Leasehold and Freehold Reform Bill

Peter Bottomley Excerpts

2nd reading
Monday 11th December 2023 Commons Chamber

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

The House will be grateful to know that the official Opposition support what the Government are trying to do. I pay tribute, as the right hon. Member for Ashton-under-Lyne (Angela Rayner) and my right hon. Friend the Secretary of State did, to the people in the all-party parliamentary group on leasehold and commonhold reform—Liberals, Labour, Conservatives and others—who, over the last 11 years, have worked together to try to get to a situation where it is not possible for freeholders, on purpose or by mistake, to exploit residential leaseholders.

When I first spoke on this issue about 11 years ago, I declared my interest as a leaseholder in my constituency with no problems whatsoever. Six of us bought the freehold willingly from a willing seller—the person who developed the block of flats—when he retired. I have since acquired an interest in another leasehold property. I do not take part in these debates to try to feather my own nest; I am trying to ensure that the 5 million people who are in a worse position have as good an experience as I have had.

It is 10 years since I first started quoting Leasehold Knowledge Partnership. In addition to Sebastian O’Kelly and Martin Boyd, whom the Secretary of State referred to as well as the campaigners in the National Leasehold Campaign, I would like to name one or two journalists who have helped—in particular, the people at “Newsnight”—and the people who have batted away at the issue. Major media organisations ought to have a housing correspondent or editor rather than putting it with home affairs. We cannot expect Mark Easton at the BBC, when he covers the Home Office, to be able to become expert in residential leasehold in the way that is needed.

I hope that in Committee, and especially in the House of Lords, the parts of the Law Commission’s recommendations that have not been incorporated in the Bill will be put forward for decision by the House and the other place. The three reports that it produced in 2020 should be implemented in full, or else, when those reports came out the Government should have said what was wrong with the proposals.

May I emphasise what the Secretary of State said about the ongoing consultation and continuing conversation on modern leasehold—the ground rent issue—where the period of consultation has been extended from, I think, late-December to the middle of January? People will be grateful for that. There are five options. As Dean Buckner, a trustee of LKP, the campaigning charity, has said, those who own freehold interests have known since Scotland abolished leasehold that the gravy train was going to end. When the Government came forward with the proposal that ground rent should not be more than 0.1% of the capital value, they knew that their value was not as high as some were estimating, and when people start looking at the discount rate—I think in the impact assessment it is about 3.5%; in fact, long-term debt for the Government is now at 4.5%—they see that that again will reduce it. I make the suggestion, which is also on the LKP website, that the Government can deal with any possible compensation by saying that they will tax it at 45% or higher, which will make attempts by people to take it to judicial review or challenges to the Government on human rights terms null and void, or at least not worth trying.

May I say to the Government that after the Grenfell fire tragedy, while it became clear that up to £15 billion of remediation was needed not just for cladding but for other fire defects and that the only people who could eventually pay those costs by law would be the leaseholders who own not a brick in the building, the people who ought to be paying are the insurers for those who were responsible—the designers, the architects, the builders, the developers, the subcontractors, the component manufacturers and the like; they were all insured? I commend to the House that, in Committee, it should somehow be written into the Bill that potential claims by leaseholders be gathered together in an agency, which could sue the insurance companies and those they insured to get a contribution from them. That would reduce the costs both to leaseholders and to the Government, who have been providing a lot of money to try to ensure that remediation has happened.

I pay tribute to successive Secretaries of State, who have had to give written instructions to their permanent secretaries for some of the compensation for fire defect costs, and I say to the Government that the artificial distinction of 11 metres is unjustified. Actually, fire death certificates show that more people die in fires in lower buildings, and higher buildings are not riskier. We ought to try to recognise the realities. It is also worth saying in passing that when Dame Judith Hackitt produced her report and recommendations, I do not think she was well briefed on the law on leasehold, which is why some of her recommendations were not properly appropriate. I am glad that since Gavin Barwell we have had a succession of Ministers who have put the Government on the side of leaseholders; we now know that there are 5 million to 6 million of them.

[Bob Blackman (Harrow East) (Con)]

I thank my hon. Friend for what he is saying. Does he agree that, at some stage or other, these unsafe buildings were signed off as fit and proper buildings under building regulations and that leaseholders also have a valid claim against the individuals who signed them off, who are also insured?

[Sir Peter Bottomley]

I agree with my hon. Friend and pay tribute to him for his work in this field. It is worth noting that building standards were set not by those who sign buildings off—the building control people—but by the Government or quasi-Government agencies, so the Government bear some responsibility as well, as I think they recognise.

In my thanks. I want to include Katherine O’Riordan, who has helped the secretariat of the all-party group and worked remarkably well. Given that my involvement as an active campaigner on this matter came through a constituency case, I pay tribute to my senior caseworker, Colette Hanson, who for many years—over a decade—has helped to support constituents facing awful problems, whether on this matter or others.

The Secretary of State referred to James Brokenshire, who carried forward many leasehold reforms. I also thank Sir Nigel Shadbolt and Sir Tim Berners-Lee and their Open Data Institute for providing help to LKP, the campaigning charity, in getting information that is publicly available and putting it together so that we could know the scale of the problem that we are facing. I pay tribute to the law commissioner Professor Nick Hopkins and his team for their 13th programme of law reform. I also pay tribute to Wendy Wilson at the House of Commons Library, who has since left, and Hannah Cromarty, who have produced briefings for Members of Parliament, which I commend to those outside this building. If they look at the House of Commons research and the LKP site, they will be as knowledgeable as me and will put across these points as effectively or more so.

Over and again I want to emphasise that people must respond to the Government’s very good consultation on ground rent. It is well-written and brings out the issues properly. I would be surprised if the dominant view were anything other than that ground rents should be reduced to peppercorns. At one stage, the Government suggested bringing it down to £10, but that still leaves most of the superstructure and the problems with leaseholders. It should be brought down to a peppercorn to eliminate those. When the consultation is analysed, I ask the Secretary of State to look with favour on reducing ground rents to zero. If I get any benefit, I will give it to a good cause, but I am not saying this for me.

I could go on at length, and at some stage I probably will. Having made my preliminary remarks, I want to say to the House that this is the opportunity, before a general election—whoever wins—to get legislation through that may be complicated in law but not in politics. Are we on the side of the people who have been at risk or exploited by interests who have owned freeholds? I have given my list of past shame, and I will not trouble the House with it now. If people have problems with their landlords or freeholders, they should tell their Member of Parliament so that they can bring it up in Committee or on Report.

I suggest that those who have used expensive lawyers to screw residential leaseholders use their money on something else. When a notable charity uses expensive lawyers to raise the cost of enfranchisement or lease extension by a third—an issue that should have come to Parliament rather than be done in the privacy of an upper property tribunal—we know that those running charities can get it wrong, too. We have left this too long. Let us now get on with it.

[Madam Deputy Speaker]

I call the Chair of the Levelling Up, Housing and Communities Committee.

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[Mr Betts]

I do remember that far back. Many will not remember the Labour Government’s ’67 reforms, but they were quite important on those grounds—absolutely.

Other good aspects of the Bill include its reducing the price of enfranchisement and trying to make it simpler. Now, I am not sure that it makes it simpler; it is still a bit complicated. In the end, it partly depends on the capitalisation rates that the Government introduce, which will determine the price. But a lot of my constituents who are leaseholders live in houses, and they often face enormous barriers to carry through the enfranchisement process. I have referred to Coppen Estates in my constituency, which is notorious for simply not replying to letters. I once got it to reply to a recorded letter at the third time of asking. Normally, it ignores everything. That is just its way of trying to hang on to its ground rents and its income from leases. How will we deal with those sorts of individuals and companies, and the fact that they transfer ownership around from one company to another?

Why is there no right of first refusal for leaseholders in the Bill? I was pleased that, some years ago, Sheffield Council agreed that when it sold freeholds, the right of first refusal would go to the leaseholder. That would be a simple reform, and I hope the Secretary of State will consider it. The improvement of the enfranchisement process to make it simpler and reduce the cost is right, but I would like further improvements to ensure that it will work.

I welcome the standardisation of service charges. One big complaint to the Committee was that leaseholders often simply do not know what they are paying and why. They cannot work out which services are supposed to be provided and which are not. That is an important step forward.

On commission fees, we heard about the £150 to change a doorbell and the £3,000 to put up a conservatory—complete rip-offs. There is no justification for them in houses in particular, and very little justification in flats. I am pleased that freeholders will now have to provide a schedule of rates that will be charged. We called for a cap on rates, which might have taken reform a little further, but at least there now has to be clarity and transparency. I also welcome the clause that means leaseholders will not end up paying for the legal and other costs of freeholders where there is any conflict or dispute.

A number of other measures have been omitted from the Bill, but they could be included very easily. The Secretary of State mentioned forfeiture. If leasehold is a feudal tenure, then forfeiture is prehistoric—it really is. If a leaseholder in a very small way fails to comply with an element of their lease, they could have the property taken off them. That is just unacceptable and unjustifiable. The Secretary of State was right in what he said. Forfeiture is not necessarily something that gets used, but the threat of its being used puts the onus on leaseholders to “behave” or do what the freeholder wants them to do. The removal of that with a simple clause would be really welcome.

[Sir Peter Bottomley]

I should have included the hon. Gentleman and the Select Committee in my thanks, and I do so belatedly. On forfeiture, we could ban it completely, although there may be times when it is necessary to have an order to sell a property to pay debts. The limit should be raised from £350 to a significant figure such as £5,000, and any remaining equity should go back to the person who owned the lease and not be pocketed by the freeholder.

[Mr Betts]

The Father of the House makes a very reasonable point. My point is simply that forfeiture is currently a blanket possibility that can apply to any breach of a lease, however minor, and non-payment of a very small amount could cost the leaseholder the total of the value of their property. That is what we have to stop.

Why do freeholders not have to join a redress scheme? The Committee called for them to be included in the redress schemes. The Secretary of State is bringing in a number of redress schemes and ombudsmen extensions, so why can freeholders not be included?

One of the big issues raised with us, where again there is a lack of transparency, is that many leaseholders have to pay into a reserve fund—a sinking fund—for their property. Can we not have some protection for those funds formally written into law? Currently, many leaseholders have no idea what the money is being spent on. There is no obligation on the freeholder to explain it and certainly no protection that funds have to be used for the purpose for which they are paid.

On mis-selling, one of the big complaints we heard when we met leaseholders—this related to houses in particular; Persimmon Homes has been mentioned, but there were other developers too—was the fact that they were being sold a leasehold as though it was the same as a freehold. The solicitors were compliant in that, because they had been recommended by the developer. Often, a bonus was thrown in: “We’ll give you new carpets in the living room if you use that solicitor.” The Competition and Markets Authority investigated at our request and said there was mis-selling, but so far nothing has been done about it. The Government have done absolutely nothing to rectify that injustice. Can we not see something on that again? I do not think that there is any great conflict across the House, or between anyone who has been involved in this matter. It is wrong—absolutely wrong. Solicitors should not be induced in this way to provide conveyancing to a purchaser, when the developer is recommending that solicitor. It simply is not right and it needs addressing.

My final point is one that we raised on the private rented reforms that the Government will hopefully pursue —and hopefully this year coming, rather than waiting any longer with regard to section 21. We have called repeatedly for a housing court. I know the Secretary of State will explain again why he does not want to do that, but I think we ought to keep asking. There are so many issues in the housing field that need a specialism, and need quick decisions and quick resolution. A housing court would be one way of doing that and of trying to improve the process.

--- Later in debate ---

[Rachel Maclean (Redditch) (Con)]

I am delighted to speak on this flagship piece of legislation, which will restore true home ownership to millions, end rip-off charges and introduce fairness to the leasehold market. I am confident that it is a good piece of legislation not because I did all the preparatory work on it, but because I worked with brilliant officials, whom I thank.

We heard the testimony of so many thousands of leaseholders who struggled with blighted properties that led to blighted lives. There are too many of them to mention individually, but the strength and tenacity of the campaigners—and the organisations, such as the Leasehold Knowledge Partnership and the Leasehold Advisory Service, under the leadership of the superb Martin Boyd, which helped them—is enormously impressive. Take, for example, Liam Spender, who was able to show that leaseholders in his block had paid £1.6 million in excess service charges to their freeholder, FirstPort. Incidentally, FirstPort is one of the worst offenders I heard about in my time as Minister. Yet freeholders still had the audacity to sit in front of me while I was a Minister and claim that

“some people like the security of paying service charges”

and that there is no evidence that they oppose ground rents. Yes, truly, that is what they said. Shockingly, I understand that Mr Spender and his tenants have received nothing yet, and now the freeholders are appealing the decision with the leaseholders’ own money. I would like the Minister to set out clearly how the Bill will tackle their situation and end that scandal once and for all.

We got here because of the greed and unethical behaviour of predatory freeholders who have treated leasehold properties as a cash cow and the leaseholders as a milking machine to produce an endless stream of income for no work at all. It is the ultimate definition of rent-seeking behaviour. In its worst excesses, it is frankly disgusting. I and many others find it appalling.

[Sir Peter Bottomley]

On the case that Liam Spender has so rightly been pursuing for his fellow leaseholders, does my hon. Friend think it would be a good idea if the Select Committee considered inviting in the people he has been engaging with to ask why they did not put their hands up straightaway, settle and give back all the money they wrongly took from leaseholders, without having to have extended legal proceedings?

[Rachel Maclean]

That is an excellent suggestion from my hon. Friend the Father of the House, with which I strongly agree—as I do with everything he says about this issue.

Despite the theatrics we heard from the right hon. Member for Ashton-under-Lyne (Angela Rayner), who spoke for the Opposition, it is the Conservatives who are finally bringing in sweeping reforms. It is right that we note that Labour ducked the issue while they were in office. They could have fixed it then. They could have saved millions from misery—nearly 5 million homes, accounting for 20% of the entire housing market, are owned on a leasehold basis across the UK—but it appears they bowed to pressure from freeholders. We will never know why, but thankfully things will now change.

--- Later in debate ---

[Gareth Johnson (Dartford) (Con)]

My speech will be brief, as I want to concentrate on one aspect of the Bill. Estate management companies are a massive and growing issue in my Dartford constituency. Some 7,000 new homes have been built in my constituency over the last 10 years, and they are predominantly “looked after” by management companies.

I welcome the measures in the Bill that will rightly allow residents to challenge the invoices and bills they are sent by management companies. This will help to transfer some of the power back to residents, by giving them a tool to say, “This invoice is unfair,” “This bill is not right,” or, “These accounts are not right.”

It is absolutely right that power is transferred away from management companies and into the hands of local residents, because at the moment management companies seem to do pretty much whatever they like. They can put up the charges they levy on residents way above inflation while providing a very poor service, and local residents can do very little about it. Local residents find themselves completely restricted in challenging what is, on occasion, a hideously poor service with extortionate fees. They are trodden on by the management companies.

Of course, residents question why they have to pay council tax at the same time as paying management fees, as they often find that their management fees are used to pay for, say, play parks that the whole community can use for free. They have to pay for it, they have to pay for the maintenance and they have to pay council tax, too, which seems very unfair.

In my experience, local residents want to be able to change their management company. They want to be able to switch over and to say to their management company, “No, you have not provided a good enough service. You are charging us too much money, and therefore we are going to use a different management company.” If that happens, it will help to tackle most of the problems we are experiencing with management companies. It will end the monopoly by returning competition to the system, enabling the good management companies to prevail and the poor ones to fall by the wayside.

[Sir Peter Bottomley]

The whole House will accept that my hon. Friend is rightly arguing for total transparency. There ought to be open-book accounting by these managing agents, so that those who are paying can see what is happening.

Does my hon. Friend agree that the amalgamation of managing agents is a dangerous trend? It means that the choice is reducing, not increasing. Given that some managing agents are very large and people’s experience of them is not very good, we ought to try to make sure that there is not this continual amalgamation and that there is a good choice of good managing agents that want to earn a better reputation.

[Gareth Johnson]

The Father of the House makes a very good point. I would like to see co-operation between companies, rather than amalgamation. In my constituency, we often see two management companies sending two people to mow the grass on the same estate. Residents look out of their window and see the grass on one side of the estate being mowed by one company and the grass on the other side of the estate being mowed by a different company. Of course, they have to pay twice for that pleasure. If the companies co-operated, that situation would not arise.

Some 20% of the people attending my surgeries are there to complain about management companies. Even a constituent of the hon. Member for Greenwich and Woolwich (Matthew Pennycook) came to my surgery—with two of my constituents, I hasten to add—to raise issues about management companies. She was very complimentary of the hon. Gentleman, by the way, but I put her straight. However, she was not very complimentary about the management company that she was suffering from. This problem happens in Greenwich, in Dartford and across the country, and we need this Bill to get to grips with it.