Leasehold and Freehold Reform Bill (Seventh sitting)

Rachel Maclean Excerpts

Committee stage
Thursday 25th January 2024 Public Bill Committees

[The Chair]

I call Matthew Pennycook—

[Rachel Maclean (Redditch) (Con)]

rose—

[The Chair]

Oh, I beg your pardon. I did not catch you out of the corner of my eye. I call Rachel Maclean.

[Rachel Maclean]

I apologise, Mr Efford. I was not quick enough on my feet. Thank you for calling me, and it is a pleasure to serve under your chairmanship.

I thank the Minister for his comprehensive answer to the shadow Minister’s questions. My point is somewhat in the same vein, and I am very much thinking of the witnesses we had from the National Leasehold Campaign, who talked about this point in quite a bit of detail. Their concern was about having to pay to buy out the ground rent. Of course, there are a number of elements, factors and variables dependent and contingent on the outcome of the consultation. There are people who might be watching this thinking, “Well, when will I actually know how much it is going to cost me?” A year can go by and they may tip over that threshold. Can the Minister give a bit of clarification to those leaseholders who have been trapped for so long and want to see some light at the end of the tunnel? What signpost can he give on when this right will apply to them and how much they will have to pay if they want to exercise their individual right to have their ground rent reduced to a peppercorn?

[Lee Rowley]

I am grateful to my hon. Friend for raising that point. She is absolutely right that this matter is important to a number of people, and that it is important that we provide the greatest transparency at the earliest opportunity. I hope she will forgive me for not being able to answer her very valid question directly. We are dependent on an appropriate and detailed review of the consultation, which is necessary—for some of the reasons we talked about on Tuesday—given its importance to a number of parts of the sector and others. We need to allow that to conclude, hopefully as swiftly as possible, and then we need to get it through this place and our colleagues in the other place, who can often slow us down. Hopefully, that will happen as soon as possible.

--- Later in debate ---

[Lee Rowley]

I am grateful to the hon. Gentleman for raising that point. He articulates another example of good law being used in a way that is, in my view—without talking about individual incidents—both unintended and inappropriate. I am not a lawyer, and do not seek or have any desire to be one, but as I understand it, there is a concept of reasonableness within the legal domain based on an Act from a number of years ago. Hopefully that helps to answer part of his question, at least from a structural perspective. On the variable service charge side, without talking about individual instances, that kind of instance is a clear example of where those impacted would be able to go through the process of challenging it, which I think would be very sensible. If I were a leaseholder, I might be very tempted to do that, unless the charge could be justified in a different way. On the fixed service charge side, although I accept that there is the potential for these kinds of challenges, conceptually that needs to be balanced with the fact that when the contract was entered, an agreement was made to consent to that amount, for whatever reason—good or otherwise. That is why we are pursuing this. However, I take the hon. Gentleman’s broader point.

[Rachel Maclean]

This discussion goes to the heart of some practices and problems that leaseholders have experienced across the sector. On behalf of the many retirement leaseholders, mentioned by the shadow Minister, the hon. Member for Greenwich and Woolwich, I will make a point and ask for reassurance from the Minister.

What we are talking about with this amendment is different from the ground rent issue. Ground rent is a payment for nothing—nothing is being provided—whereas something is being provided for service charges. There is a service, so there is a need for a charge; that is perfectly legitimate. As Conservatives, we do not dispute the fact that there should be financial recompense for services. However, we find ourselves with a problem, the law of unintended consequences and the drivers of business models.

I would welcome if the Minister could touch on this in his response, but my fear is that if ground rents are removed and business models need to adjust to make recompense for that, the natural behaviour of unethical operators in the retirement sector and possibly elsewhere—some are unethical and do not think about the people who bought properties in good faith—will surely be to seek to load their charges, their profit and loss, back on to the service charge in some way. I am not close enough to existing contracts to know whether they will be able to do that with a fixed charge, so the discussion might be better suited to when we talk about the variable charge. The Minister can help me on that.

The broad point stands, however, in the case of someone dealing with the estate of a loved one, perhaps someone who has passed on, is in care, is suffering from dementia or otherwise does not have the capacity to deal with all this—the Minister will be familiar with such cases. They might be stuck with a property that they cannot sell, and that often applies in such cases when service charges are racking up in a way that is difficult for people to get a handle on—

[Barry Gardiner]

I agree with all the points that the hon. Lady is making. I wonder whether she is aware of the report by Hamptons last year, which said that service charges had increased by 50% over the past five years. That is an indication of just how much of the gouging she is talking about is going on. Furthermore, leaseholders paid a staggering £7.6 billion in service charges last year. Of course, much of that is for the proper renovation of the property, but it seems an extraordinary amount. In fact, 10 years ago, Which? estimated that leaseholders were being overcharged by £700 million.

[Rachel Maclean]

I thank the hon. Gentleman for bringing those figures to the attention of the Committee. I am familiar with them, as are others. [Interruption.] I do not wish to detain the Committee any longer—I can see the Whip making that plain to me. I will leave my remarks there, perhaps to continue at a later point, but the Minister may wish to respond in detail.

[Lee Rowley]

I, too, do not wish to challenge the patience of my colleague the Whip. There will be people who have existing fixed charges; that should not change. There will also be people who have choices about whether to enter into new fixed charges, whether absolute or indexed to some extent. For an inappropriate attempt to do something with variable service charges, there will be the ability to apply to tribunals. I hope that we are closing off all the options that would allow the kind of instances mentioned.