Leasehold Reform

Peter Bottomley Excerpts

Thursday 11th July 2019 Commons Chamber

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

Not only do we think it is a scandal, but the buyers—the finance company—must have known it was a scandal. If the Government, Law Commission or Parliament come forward and say that those houses can be enfranchised on the basis of a formula that means that those buyers do not get their expected bounce of bonus or excessive profits, it will be their fault because they knew.

[Bob Blackman]

I thank my hon. Friend for that. He is absolutely right, and I compliment him on the measures he has taken on behalf of leaseholders over many years.

The issue of legal advice for individuals who are purchasing, particularly for the first time, is crucial. We found when we took evidence that developers give incentives, discounts and all sorts of other encouragement to first-time buyers to use the same solicitors as they are using. Of course, these solicitors are then acting on behalf of both sides and are not acting independently. That must be bad and this must be made clear in legislation.

On our recommendations on ground rents and onerous terms, the Government have said they have taken note but they have taken no action. The key here is that the Government seem to be driving the view that voluntary action is sufficient. After looking through all the evidence and hearing everyone who has come before us, my view is that voluntary action is not acceptable: we have to legislate and force developers to do the right thing, otherwise they will not.

I also think we have to draw a distinction. We need to legislate to protect people going forward and then consider retrospective legislation to right the wrongs that have been done to leaseholders over many, many years. I also believe that we should legislate to intervene on existing ground rents that are onerous—not only should we do this for future cases, but we should intervene to correct the position on existing leases, because we now have a position where first-time buyers have entered into a lease and cannot sell their property. It is outrageous that we have allowed them to get into that position.

The Chair of the Select Committee has mentioned the position on permission fees. It is outrageous that someone can put a conservatory on a property that they have bought and suddenly the developer is saying, “I want thousands of pounds because you put something on the back of your property.” That should be outlawed.

On service charges, sinking funds, estate management, enfranchisement and forfeiture, it is not good enough for the Government just to lean back and say, “We note what you’ve said and we will consider what needs to be done.” We need legal action. I suggest that when the Law Commission and the CMA report, we come forward with a substantial piece of primary legislation to correct this market, as that is what will be needed. Unless we commit to doing that right now, these developers will carry on fleecing their customers.

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[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for giving us another chance to debate this issue. I have spoken before on this issue many times, and I intend to keep doing so until we have some action, because I cannot stress enough just how big a problem it is in my area.

The hon. Member for Hendon (Dr Offord) rightly pointed out the impact on London because of the high proportion of flats sold here, but the figures helpfully provided by the Library show that in 2018, 16 of the top 20 constituencies for leasehold house sales were in the north-west, and staggeringly, 14 of those were in Greater Manchester. I know how bad this is in my constituency, and my constituency is not even on that list—what must that mean for those other places? The argument that there is some sort of price differential between freehold and leasehold, when the market is so concentrated in certain parts of the country, has nothing going for it whatsoever.

In a previous debate on this issue in Westminster Hall, I said:

“I am genuinely shocked by the stories I hear in my constituency and that we have heard in this debate. I am not a man prone to hyperbole, but I would go so far as to say that the only fair description of some of the practices we have heard about in this debate is legalised extortion. There is simply no relationship between the services being rendered and the costs charged for them.”—[Official Report, 21 December 2017; Vol. 633, c. 471WH.]

I stand by every word of that statement.

The problem in my constituency is with ground rents and service charges, and we need serious action on both. For example, residents of a block of flats in the Hattersley area of my constituency were quoted £32,000 just to paint the hallways—not to paint the flats, but just the communal hallways. Frankly, they could be painted with gold, and it should not come to £32,000. Another constituent was charged £180 just to ask what it would cost to buy the freehold—just for the inquiry and the quote that came back. Frequently, worse than that, people simply do not get a response or the information when they make an inquiry about buying the freehold. Often service charge bills are received with no information and no breakdown, sometimes even charging for works that predate a managing agent taking over. Those are just a fraction of the stories I could tell. I could use more than my five-minute allocation simply reading out examples.

Like colleagues who are present, I have made many of these points before. These are always good debates. There is a great deal of expertise, good will and consensus, but frankly, I have seen everyone in this Chamber today in previous debates. This is a group of people who really know the problems, but we need some action, because we are sick of making these points.

[Sir Peter Bottomley]

Does the hon. Gentleman agree that the best thing to do in England or England and Wales, with, I hope, the Law Commission’s support, is to pass a simple statutory instrument that provides for a table of information, so that instead of people having to ask and argue with surveyors, they can look at the table and see the number of years, the ground rent and so on?

[Jonathan Reynolds]

I have huge respect for the work that the hon. Gentleman has done on this issue, and I could not agree more.

There are five things that I would like to see happen. First, the sale of leasehold houses should be ended—that is obvious, and I think there is no disagreement about it. Ground rents should be capped at a percentage of the property value or an overall financial sum. The sum of £250 a year has been raised, and I would be more than happy with that. As the hon. Gentleman said, there should be a simple right-to-buy formula that is not bureaucratic, with additional administration or legal costs, but that can be used in every case to let people purchase their freehold. There should definitely be a crackdown on unfair terms and opaque service charges. Ultimately, we need to make it as simple as possible to let residents take over if they are in that flat situation. Some people will not want that, and there are some reputable people in the marketplace providing services in that situation, but the power should be with the residents to make those decisions.

I will conclude, because I know how many Members want to speak. I cannot stress enough how much people want to know when they will have a simple and straightforward way out of this. I want to make a point that was touched on earlier about the impact on investors. It is true to say that there is another side to this. We have heard about the bad deal that our constituents get, and those on the investor side who have bought the leasehold and freehold rights are clearly getting a very good deal out of it. I want to make two points on that. Colleagues will be aware that when I am not speaking from the Back Benches, I speak from the Dispatch Box for the Labour party’s shadow Treasury team as the shadow City Minister.

First, institutional investors—particularly those based in this country—have some of the best research and analytical functions of any businesses going. They assess all kinds of risk, including political risk, and I cannot understand how anyone would invest substantially in this area without knowing the political risk that has been raised frequently about the will of Parliament and our desire to see change in this area. Secondly, there are many precedents of this House legislating to limit unfair contract terms and conditions because the power balance and the relationship between both parties is not right. I simply cannot emphasise enough how much that applies in this case.

This is symptomatic of how our housing market does not work anywhere near how it should. I do not think that our land allocation system works. I do not think that the design of new homes works particularly well. I do not think that the power of developers is right in our system. I do not think that the affordability of homes is anywhere near correct, and I do not think that this leasehold system is fit for purpose at all. We can influence some of those things at a local level, and in my constituency we are trying to do that, but some things require parliamentary legislative action. This is one of them, as I think we all agree, so let us get on and do it.

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

We owe progress to a number of people. I want to mention Lynn Boyd first, as she is the one who encourages Martin Boyd, who, along with Sebastian O’Kelly, has created the Leasehold Knowledge Partnership. They have also got better retirement solutions to deal with exploitation in the retirement market. Without them, I do not think that those MPs who have been trying to organise would have got even halfway as far as we did.

I also pay tribute to the National Leasehold Campaign, and to Jo, Katie and Cath, who provided that spark and allowed the north-west MPs to understand the strength of the issue. Together they and the north-west MPs have got both practical progress and media interest, which matters. If anyone at the BBC is listening to this debate, could they please nominate one or two housing experts with whom we could interact? Often when things come up in this part of the housing field, we do not know who to talk to. We do in health, finance and politics, but we also need it in housing.

I should also mention Gavin Barwell, who, both as Housing Minister and as chief of staff to the Prime Minister, got the Departments to start moving and told LEASE at its conference that it was to be unequivocally on the side of leaseholders. Martin Boyd has given a direct list of the number of times when LEASE, through its conferences and in its publications, allowed—and, I would say, encouraged—expertise in how to exploit residential leaseholders.

I declare an interest, as I constantly do: if I ever forget, please correct me. I own a lease—actually, I have paid for a lease in my constituency. As it happens, the other five leaseholders and I have bought the freehold. We had a good freeholder and a good managing agent, and we are happy. I have contracted to buy a leasehold flat that is being built and may be completed in three years’ time. If there is a restriction on ground rents, I might benefit from that as well. That is not the reason why I support the Labour party’s policy in this area. In a different debate, I could have a knockabout with Labour on some of their failures on housing, but on lease- hold I think the interaction between the Government, the Opposition and Back-Bench MPs will lead to significant progress, unmatched since George Thomas, Lord Tonypandy —one of your predecessors, Mr Speaker—campaigned on leasehold abuse in his first 20 or 30 years in Parliament.

There is not time in this debate to deal with all the issues, but I hope that the Chair of the Select Committee will accept praise from the whole House for the way that they, with their witnesses and advisers, have produced a report that exceeded expectations and pretty well met the needs of the situation. I encourage everyone to read that report, including the reasons for its recommendations, and say, “Let’s get on with it.”

I want to add to the list of the goodies Bob Bessell of Retirement Security. He has developed well over 1,000 homes for people in retirement with security and without ground rents. I give notice to my hon. Friend the Minister on the Front Bench that perhaps in another parliamentary Session we should return to the issue of ground rents, which the Government seem to have been persuaded are necessary by Churchill and other retirement developers. If Bob Bessell can do it for well over 1,500 homes, so can Churchill, McCarthy & Stone and the others.

I do not know how much money the firms have spent on lobbying, and I know that one of them may indirectly have given what appears to be a rather large donation to LKP—we will come to that on another occasion—but they have spent an absolute fortune trying to trip up the people who are the goodies in this campaign. I am glad to speak after my friend the hon. Member for Poplar and Limehouse (Jim Fitzpatrick) and to say that he is one of the goodies, together with the hon. Member for Ellesmere Port and Neston (Justin Madders) and the right hon. Member for Kingston and Surbiton (Sir Edward Davey), a candidate for the Liberal Democrat leadership who was a Minister under the coalition Government. They have helped as well.

We have to realise that until we can get LKP to be respected by the present chair of LEASE we will only get half as far as we can, because while that sore is still there the Government cannot expect to get the full benefit that LEASE should give and that LKP is trying to give. I make this suggestion, which is not for the Minister to answer today. Invite—and if she will not do it, instruct—the chair of LEASE to invite the chair of the Leasehold Knowledge Partnership to come to the LEASE office, and meet the LEASE staff. If there are problems, they can then be resolved quietly, and we will know that we can go on co-operating. That seems the simplest way of dealing with that problem.