Leasehold Reform

Peter Bottomley Excerpts

Tuesday 23rd May 2023 Commons Chamber

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

I thank the hon. Member for Sheffield South East (Mr Betts) for his contribution. I also thank the Minister.

I am glad that the official Opposition have raised this issue, but if they force this to a non-binding vote, it will show the party politics. That is no criticism of a political party.

The key issue is how soon life can be made better for those who deserve a better life in their own home, and how soon those who are screwing them can be unscrewed.

S. J. McCarthy and others secured an extension for ground rents on retirement homes. I have written to him at Ringwood in Hampshire, asking how many properties the company has sold since 1 April 2022, and how many properties it will sell with leases backdated to before the ban on ground rents. That is the kind of—expletive deleted—behaviour that leaseholders had to put up with for 20 or 30 years.

The days when leasehold charges were low and landlords were decent people went years ago. Governments of all parties should have noticed and acted earlier when house builders in the north-west were building a third of their properties as leasehold.

Those who know the chronology will know that, 12 years ago, a Housing Minister asked people to provide evidence of malpractice and unfairness in the leasehold sector, which apparently was not known to people in Government. It is now 21 years since Parliament and Government thought they had made commonhold viable. The Government did not notice it was not viable because commonhold came under what became the Ministry of Justice, which had no resources. When we told the Government, “Put commonhold and leasehold together under the Department with responsibility for housing”—now the Department for Levelling Up, Housing and Communities—the Department said, “Only if you transfer the resources so we can look after it.” There were no resources, so for three or four years the Government did not do it. That is the sort of thing we would expect “Yes Minister” to come back and have a look at.

So where are we now? If we look at the sales of properties in many London constituencies, we find that 80% to 90% are of leasehold properties. Some constituencies have their figure down at less than 10%, whereas mine is at about 30%.

It is well known, although I will say it again, that I own a leasehold flat in my constituency, where I have never had a problem. We had a decent managing agent and a decent landlord. When the landlord wanted to retire, he offered the freehold to the leaseholders and we bought it. I have also since bought a leasehold property in London, where probably half the flats are owned by people overseas. How on earth, under existing regulations, will there ever be a majority for, let alone unanimity on, making a change to the management or ownership arrangements in that situation? I put it to the Minister that the Government ought to say that anybody not resident in this country does not have a vote on enfranchisement, on taking over control or on an extension. They should be assumed to agree with those who are resident and have an interest while living there or being a small landlord.

The Opposition spokesman, the hon. Member for Wigan (Lisa Nandy), referred to Commonhold Now as the first group in her list, perhaps because it is the most recent. One of the people mentioned as being in Commonhold Now claims the credit for the “People’s Pledge” campaign, set up in 2011, for a vote on whether we remained in European Union. The organisation folded in 2016 when we had the referendum—well, they did well, didn’t they?

We ought to say to Commonhold Now, “Try to work with the people who have been campaigning for a long time on this, and do not start looking as though the new people on the block are going to be the experts.” Oddly, it has not approached me during its months of existence, and when it put out a press notice the BBC took it as though it was gospel and the Secretary of State had promised to abolish all existing leaseholds in double-quick time. He had not, and no one believed that he had.

If the BBC had had a housing editor for the past 15 or 20 years, we would be further forward and it would not have misled its viewers and listeners with the idea that anyone had suggested it would be possible to transform all leasehold agreements into commonhold ones quickly. However, it needs doing.

One issue that has not been raised yet arises in my constituency. I am grateful to my constituent Francine Stephenson for contacting me to ask whether

“there are any Government Grants or similar for having Solar Panels fitted on our property. We live in a block of flats and are planning to have a new roof fitted next year (money permitting) and wonder if it would be profitable to have Solar Panels fitted at the same time. Due to the expense….we wonder if the Government has or may have any suitable schemes to assist us?”

We know that most leasehold properties are in blocks of flats and that roofs need changing every 25 to 50 years. Why are we not getting on now with a way of making it possible for those involved, with or without unanimity, to have solar panels put on new roofs when they are brought up to a given thermal efficiency?

What are we going to do about decarbonising the heating smaller blocks? The larger ones do not have gas, but the smaller ones may, so what are we going to do about getting that changed so we have a thermally efficient building with a carbon-free system of heating? Had I been writing today’s motion, those are the sorts of issues I would have been adding in, rather than making it appear a bit more about party politics than about real concern for leaseholders.

I do know that people in the Opposition are deeply concerned about this issue, and I pay tribute to Jim Fitzpatrick, the former Member for Poplar and Limehouse, for his remarkable work. I also pay tribute to the leader of the Liberal Democrats, the right hon. Member for Kingston and Surbiton (Ed Davey), for previously co-chairing the all-party group on leasehold and commonhold reform, and the hon. Member for Ellesmere Port and Neston (Justin Madders) for all that he is doing.

The key point is that if we had been listening to those who first started campaigning for justice, we would be further ahead—I think there is all-party agreement on that. When Sebastian O’Kelly, the former property editor of the Daily Mail, and Martin Boyd, who had experience at Charter Quay in Richmond, Surrey, took up these issues, they thought it might be possible to achieve results fast—that did not happen. When Gavin Barwell, now Lord Barwell, became the Housing Minister, he said that the Government’s Leasehold Advisory Service would be unequivocally on the side of leaseholders. As far as I know, that organisation never once advised Ministers or their officials of the scandals that people rang it up about every day. That was the failure of the succession of chairs of that organisation—the chief executive could have done better as well.

I have found that there are a number of crooks in this business, one of whom is Martin Paine—he adds an “e” to the hurt he does. He would take leases that were about to run out and give informal extensions, not resetting the ground rent to zero, but saying that he was doubling ground rent from the time the lease was first given out. Nothing much has happened about this.

Without going through a list of all the other scandals, I ask the Minister: why not have a way of funding some test cases so that the courts can rule that this kind of crookery and thievery ends? We have done it with human rights and with the Equal Opportunities Commission in the past. A few test cases, with substantial resources behind them, would overturn many of these practices. Some of them are criminal and some are just civil, but all need challenging on behalf of the small person.

Let us look at the post-Grenfell consequences on fire safety. Our Fire Safety Act 2021 and Building Safety Act 2022 are imperfect. They have excluded too many small landlords unnecessarily and too many low buildings unnecessarily. That should be reviewed and changed.

So should the scandalous statutory instrument 2020 No. 632, the Town and Country Planning (Permitted Development and Miscellaneous Amendments) (England) (Coronavirus) Regulations 2020. It relates to permitted development rights and building up. Under emergency covid regulations, freeholders have the right in certain properties to stick one or two more floors on top of the building so that those who thought that they had the top-floor flat will find it is a building site for five years. The person who owns the building and tries to use those rights does not even have to inform the leaseholders that they are going to do so. Apparently, local councils have little power to block them.

[Sir Julian Lewis]

I declare an interest, as both a leaseholder and the owner of one buy-to-let flat. I have the direct experience of having had a top-floor flat and having had another floor and a roof garden built above it. After all the faults came about, many of which still persist, guess who had to pay, in one case more than £200,000, for remedying them? It was the leaseholders, not the freeholder.

[Sir Peter Bottomley]

The point is well made. I am sorry to go on for slightly longer than I ought, Mr Deputy Speaker, but I have been fighting on this subject for a long time and there are rare opportunities to get some of these things on the record.

The Minister has rightly talked about the commissions and loadings on insurance and the Competition and Markets Authority has looked at some of the insurance rates. The fact is that post Grenfell, the number of fires has gone down dramatically and it will go on reducing. It is not the high-rise properties that had most fires in any case, but the lower-level ones. We need to make sure that we watch all these issues and that the Government have people whose voices they listen to giving them advice on where action is needed.

We have to look at the Law Commission proposals. I hope that the Government will say in the King’s Speech say that they will get those through. When we were waiting for the King to come to Westminster Hall on the Tuesday before the coronation, I happened to be standing with the Leader of the Opposition and the Prime Minister. I said to the Prime Minister, “We need this legislation. It is going to be complicated in drafting but simple in politics.” I said in front of the Leader of the Opposition, “If you bring forward a Bill, it will not take a long time in this House. There will be detailed discussion but it won’t take a long time. No one will try to filibuster. It will have all-party support and we can get it through and change the lives of millions and millions of people.”

Only eight years ago, the Government thought the number of leasehold properties was about 2.5 million, but we now know it is about 6 million. We know that this is the fastest-growing element of the housing market.

[Matt Western (Warwick and Leamington) (Lab)]

The hon. Gentleman is an authority on this subject. Is he saying that the reason there is no urgency on this is that the developers are making colossal profits out of it, and that there is a true correlation between their excessive profits and the expansion in leasehold?

[Sir Peter Bottomley]

To a certain extent, I agree with that, but perhaps we can take it up another time or the hon. Gentleman could make his own speech later on if he so chooses.

I was going to make a point about retirement homes and end-of-life homes. We ought to have three times as many as we do. We need to attract people into decent homes, which are probably smaller and more thermally efficient, rather than them living in a cold, draughty place with many rooms that are not needed. I have an uncle who told me that his home in Taunton is so thermally efficient that he has not had to turn the heating on once in the four years that he has lived there.

If we can attract people into those homes with confidence, that will free up many more homes that will go to younger families, who will do up those homes with carbon-free heating, better insulation and all the kinds of things that we went through when we were young in the life cycle of housing, so we will all gain. That will not happen until we have housing providers who can be trusted. Again, I say to Mr McCarthy at Churchill, “I wish I could trust you. Why don’t you engage with us and show us that our doubts can be answered and that if your practices are unworthy you will have better ones?”

We had the same thing in the past with McCarthy and Stone—the McCarthys were obviously involved in that as well. Some of the managing agents there—this was when the Tchenguiz interests were involved—were involved in the scandal over call systems. They ran a cartel that saw leaseholders either unnecessarily paying out millions and millions of pounds to replace a system, or being overcharged. When the police came to investigate them, they declared themselves as having a cartel, which meant that they got let off completely free. That should not have happened. The first time that we lay complaints against these people, there should be action. The police need to be involved in these things as well.

I hope to have another opportunity in this Parliament to raise more of these issues. The key point is, why cannot we have action now on the scandals? Why cannot we frighten people?

On the overall costs of the defects in fire safety—not just cladding, but many others—why do the Government not get in the insurance companies, which covered the liabilities of the developers, the architects, the builders, the sub-contractors and everybody else, and say, “We want to have a few billion pounds from you as well, so that nobody is left in a home that is either unsafe or unsellable”?

We want people to have the confidence to live in their homes. I look forward to seeing what the Government do, and I am grateful to the Opposition for raising the motion, although I shall look down on them with less respect if they force it to a vote.

--- Later in debate ---

[Danny Kruger (Devizes) (Con)]

I agree with what the Minister said about the Government’s plans. It is good that we have cross-party consensus on the need to radically reform leasehold. I recognise and agree with the points that have been made by Members on both sides of the House. It is a feudal system that ultimately needs to be abolished, in ways that I will come on to describe.

There is a danger, perhaps, that we leap straight from one extreme to another: we Conservatives have a bit of a fetish for property ownership, and there is a small danger of our making a cult of freehold and the principle of owning one’s house outright. I understand why we do this—we all want to own our homes, and we believe that a free market will help to grow the supply of new homes that we urgently need—but there is a limit on the supply of new house building, and that limit is land. It is possible to release more land into the market, and we need to do that, but there do need to be limits; I hope that even the most extreme libertarians on the Conservative Benches will recognise that there must be limits to the release of land for house building.

The free market must have some limitations, because without limits, or with limits that companies with deep pockets can game at the expense of local communities, it is not a free market at all; it is a speculator’s charter. We need a system that is both better than the feudalism of leasehold and better than the perversion of capitalism that we sometimes see in our communities.

We need to grow supply, and I recognise that we need more freehold and more traditional ownership, but as I say, land is finite, and the price of a house, which we all worry about, is really the price of the land underneath the house. There are two effects of this. The first is that the building—the bricks and mortar—hardly matters to the house builders. We see the way they knock up buildings without beauty, without quality and without much innovation. I pay tribute to the work that my hon. Friend the Member for South Norfolk (Mr Bacon) has done on self-build and the opportunities for far better innovation, beauty and quality in house building if we recognise that the quality of the structure matters more than the land it is built on.

The second effect of the system we have at the moment, whereby the price of the land is the real factor, is that the overall price of housing rises. We now have the highest house prices in history. That has a reinforcing effect, because it privileges the volume house builders—the speculators in land—who can afford to bid at these auctions and who bet on rising prices, hoard sites and hold back land from development; they game the development system. I mention in passing the egregious five-year land supply rule, which is such a gift to developers, who ride roughshod over local plans and the wishes of local communities. There are a number of cases in my Wiltshire constituency where that is a problem.

[Sir Peter Bottomley]

May I add one point, which I hope my hon. Friend will not regard as discordant? People ought to know the sums that public affairs companies and lobbyists get paid by the developers, those involved in exploiting leaseholders and those who buy freeholds, for lobbying the Prime Minister’s office, the Treasury, the Department and the media. If equal resources could be given to the National Leasehold Campaign, the cladding groups and the Leasehold Knowledge Partnership, we would have equality of arms.

[Danny Kruger]

My hon. Friend is right: the way these companies operate is shameful.

The price of land is the issue. There is a way to get through this, and it is along the lines of what we are debating today: not leasehold and not pure freehold, but a form of commonhold. I want to end by mentioning a particular form of commonhold that I would like to see much more of and that we see a little of around the country. My hon. Friend the Member for Worthing West (Sir Peter Bottomley) mentioned the need for housing providers that can be trusted. They do exist, and they exist using leasehold: it is the community land trust model. Community land trusts act as long-term stewards of community housing, and they often use ground rents as a way to finance their work, with the consent of leaseholders.

We need to worry about scrapping leasehold without replacing it; that would be bad. We need to replace it with something along the lines of commonhold. Around the country, we see brilliant innovations of community land trusts in pockets of rural and urban areas. The Government have indicated in previous debates that any ban on leasehold would include an exemption for community-led housing, and I hope that consideration will be given to ensuring that community-led housing is also protected under any changes to leasehold and any replacement with commonhold.

I pay tribute to the Community Land Trust Network. The Secretary of State came to an event that I hosted in Parliament a few months ago. A number of really inspiring CLT groups came to talk about their experience. I encourage the Government to listen to the Community Land Trust Network and to use the ongoing consultation on the national planning policy framework to make real changes, such as reopening and extending the community housing fund and, crucially, helping local CLT groups and community groups to buy land. At the moment, they find it so difficult to outbid the speculative developers, because they intend to make a large proportion of the housing affordable, and they simply cannot make the numbers add up in the way the speculators can.

We need to find ways to give more land to CLTs, and my suggestion is quite simple: we need to transfer public land quite deliberately to community land trusts. At the moment, legislation states that public landowners who want to divest themselves of those assets need to seek “best consideration”, which local authorities or other public landowners often interpret as simply seeking the highest price. We need to specify that “best consideration” means the objects set out by the Secretary of State, which I suggest should include affordability and community ownership. We also need to enable CLTs to buy private land at agricultural prices, not speculative prices.

I welcome the cross-party consensus on reforming leasehold—I think that is absolutely right. I hope consideration will be given to ensuring that these community-led housing models will also be protected in the new plans and will be able to thrive. I welcome the debate, and I give thanks to the shadow Secretary of State, the hon. Member for Wigan (Lisa Nandy), and to Members on the Opposition Benches who are campaigning alongside Government Members for these sorts of reforms. I also share my hon. Friend the Member for Worthing West’s wish that we do not push this rather partisan motion to a vote.

--- Later in debate ---

[Matt Western (Warwick and Leamington) (Lab)]

I recall, back in the 1980s, the scandal of endowment mortgages. Over the years, I have also owned leasehold properties and had my fingers badly burned, so I understand many of the issues that so many people across the country must be facing.

The public rightly want reform. When people, particularly first-time buyers, look to buy a property, they are not made aware of what they are entering into, particularly with leasehold agreements. They think they are buying a home, so they think they will own the home. Of course, they then discover that they have actually bought high ground rents and extortionate service charges, often for services that are promised but not delivered, such as the maintenance of green space. Homeowners are paying full council tax, yet they are having to pay perhaps another £300 to maintain the verges and parks around these new estates. Some developers promise a council tax discount, despite paying additional amounts to companies such as Greenbelt, which I believe is associated with Persimmon Homes.

The scale of this is extraordinary. I understand there are about 5 million leasehold homes in England, including 8% of houses, and I know just how prohibitively expensive this can be. The absence of sinking funds, the lack of management reporting, the extortionate insurance payments, the charges for permission to make changes, the fact people cannot have bicycles on their property, the fact they cannot fit an electric vehicle charging point, and other ridiculous things—the list goes on.

[Sir Peter Bottomley]

In addition, the people who manage even large blocks need no qualifications, and there is no full protection for leaseholders’ money.

[Matt Western]

The Father of the House is absolutely right. In one of the properties in which I was a leaseholder, we set up as directors and took control of the property. We appointed our own management company, at significantly lower cost, to address some of the massive overcharges we faced.

In 2014, the Competition and Markets Authority estimated that the average service charge amounted to just over £1,100 a year, suggesting that service charges could total between £2.4 billion and £3.5 billion a year. My hon. Friend the Member for Sheffield South East (Mr Betts) highlighted the 2019 Select Committee report—I was privileged to sit on that Select Committee—which identified that, too often, leaseholders, particularly in new-build properties, have been treated by developers, freeholders and management agents not as homeowners or customers but as a source of steady profit. We concluded by urging the Government to ensure that commonhold became the primary ownership model for flats in England and Wales, as it is in many other countries. Of course, that has not been adopted.