change. The law on forfeiture is another thing I hope the Minister will be able to tell us about, either today or next year.

[Anne Marie Morris (Newton Abbot) (Con)]

Will the Minister consider the particular problem of leasehold in shared ownership? There, when you want to extend, you do not even have recourse to the courts, as there is no reference to it in the Leasehold Reform, Housing and Urban Development Act 1993. It is very serious that, with co-owners, you can effectively be treated as a tenant, with few rights and little opportunity to sell on. Even if you think you own 50% of the property, you will pay the full charge—including all the maintenance costs and any valuation fee if you purchase any more. It is a dreadful position to be in, yet it has been seen as a way of encouraging those with very little to start on the housing ladder.

[Sir Peter Bottomley]

My hon. Friend makes a point that shows the truth of what I said at the beginning: the Government’s announcement today has gone further than people expected, but it does not cover everything. There needs to be a forum in which the Government can actually listen to the voices of those who represent the unfortunate ones who are caught in a trap and find ways of solving that.

By the way, that if someone is to talk about me and uses “you”, may I ask them please use it in the plural sense? The hon. Member for Poplar and Limehouse (Jim Fitzpatrick) and others have given help over the years as well. We have to make this a “we” thing that is cross party and effective.

[Norman Lamb (North Norfolk) (LD)]

May I congratulate everyone who has been involved in this campaign so far? I am acutely aware that every time the hon. Gentleman gives way, he has to get up and down from his chair with his dodgy leg, so I apologise for that. I want to draw attention to another group: long leaseholders of the National Trust. I have a number of constituents who are in that situation. Even though the period of the lease goes well into the future—2043, in one case—they almost certainly cannot sell their homes because they have no idea what the modern ground rent will be at that date. They are trapped completely. It is really important for the National Trust to behave responsibly.

[Sir Peter Bottomley]

That is a point that the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) might raise if she speaks. My right hon. Friend the Member for East Devon (Sir Hugo Swire) sadly cannot be here because he has a Secretary of State visiting his constituency, but he asked that the question of National Trust leaseholders be raised. I also want to pass on the strong encouragement from my hon. Friend the Member for Eddisbury (Antoinette Sandbach), who has a constituency engagement and cannot be here but wishes to be associated with all that we are saying.

How is it that past Ministers failed to get a grip or an understanding? One reason—I make this direct accusation —is that the present and past chairmen of LEASE, the Leasehold Advisory Service, were not up to the job. They were supposed to be the ones providing impartial advice to leaseholders and others. In practice—perhaps, they can argue, because they not properly or fully funded—they had to raise money commercially. Their idea of raising money commercially was to run a conference where lawyers, accountants, surveyors and freeholders came together to swap ideas on how to put one over on the leaseholders. Only when the Leasehold Knowledge Partnership charity started pushing did some of the leaseholders get invited to a little bunfight afterwards. The trustees of LKP were not invited to the conferences, but some of them decided to go anyway. That is a crazy way of dealing with things. When I raised that with Deep Sagar and similar issues with Roger Southam— the present LEASE chairman, who I doubt will be chairman for very long—they did not respond in a way that I regard as proper.

My biggest condemnation is this. Who knew most about the problems of leaseholders? The advisory service that leaseholders would ring up. Who should pass on to Ministers that there are problems? The Leasehold Advisory Service, LEASE. Did it? No. Because it is pre-Christmas, I will not use the sort of language I would be tempted to use if I were in a coffee shop. We then had the problem that staffing on this side of the housing department in the Department for Communities and Local Government was not strong enough. I am glad that there are now more people there who have more of a commitment to more engagement.

The Minister needs to have a quiet word. When embargoed notices of what was going to come out at midnight were sent out, every single journalist was obviously going to ring up Martin Boyd, Sebastian O’Kelly and one or two MPs who were involved, who had not had a copy of the embargoed press notice. It would be far more sensible to look on the major charity in this field as partners, not as people who need to be approached third hand for comments. As it happens, their comments were good and supportive, and I am glad they did that. However, I think the hon. Member for Poplar and Limehouse will agree that LKP should be regarded as trusted friends.

LKP is the secretariat for the all-party group. On behalf of all of us, I would like to pay tribute to it for all that it does, together with Katherine O’Riordan, who does so much work in preparing our meetings and roundtables, which has helped to raise the general level of understanding. While talking of praise, I thank the lawyers who have given advice to both us and Government on how to make changes that will work.

I had a whole series of other issues in my prepared notes. If the debate dies out towards the end, perhaps I will speak again after the Minister, but if my colleagues on both sides of the Chamber fill up most of the time, I do not mind. We can deal with the issues that I have not raised in detail either by correspondence or if, as I asked at business questions today, the Government hold a debate in their own time on their proposals. That will get a widespread welcome, and we can then work out the timetable, the modalities of making the change and how we can get the Law Commission recommendations to come forward as fast as possible.

We can then re-gather here in 10 years’ time and say that, since Christmas 2017, substantial progress has been made for new leaseholders, who will not be exposed to all these horrors, and on the ways forward for existing owners of leases, who will be messed up unless we make a change on extending leases and the costs of getting permission to do all sorts of simple things. Sir David, I think that this debate will be remembered not just for your chairmanship, but also because it has brought us all together to make change for the better.

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[Mr Wragg]

Indeed, the lack of transparency and information for those purchasing the leasehold is a problematic area. The hon. Gentleman is right to highlight that.

The issues that people face include: paying for ongoing and increasing ground rent, often at unjustifiable and unaffordable levels; paying arbitrary fees to the freeholder for permission to make even the most minor of alterations to a property; and the financial impact of extending the lease or buying the freehold from the developer after moving in.

Leaseholders in England will normally pay an annual ground rent to their freeholder or landlord for renting the land that the leasehold property is on. However, developers are increasingly selling leasehold properties with short ground rent review periods, often every 10 years, which allow for above-inflation rises. Indeed, there have been reports, as was mentioned earlier, that some of those rises have been doubling every decade, well above inflation. Worryingly, these terms are not always made explicit to potential home owners at the time of purchase, leaving buyers open to finding themselves in vulnerable and unforeseen positions years down the line. Even when full diligence was conducted at the time, the freehold can still be sold on later to a third party, even after residents have moved in, by legally out-manoeuvring leaseholders’ right to refuse.

[Sir Peter Bottomley]

I can quote an example where, if the people had managed to buy the freehold from the developer at the beginning, it would have cost them between £2,000 and £4,000. A year later, when they applied to the so-called long-term freehold interest—often using pension money for purchasing—they were quoted £40,000. When they objected, that came down to £30,000, but they were still left being completed shafted.

[Mr Wragg]

There was certainly an iniquity there, which needs to be resolved.

Like many right hon. and hon. Members present, I am dealing with a number of cases and complaints on behalf of my constituents. I am pleased to be able to put some of them on the record in this debate. A resident of the new build estate at Strines in my constituency informs me that he is entering the fifth year of his lease, and the prospect of his ground rent increasing is causing him a great deal of trepidation. He is paying £250 plus a £300 service charge. Along with the worry about the additional strain on his finances, he is rightly concerned at the possibility of his property becoming less attractive for sale.

Several residents of the new build Offerton Park estate tell me that property developer Bellway recently transferred the freeholds to a financial management company called Adriatic Land 6, so they are now subject to above-inflation ground rent increases every 10 years. They were not offered a chance to buy the freehold themselves at a reasonable cost.

The residents of Davies Court in Romiley, with whom I had a very enjoyable meeting last month, and who are predominantly retired, face annual ground rents of £450. That is £450 being demanded from pensioners for the ground their houses stand on. The managing agency for the building, FirstPort Retirement Property Services Ltd, also charges residents spurious administration fees when homeowners carry out improvement works, such as installing fitted wardrobes or new bathrooms, at their own expense. The company even attempted to charge one retired lady an £80 administration fee when she bought a cat. She refused to pay.

These are just a few examples from my post bag that highlight the unfair and, in places, absurd situation.

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[Mary Glindon (North Tyneside) (Lab)]

It is an honour to speak under your chairmanship, Sir David. I congratulate the hon. Member for Worthing West (Sir Peter Bottomley) and my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) on securing this debate. Notwithstanding the announcement that was made today, like other hon. Members I have a number of constituents who have been adversely affected by the vexed issue of leasehold versus freehold ownerships.

Many people in north Tyneside have purchased homes where freeholds have subsequently been sold to a third party that puts extortionate prices on the purchase of leases. One couple who bought their new home five years ago were told that they could buy the freehold for about £4,000, but the sales rep discouraged them, saying that they would not have to worry about it for a couple of years. It was already an expensive time for them so they decided to take just the leasehold option. Since then, they have been informed that their freehold has been sold on twice. They contacted a specialist solicitor, but could not afford the fee to ascertain the cost of enfranchisement. They fear that they may never be able to buy the freehold and that they will be left with an unsaleable property.

Another constituent is caught in what is known as the “fleecehold” situation. She is a freehold owner of a new build house but has received an invoice for service charges from the estate management company on behalf of the developer. She was a first-time buyer and vaguely remembers something being mentioned about a rentcharge. When she queried it, she was told that she was buying the freehold and that that was an estate management charge towards the upkeep of the estate. She paid the amount via her solicitor for the first year and heard nothing about it after that, until she received an invoice a couple of months ago.

Subsequently, she looked at her responsibilities regarding the fixed rentcharge. She found that it had now doubled, with 43% of fees to be paid to the management company. What concerns her most is a statement in her transfer document that says that the rentcharge is associated with rights of re-entry and that if it falls into arrears, the rentcharge owner can repossess her property and enjoy the same rights as if the transfer had never been made. That was never made clear to my constituent. If she had known, she would not have bought her so-called freehold property.

My constituents are right to be concerned about finding themselves in such a position in relation to the biggest and probably most important purchase they will make in their lives. I am glad that 20 hon. Members, some of whom are here, supported my recent early-day motion on fleecehold, which asks the Government

“to investigate this practice as a matter of urgency and with a view to first clarifying the law and then outlawing this practice.”

I hope the Minister will make reference to that.

[Sir Peter Bottomley]

The hon. Lady’s early-day motion is very important. The Government should consult on whether it is possible to refer the matter to the Competition and Markets Authority and have that kind of clause struck out as unfair, unreasonable and unenforceable.

[Mary Glindon]

I am grateful for the hon. Gentleman’s straightforward statement.

It cannot be right that sales reps quote prices for the freehold but do not deliver, or that a freehold can be sold to a third party without telling residents. Nor can it be right that solicitors do not inform home buyers of the pitfalls, or that residents find themselves with charges and restrictions far beyond the original agreement.

The list goes on, but in the end, like my constituents, current home buyers are left worrying about what that means for reselling their houses. Although the Government’s announcement is welcome for future home buyers, I hope they take note of one of the country’s leading building societies, Nationwide—of which I must declare that I am a customer—which has changed its lending policy to protect people who buy new build leaseholds. It wants the Government to take action by preventing the Help to Buy equity loan being available for sites where new houses are being sold on a leasehold basis.

--- Later in debate ---

[David Hanson (Delyn) (Lab)]

I thank the hon. Member for Worthing West (Sir Peter Bottomley) and my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) for securing this debate. I shall say straight away that I welcome the Government’s action last night, which will be helpful for the future.

My concern, which relates to that of other right hon. and hon. Members, is about what happens between now and the point at which any legislation is implemented, and what happens for all our constituents who have faced difficulties and challenges in the past. Those challenges have been so difficult for some of my constituents that they do not want the estates and houses that they have been involved in to be publicly identified because they fear a further loss of income on any future sale of their property.

Before I ask the Minister some specific questions, I will touch on a number of key areas of concern—similar to those outlined by other hon. Members—that have been raised with me: first, the lack of information at the time of purchase, which has been mentioned already; secondly, the concerns and information around the onward sale of freeholds to third parties; thirdly, the issue of what happens on split sites, which my hon. Friend the Member for Weaver Vale (Mike Amesbury) mentioned in his intervention; and fourthly, the element of devolution.

On the lack of information, I feel like I am in an echo chamber. The points that have been raised with me have also been raised throughout the debate, but are worth repeating. My constituents, of whom many were first-time buyers purchasing with Help to Buy and who were grateful to the Welsh Assembly and the UK Government for helping them, were forced to use solicitors recommended by the building company; did not get an explanation about what freehold or leasehold mean; did not get an explanation about potential future charges; never had it explained that those freeholds could be sold on to a third party, which might impact on their finances at a future date; and were offered different prices by the same company for the same freehold.

For the same house and the same freehold companies offered £1,500, £5,000 and £7,500 at the same time at purchase. People said, “Well, I cannot afford that now because I am on a Help to Buy scheme. I’ll undertake whatever you think is best for me,” and the advice was to have the leasehold, so people have found themselves on that. We need to revisit that for the future and get some clarity from the Minister about what that means now for people who have undertaken that scheme recently.

Onward sale is important. I know that the Minister will deal with that for the future and will consider completely banning the sale of leaseholds as a matter of principle, but I have a situation now where my constituents bought a property and the leasehold from what they thought was a reputable company, but found that the freehold has been sold on to a third party. Shockingly, my constituents did not even know and were not offered the chance to buy it at that time. In one example, one person happened to see the sales director of the company on site and asked to buy the freehold, which was sold to them, but the freeholds of the other 21 properties were sold to a third party. Only later did my constituents find out that that sale had taken place. They were not offered the chance to purchase as a first port of call, even if they had wanted to.

[Sir Peter Bottomley]

I think I am right in saying that the law is that if they had been in a residential flat, the freehold could not have been sold without it being offered to them. That should have been the law for the houses, but I suppose it was not because no one imagined that anyone would ever sell a leasehold house again.

[David Hanson]

I am grateful for that clarification.

This is not about the future; I am sure that the Minister is already receiving representations on a cross-party basis about what should happen in future. It is about how we deal with the past. For example, my constituents who wished to purchase the freehold from the company that had bought it—as they found out only at a late stage—not only have to pay an initial investigatory charge of several hundred pounds, but a premium of £1,000 on the purchase price. Many of the people in that position are either first-time buyers or retired. One of them, a former constituent of the shadow Secretary of State, my right hon. Friend the Member for Wentworth and Dearne (John Healey), who moved to my area to retire, has raised the issue with both of us. What is the situation with buy-back at a fair price and with fair charges? How will the Minister deal with those issues?

I mentioned split sites. There is a very big development site in my constituency, and when this scandal broke halfway through the development, the company in question decided, “Let’s get out of this quick—let’s forget this and try to limit our liabilities. We’ll sell the freeholds to the customers buying the houses.” Half the massive estate of 400 or 500 houses now has a leasehold with the company, and the other half is being developed without leasehold. How will somebody who has bought one of the houses with a leasehold ever be able to sell it, when—as my hon. Friend the Member for Weaver Vale pointed out—owners of houses on the other side of the street have a different situation as regards the leasehold and potentially different liabilities? Nobody will buy a house from the half of the estate with leaseholds if they can buy one from the half without.

I approached the company, which I will name; it is Persimmon, whose chief executive’s bonus this year was £118 million. When I asked whether it would sell or give the freehold to my constituents on the same basis as to the others, the answer was no. It said that it would sell it for £3,750—at a time when it is giving £118 million to the chief executive alone. My constituents, who have stretched themselves to buy their house in the first place, cannot afford to pay that. I then asked the company whether it would ensure that it did not sell the ground rent on in the meantime. Very gratefully, I am sure—that was sarcasm, for Hansard’s purposes—its reply said that

“we will not sell the ground rent to any third party until at least two years following the purchase of their leaseholds. In the circumstances we are prepared to confirm a minimum date of 14 July 2019, being two years from the date of our meeting.”

So Persimmon has said that it will not sell that on for the next two years, but there is no guarantee beyond that. My constituents cannot sell their houses, because over the road similar houses are being sold as freehold, but they are finding it difficult to pay the £3,750 because they are already stretched. That is particularly important for the Government, because many of these people are on Help to Buy. When the value falls, not only do the constituents struggle, but the Government lose out on any potential sale.

My last point relates to my personal circumstances. My constituency is as near to England as the south side of the river Thames to the House of Commons; we are literally two or three miles across the border. My hon. Friend the Member for Alyn and Deeside (Mark Tami), who was present earlier, is in a similar situation. The majority of houses in my constituency are built by companies based in Manchester, in the north-west of England. What discussions has the Minister had with the National Assembly for Wales, which has devolved responsibility for housing issues, about his proposals and plans for the future? If he introduces a ban in England, will it cover companies based in England on sites based in Wales? If he introduces regulations, what will the parallel consequence be for the National Assembly for Wales? My constituents are using these schemes, but the materials have been made in England, the profit is going to England and the policy was developed in England. That needs to be clarified, so will the Minister tell us what is happening with the Welsh Assembly?

I have three solutions for the Minister. First, he could work with the National Assembly for Wales, as well as in England, to give a definitive right to buy to constituents who have a leasehold with a third party or a particular company. There is even an argument that he should exert real pressure for a right to be given the freehold as part of the price. In my constituency, houses are being sold at the same price freehold as they are leasehold. That is simply not tenable. It is an extra piece of profit for a company that is already paying its chief executive £110 million.

If the Minister cannot get freeholds given freely, he needs to consider a price cap—and if he cannot solve that problem, he should at least consider a price cap on the charges that may accrue for future generations. The continued rise of the price as regards leaseholds is not acceptable. If he cannot find a mechanism to compensate people, he could legislate to freeze the price at its current level.

The Minister should also consider helping people who have bought a house on the Help to Buy scheme, but who now wish to actually buy what they thought they were buying in the first place: the land on which the house was built. Introducing a mechanism to give financial support to them to buy the freehold would be an extremely good contribution.

I welcome what the Minister has done so far. I know that we are in a pickle and a mess, although in a way I am relieved to hear that the problem affects not just people in Delyn and north Wales, but many others. There are real challenges for the people who are in this mess, and the Government and the Welsh Assembly have a duty and a responsibility to try to resolve it.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

It is a pleasure to serve under your chairmanship, Sir David. I thank the hon. Member for Worthing West (Sir Peter Bottomley) and my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) for introducing the debate. I also thank our colleagues in the Leasehold Knowledge Partnership, who have been a great help to me, both as a constituency Member and in my former housing role on the Opposition Front Bench. Frankly, they have been doing the work that LEASE should have been doing, but they have not been funded to do it by the Government. They have done a sterling job representing leaseholders and supporting the Members, local authorities and others who have supported leaseholders in recent years. I was on the Front Bench when we debated leasehold and commonhold reform on 20 December 2016 —a year and a day ago—but I will not repeat the arguments of my speech in that debate, which can be easily found.

There are many leaseholders in my constituency who live in the blocks of flats that have been built there in recent years, particularly in Brentford, my home town. Things have moved on in the past year, and many of us are grateful for the new tone from the Department, which can be seen from the release that it issued last night at midnight. Relatively recently, however, we have seen a racket growing, particularly from developers.

Ground rents for houses mean that people who had thought they owned their home actually own a depreciating asset. The racketeers are withholding the right to own and the right to manage. Freeholds are being sold on without notice. Links between freeholders, conveyancing solicitors and managing agents are far too close. People are having fees demanded of them on conveyancing that the solicitors did not originally tell them about, as well as fees for changes to homes, building extensions, sub-letting and so on. I was perturbed to hear from my hon. Friend the Member for Heywood and Middleton (Liz McInnes) of people being charged again down the line.

That is absolutely shocking. The examples we have heard already in this excellent debate show that elements of the private sector, instead of doing their job as developers and in some cases managing agents, are frankly taking homeowners for a ride, and that has to stop. We have heard about a series of things that are symptomatic of how freehold ownership has become an asset class in itself. Money is being made not on buying and selling, but on owning and ripping people off, and that has to stop. The extent of the problem is illustrated by the fall in the share price of McCarthy & Stone and other developers on the back of the Government’s announcement this week. That shows how much of their asset value is based not on what we should think of as their core business, but on these appalling practices that we have been hearing about.

I am grateful to the Government for the movement they have made on new build leasehold houses, ground rents and protecting leaseholders from possession orders. I also welcome the additional staffing in DCLG, and I hope that those things are an indication of a new-found commitment to serious change. Will DCLG fund the work recommended in both parts of the Law Commission’s report? The first part recommended a simplification of the law and improved fairness and transparency for leaseholders. The second part of its release earlier this week looked at the assignment of leases under new contracts, ground rents, which the Government mentioned, high fixed service charges and fees on assignment.

The single biggest opportunity for the Government is the introduction of a commonhold law that works. England is perhaps unique in that we have a lack of true rights for the owners of flats. We should learn from similar jurisdictions, such as Australia, and nearby jurisdictions such as Scotland. Previous Tory and Labour Governments have tried introducing commonhold law that works, and my right hon. Friend the Member for Wentworth and Dearne (John Healey) tried to do that. I am sure he will refer to that later this afternoon. Let us have another go at ensuring we get a commonhold law that works, because it would put a permanent end to the racketeering practices we have heard about today. The Minister can be assured that if the legislation he proposes is good, he will have support from many Opposition Members.

Among other things, the Government need to end the false departmental divide between the Ministry of Justice and DCLG and bring all the issues into one place. Like other Members, I ask the Minister to address the situation of the hundreds of thousands of victims of the current law who seek recompense for the failures so far. We cannot let them be left high and dry. We also need to address the challenge for residents’ groups in leasehold blocks of flat. Let us not forget that residents’ groups work as volunteers. Many have gone through or are going through the ever-twisting hoops to set up a resident management company. Some are trying to seek ownership. Even when they do not have the kind of freeholder that we have heard about today, that is a lot of work in their own time, and they need recognition and support for that. I hope the Government will take that into account.

Finally, I want to talk about post-Grenfell fire cladding. In my constituency, we have more than 300 leaseholders in the Blenheim Centre in Hounslow. The freeholder, Legal & General, has agreed to pay the full cost of the recladding that will need to be done and the back pay of the fire marshals, who were costing the leaseholders an awful lot of money. The total bill could be £10 million. I am also pleased that Notting Hill Housing has agreed to fund the recladding in the modular housing at the Paragon development in Brentford. That is not because of inflammable cladding, but because of the lack of fire breaks. My understanding is that those two cases are exceptions to the rule. There are an awful lot of leaseholders in flats across England where the freeholders are not prepared to pay the cost of recladding. There is an awful lot of uncertainty, and we have not seen a response of any substance from the Minister. We look forward to hearing that today.

[Sir Peter Bottomley]

The hon. Lady has raised a point that the hon. Member for Poplar and Limehouse also raised. LEASE has been given extra responsibility for trying to help people living in blocks that may be affected by post-Grenfell issues, but what is presently on the LEASE website is totally inadequate. It may be a start, but it is not good enough. LEASE should get together with the LKP to use the LKP information. That information has already been of advantage to a number of residents, and it could be of advantage to more. It will not solve all the problems, but why not try to put all the information together, rather than staying away from some of the people who have been helpful and putting responsibility on those who have not?

[Ruth Cadbury]

I concur with the hon. Gentleman’s comments. He is absolutely right. Mere words of comfort and a promise of mediation are not what leaseholders are looking for. Many leaseholders are working people or retired. All of their wealth and quite a lot of debt is tied up with their homes, and there is an awful lot of stress and worry across the country on the issue. I hope we will get something from the Minister today.

All that is left for me to do is to wish merry Christmas to you, Sir David, to fellow Members and to the many parliamentary staff who make our jobs possible in this place.

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[Sir Peter Bottomley]

It goes a stage further than that. There is a case going to appeal—the Stanley v. Mundy case—where the Wellcome Trust, which bought freeholds from the Henry Smith Charity, has managed to persuade a property tribunal that the rate at which people pay for extending leases should be much higher than at present. In fact, most of the evidence is that it should be lower. Governments should get involved in that and produce a chart that gives fair prices. If freeholders want to challenge that, they should guarantee to pay the costs of the leaseholders—not the other way round.

[Jonathan Reynolds]

I absolutely agree. My distress is even greater after hearing about that situation; action like that will cause great distress across the country. As I say, I cannot believe that any organisation to whom leases have been sold on, these leaseholders, asset classes, or any pension fund that has got involved in investing in them, would not have made a reasonable assessment of the political risk involved. It is clearly unjust. I cannot imagine any colleague from any party standing up to defend the kind of constituency examples that have been shared in today’s debate.

The time is clearly ripe for action, and there is clearly a consensus for strong action. My only plea to the Minister would be this: for many constituents, this matter is urgent. It is blighting their lives and affecting their quality of life. It is clearly affecting the liquidity of the housing market, and whether people can make reasonable decisions about their households going forward. We need the action to be as swift as possible. Clearly, it is not straightforward and there are issues to resolve, but I cannot believe that anyone who has listened to today’s debate, or others that have taken place, would not agree that there is consensus for political action. Please, Minister—let us get on with that as soon as possible.

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[Alok Sharma]

As the hon. Lady knows, we are meeting in the new year to discuss the issue of the charity loophole and specifically her case. My officials are in touch with the charity, and I would be very happy at that point to discuss the details. Of course, if she wants to feed some suggestions into the work that we are doing more widely with the Law Commission, I would be very happy to receive them from her.

[Sir Peter Bottomley]

I suggest that either the Minister or his officials should have a round table with the charities, the National Trust and the Charity Commission, and spell out to those people that, although the law at present may give them the right to say no, they ought to ask whether it fits with their charitable purposes to do so. Perhaps they ought to say yes, because charities are supposed to do good for people.

[Alok Sharma]

My hon. Friend makes an interesting suggestion. I will take that away and come back to him.

Certainly, in bringing forward legislation we will continue to work with stakeholders, including the APPG, to ensure the best outcomes for consumers. We have heard many ideas in this debate. We want to ensure that our plans do not have an adverse impact on supply, and we will work with the sector to consider the case for exemptions.

It is important that we get the detail right. We are committed to ensuring that our reforms deliver a fairer and more transparent system for both existing and future leaseholders, and to stamping out the leasehold abuses that have existed to date. I have written formally today to the hon. Member for Ellesmere Port and Neston to confirm that I welcome the opportunity to meet him early in the new year to discuss further his thoughts for a Bill. I am open to a dialogue with the APPG about our thoughts as we move forward.

A number of colleagues have talked about building regulations. As we know, on Monday Dame Judith Hackitt published her interim independent review of building regulations and fire safety. It is important that leaseholders have access to specialist advice to understand their rights. The hon. Member for Poplar and Limehouse, the hon. Member for Brentford and Isleworth and my hon. Friend the Member for Worthing West mentioned LEASE; we can confirm that the Secretary of State announced on 4 December that the Department for Communities and Local Government is providing additional funding to the Leasehold Advisory Service over 2017-18 and 2018-19 to provide a dedicated advice and dispute resolution service for those leaseholders affected. I can also confirm that we will conduct an internal review of the wider landscape of support and advice to leaseholders, to ensure it is fit for purpose in the new legislative and regulatory environment.

To cover a few other points that were raised, the hon. Member for Greenwich and Woolwich (Matthew Pennycook), the hon. Member for Battersea (Marsha De Cordova), the hon. Member for Poplar and Limehouse, the hon. Member for Brentford and Isleworth and, of course, the shadow Minister raised the issue of costs related to cladding. The Secretary of State has said that local authorities and housing associations with which we are engaging are not passing on the costs of essential works. He has also encouraged private sector freeholders to follow suit, and some have. I spoke to L&G, the company mentioned by the hon. Member for Brentford and Isleworth, and I am delighted with the approach it is taking. I realise there are some instances where costs are being passed on. That is why we are providing additional funding to LEASE, as I have just mentioned, to provide leaseholders with the advice and support they need.

Colleagues have raised a number of issues. The right hon. Member for Delyn asked about homes built in Wales by companies that are not from Wales. Of course, whether Wales abolishes leasehold is a devolved matter. However, I can confirm that my officials have been working with the Welsh Assembly to inform them of our plans on leasehold, and we will continue to liaise with them.

My hon. Friend the Member for Worthing West talked about forfeiture. I can confirm that that is being considered by the Ministry of Justice. There are protections in place, but I agree that reform is needed. We will continue to work with the Ministry of Justice to take this matter forward. I also noted his point about the National Trust, but as he knows, National Trust properties are exempt from enfranchisement under the Leasehold Reform Act 1967.

If I understood him correctly, my hon. Friend the Member for Witney (Robert Courts) asked whether we were looking to abolish leasehold. Leasehold needs reform, and although in certain cases it is an established structure that can work well, we want to make sure that there is fairness in the way that the system operates.

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[Sir Peter Bottomley]

I am grateful to you for chairing the debate, Mr Bone. We all thank the Minister, not only because he has responded to many of the points made today, but because he has been one of the people responsible for carrying forward the work and initiative of his predecessor, Gavin Barwell. When Gavin Barwell spoke at the LEASE conference a year ago, he shocked people by telling the truth: LEASE should be there for leaseholders and nobody else; that we should be unequivocally on the side of the ordinary person; and that those looking for good, fast-buck investments in the leasehold field better start thinking of something different.

On the Minister’s point about the National Trust, although it may have an exemption, as our right hon. Friend the Member for East Devon (Sir Hugo Swire) has said, why should it choose to use it? Is that right, fair or necessary? The same applies to charities in the north-east, too.

The debate was essentially about two points, and one was whether we can get commonhold to work. I have in my hand a paper from the 11 September meeting of the all-party parliamentary group on leasehold and commonhold reform by Philip Rainey QC, who talks about the necessary reforms needed to launch a commonhold mark 2. He talks of how to level the playing field by eliminating the comparative benefits of long leasehold and how the playing field can be tilted towards commonhold. He suggests some very simple incentives—one of which might be a change to the stamp duty land tax on development land, which would give a simple signal and would probably get people moving quite fast.

He also says there should be some kind of compulsion or sunset clause, some way of dealing with conversion and then a relaunch. I will not go into the rest of his paper, but it is available to the Department and it should be taken forward. Again, perhaps a roundtable on that, with experts brought in, would be useful.

A lot of professionals are involved in the leasehold field, and the regulatory system has failed. I apologise if I confused the wrongs of Dudley Joiner with the wrongs of Benjamin Mire in a previous debate, but Benjamin Mire was in the trade and held judicial office in the property tribunal. He was investigated by the Judicial Conduct Investigations Office, which was about to throw him out of that office, but he resigned just before it could. He had clearly committed an offence under the Royal Institute of Chartered Surveyors’ terms, yet clever lawyers, who delayed the case beyond the time limits, allowed him to get away scot-free.

Dudley Joiner, with this Right to Manage Federation, has, through various degrees of insolvency and poor advice to a number of leaseholders, managed to get leaseholders to lose lots of money. He is the sort of person who could resign from one of the regulatory bodies—it is not compulsory to be in them—and apply to join another. The same thing applied when the Tchenguiz interest owned Peverel, which was involved in several of the biggest leasehold scandals over the past 20 years. Peverel and its subsidiary, Cirrus, abused their position in blocks of leasehold flats, but they could actually apply not to be struck off by the Association of Retirement Housing Managers.

The same applies to Sally Keeble, who was formerly a Member of Parliament, and who resigned as regulator of the Association of Residential Managing Agents and gave five good reasons why voluntary regulation was not working—some were to do with clients’ funds and others to do with the powers that people should be carrying forward. We then come to the person we were told was appointed under the terms of the Nolan principles, Roger Southam, the present chairman of LEASE. I can send to the Minister privately the list of points, which I am sure his Department has already, of how Roger Southam used to advertise how he could help to get more money out of leaseholders. How can that sort of person, under the Nolan principles, be appointed to chair LEASE?

When people were appointing other members of LEASE, did they consult explicitly with the Leasehold Knowledge Partnership and its trustees—people who would not actually want to run LEASE themselves, although they provide equivalent services in some ways—on who they think would be a suitable appointment? It seems to me that one always needs to ask people in the field what their views are. That is only consultation, not necessarily giving them the power of decision, although some of the things they knew should certainly have been used as a veto against those making the appointments.

I could go further, but before we come to the end of the debate and the year let me list some points. We have heard a whole series of examples of leasehold abuses. On leasehold enfranchisement and the extension of leases, which brings us to the James Wyatt point through Parthenia and the issue of hedonic regression, I think the Government really have to get involved in that case. We should not let it be possible for the law to be set by judges, just because expensive barristers are clashing heads like a couple of bulls pushing against each other. We should actually ask what the public purpose, the public policy and the public interest of the law is and get directly involved.

I referred to commonhold and the ground rent issue, and we can certainly learn from the ground rent redemption issue in Northern Ireland, which I hope Ministers have looked at; from today’s announcement, it looks as though they have. I would spend more time on park homes if I could. However, it is worth mentioning, in case the Devon and Cornwall police is watching. Has it yet managed to find the 40-foot-long trailer stolen from Sonia McColl’s yard? She took up the issue of park home residents and, like Tony Turner, with his residents’ alliance, has been subject to incredible abuse. Of course, the biggest abuse is to have one’s home stolen, and hers has been.

I spoke about the regulation of managing agents. We have not fully dealt with the right to manage, but essentially, if any group of leaseholders asks for the right to manage, the presumption should be that they get it. They should not have to go through legal hoops and try to find every other leasehold owner to try to get permission. The presumption should be that, if they ask for it, they should have it. I am glad that the Law Commission programme has been referred to. Cladding has been covered by the hon. Member for Poplar and Limehouse.

This debate is only a stepping stone, but it is an important one. The people who deserve the credit are our constituents who raise the issues with us. We are only here to be the functionaries. We should be the people who turn their cases of injustice into a system in which it does not happen to more people in the future, and in which those who are already stuck in these terrible conditions have the chance of an easier life. Someone who has a home—whether a park home, a leasehold home or a freehold home, or if they are a tenant —deserves a fair life and to not spend time worrying about their money or their lives. I finish by wishing everyone a merry Christmas.

Question put and agreed to.

Resolved,

That this House has considered leasehold and commonhold reform and leasehold abuses.