Leasehold Reform

Stephen Doughty Excerpts

Tuesday 23rd May 2023 Commons Chamber

[Helen Hayes (Dulwich and West Norwood) (Lab)]

Tomorrow, I will meet my constituent Luke Thomas, who is attending a drop-in in Parliament to raise awareness about the skin cancer melanoma. Luke first contacted me in 2020. He has stage 4 skin cancer, diagnosed after he had bought his first home, a shared ownership leasehold flat in my constituency. Knowing that his cancer is now incurable, Luke decided that he wanted to move back to Wales, to be able to enjoy more precious time with family and friends and to draw on their support when he needed it.

However, Luke is one of many, many leaseholders to spend years effectively trapped by a system, the deficiencies of which were further compounded by the cladding scandal following the horrific Grenfell Tower fire. Luke’s flat has been effectively unsellable, and he faced the dreadful and unacceptable situation of precious, limited time slipping away, unable to move forward with his life. Two and a half years later, Luke’s housing association has finally agreed to an exceptional buyback, but that is not a system, and Luke should never have been placed in that situation.

Luke’s story is heartrending, but it is not unique. I have many constituents who are still living with the consequences of the interaction between the feudal leasehold system and the scandal of building safety exposed by the horrific Grenfell Tower fire. Many have been trapped by the inability of their freeholder to undertake intrusive surveys and fire safety works in order to secure an EWS1 certificate, without which their home is effectively worthless. Some constituents, such as Luke, need to move for compassionate reasons; others, because their job has changed. I have constituents who have had a family and are now overcrowded in their leasehold homes, who have been unable to move for many years because of the lack of an EWS1 certificate or the completion of fire safety works. What started as the fulfilment of a dream—the security and stability of their own home, and the first rung on the property ladder—has become a living nightmare.

The Government’s delay in bringing forward leasehold reform is inexcusable. I was on the then Housing, Communities and Local Government Select Committee in 2019 when we published the report referred to by my hon. Friend the Member for Sheffield South East (Mr Betts), the Committee’s Chair. On a cross-party basis and on the basis of the evidence, that report set out recommendations, including that Government should make commonhold the predominant form of tenure for flats, ban the most egregious practices and introduce some protections against catastrophic costs for leaseholders.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

My hon. Friend is making a very powerful speech, and she speaks passionately about her constituent Luke wanting to move back to Wales. My constituents have faced similarly terrible experiences as a result of the leasehold system. The Welsh Government have taken some important steps in Wales, virtually eliminating new leasehold for houses and reducing ground rents on new leases to a peppercorn, but does my hon. Friend agree that we need to see ambitious reform from the UK Government on an England and Wales basis so that all our constituents can get out of these terrible situations?

[Helen Hayes]

I thank my hon. Friend for his intervention. It is unfathomable that the Government, when faced with the urgency and magnitude of this crisis—affecting not just a few people but thousands across the country—have failed to act with urgency. It is very welcome that the Welsh Government have stepped up to the scale of the challenge.

The Committee’s report also included practical measures, such as introducing a standard form for presenting charges for leaseholders so that that information is easy to understand. This is about not just the major, catastrophic problems that leaseholders face, but the day-to-day complexity of a system that is difficult to understand and administer. However, the Government have taken next to no action on those recommendations. I received an email last week from a constituent who has saved for years to buy her first flat in an area that she loves, but has been told by multiple solicitors that they are unable to act in relation to the conveyancing because of the uncertainty created by the Building Safety Act 2022. As such, I specifically ask the Minister to look urgently at that issue and whether there is a need for further guidance to conveyancing solicitors, because new legislation designed to make building safer should not have the unintended consequence of preventing sales moving forward.

Finally, I want to raise the plight of leaseholders living in flats that have district heating systems. Such leaseholders are liable for a proportion of the costs of the heating of their whole block. They have very little control over the consumption of energy, which is influenced by the age of the communal boiler; the temperature that other residents choose to maintain in their homes; the hot water consumption of their neighbours; and the date on which their landlord chooses to switch the heating on and off each year. Because gas for district heating systems is often purchased in bulk in advance, those leaseholders are only now seeing the sharp increases in bills that other customers experienced last year. Inexplicably, there is no Government support at all for customers of district heating systems, and so many of them are now facing completely unaffordable heating bills in addition to the other, often extortionate costs associated with being a leaseholder. This problem is pushing leaseholders into poverty.

There are many thousands of leaseholders across the country—thousands of families facing the uncertainty and anxiety of extortionate and unpredictable costs, building safety defects and sharp practices. The Government’s failure to act with urgency to help them is a complete dereliction of duty. It is time that they stepped aside for a Labour Government who will deliver the reform that leaseholders so desperately need.

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[Andy Carter (Warrington South) (Con)]

It is a pleasure to follow the hon. Member for West Lancashire (Ashley Dalton), and I am pleased to be able to speak in today’s debate because this issue is very relevant for my constituents. However, I am a little sad that this is an Opposition day debate rather than the Second Reading of a Bill that would resolve many of the issues. Lord Greenhalgh, when he was the Minister responsible, made a promising start to the process when he brought in the first stages of leasehold reform to crack down on exploitative freeholders by removing escalating ground rents. Now is the time to ensure that the next stage of reform delivers for those who are currently trapped in a leasehold system.

The north-west has some of the highest proportion of leasehold dwellings in the country. The most recent statistics from 2019-20 put the proportion built at just shy of a third of all homes—the highest outside London. Throughout my time as the Member of Parliament for Warrington South, its residents have raised issues with me regarding leasehold time and again. There are issues in Chapelford, Edgewater Park in Latchford, Chase Meadow in Lymm—I could list endless developments built over the past 20 years under the leasehold system where problems have been raised. In turn, I have raised those problems with a variety of Ministers, all of whom have said, “Reform is coming.”

I recognise that there has been some progress from Government. I particularly welcome the work to protect elderly residents by reducing ground rent to zero on all retirement properties. It is also welcome that we are restricting ground rents to zero for new leases to make the process fairer for leaseholders. That will also apply to retirement leasehold properties when homes are built specifically for older people, so purchasers of these homes have the same rights as other homeowners and are protected from uncertainties and rip-off practices, but it needs to go beyond that.

I welcome the Secretary of State’s proposals to address the problems associated with leasehold sales, but there is growing worry among many of my constituents that the difficult situation in which they find themselves may not be completely addressed by what we have heard so far. I am afraid that bringing forward plans to give leaseholders the right to extend their leases by up to 990 years, boosting property rights and giving homeowners long-term security and peace of mind do not address all the issues. The constituents I talk to have genuine concerns about the purchases they made 20 years ago and are stuck with problems that are ever-increasing, particularly in relation to service charges, for which they receive little. I urge the Minister to go further in many of the proposals they have put forward.

Colleagues might recall that in a speech in the Christmas Adjournment debate I raised the issue of homes in the Chapelford area of my constituency. I pay tribute to the residents who live there, who first raised their concerns 13 years ago with one of my predecessors. I wrote to the Minister about it recently, and she kindly responded, for which I am grateful. Residents not only have to pay fees, but run into difficulties just trying to get hold of a freeholder. They are faced with complicated, protracted processes from which they cannot even get information about the leaseholds on their homes. They then have to spend money to get information from those leaseholders. My constituents are trapped in leasehold. It makes it difficult to sell those properties. In fact, I assisted a constituent recently because the plans drawn up in the leasehold were just not correct and the solicitors acting for the new buyer rightly would not proceed with the sale.

A number of solicitors in Warrington approached me to say that they had been asked to act for people buying leasehold properties in the Chapelford area, and they refused to do so, because they were so concerned about the details in the contracts. As a result, when purchasers returned to developers, the developers recommended solicitors who disappeared overnight when the development had finished. The process that the developers had put through to the solicitors ended up going absolutely nowhere, and there is a scandal with how solicitors behaved and disappeared once the process and the development had finished. I raised this matter in the House about six months ago, and the Solicitors Regulation Authority approached me asking for details of the solicitors. Frankly, it is impossible to trace them. They sign their names with a company, and the company dissolves and we cannot trace the individuals involved in any way. The Government need to look much more closely at how the solicitors in these cases have acted.

As I mentioned earlier, the Competition and Markets Authority looked at some of the leasehold situations for two years and made progress with several developers, but it did not resolve all the concerns, particularly in relation to properties in Chapelford. That was a missed opportunity for a deep dive into what is going on and addressing individual problems, rather than just looking at the big picture. Will the Minister ensure that the proposals that the Department brings forward in the next Session will address many of these problems? It is vital that people wanting to get out of leasehold can do so without facing extortionate fees that leave them trapped in a leasehold indefinitely or result in them being short-changed when they have to leave the leasehold system.

[Stephen Doughty]

The hon. Member rightly talks about transparency and the difficulties with contacting freeholders. I have had that experience in my constituency too. Does he agree that there needs to be a lot more transparency and communication among freeholders, managing agents and leaseholders? Often there is not transparency over insurance charges, service charges or who to contact when things are going wrong. I have experienced many frustrations on behalf of constituents in that regard.

[Andy Carter]

The hon. Gentleman reminds me of a recent situation with a development in Lymm, where the constituent asked me if I could contact the freeholder to go through the details of what they were actually paying for, and I have still not had a response. I am not sure the freeholder knows what services are being charged for. I am grateful for the point that the hon. Gentleman raises. Finally, I say to the Minister that this legislation is desperately needed. My constituents and I want to see a solution. I sincerely hope that the Department will take heed of the speeches being made in the House today so that we get the reform needed in the next King’s Speech.

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[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.

[Stephen Doughty]

Does my hon. Friend share the frustration that many of my constituents face? When they try to set up “right to manage” companies, and to move towards taking over their freehold, the process and the disputes about which buildings and outhouses constitute part of their property make it extraordinarily complex, and often expensive, to take control of management accounts.

[Matt Western]

My hon. Friend is absolutely right. It is incredibly complex and extremely expensive to go through that process.

The last Labour Government’s Commonhold and Leasehold Reform Act 2002 introduced commonhold as a new tenure, which this Government should have pursued over the past 13 years. Progress was not made for two reasons: the conversion from leasehold to commonhold requires consent from everyone with an interest in the property, as my hon. Friend just said; and developers do not want to build new commonhold developments because there is no incentive and no financial upside, as my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) highlighted. This Government have ignored these exploitative practices, and the ever-louder calls from the public to end them, for 13 years. They launched the Commonhold Council two years ago, so will the Minister update us on what has happened with that? It appears to be nothing.

The public are aware of the Conservative Government’s broken promises. Their 2019 manifesto promised to address this issue by implementing a

“ban on the sale of new leasehold homes”.

That has not happened. Even the Housing Secretary admitted that they should end this “absurd, feudal” system, but we are 13 years on from the last Labour Government and nothing has happened. This Government have let down the public. I appreciate that there is a high incidence of these cases in the north-west England, but there are also some in my constituency. Groups of residents across my local towns are keen to take control of the development of their blocks, but it is too expensive and complicated to do so, as many Members have been saying. In one block of 70 flats, the residents have managed to take that on, but the previous managing agent took £76,000 from the residents’ account and they have not been able to recover the money. The residents are keen to ensure that managing agents are better regulated in any proposed legislation.

As my right hon. Friend the Member for North Durham (Mr Jones) said, there is so much sharp practice out there. That is why Labour would implement the three Law Commission 2020 reports in full. They included measures designed to make it easier for leaseholders to convert to commonhold; to allow shared ownership leases to be included within commonhold; to give owners a greater say over how the costs of running their commonhold are met; and to ensure that they have sufficient funds for future repairs and emergency works.

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[The Minister of State, Department for Levelling Up, Housing and Communities (Rachel Maclean)]

It is a pleasure to wind up this wide-ranging and impassioned debate on behalf of the Government. We have heard from Members across the House of the challenges inherent in the leasehold system—challenges that we are determined to tackle through further reforms in this Parliament. I am grateful to hon. Members on both sides of the House who have given powerful examples from their constituencies of leaseholders who have been hit with unfair and unreasonable costs. I pay tribute to the Father of the House, my hon. Friend the Member for Worthing West (Sir Peter Bottomley), who set out how he believes life can be made better for people in their homes. I thank him for his considerable and extensive work alongside the Leasehold Knowledge Partnership and as co-chair of the APPG on leasehold and commonhold reform. I also thank my right hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) and my hon. Friend the Member for Leigh (James Grundy) for their contributions.

The examples set out by Members across the House only underscore the importance of our work to reform the leasehold sector for good and move towards a simpler, fairer, more equitable commonhold system for flats—a system that, as my hon. Friend the Minister for Local Government and Building Safety rightly asserted in opening the debate, is common around much of the rest of the world.

[Stephen Doughty]

Will the Minister give way?

[Rachel Maclean]

I do not have much time, and I have a lot to get through, so I hope the hon. Gentleman will allow me to answer the questions asked by him and his colleagues.

The first point to address is one of timing. In a sense, this debate hinges somewhat on a false premise. It hinges on media speculation—

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[Rachel Maclean]

It is a commitment that I have made from this Dispatch Box, and the hon. Gentleman has heard me say it clearly. He is an extremely experienced Member of Parliament, and he knows that it is not possible for any Minister to commit to the details of what will be in a future Bill or King’s Speech, but I am making commitments about the measures that we intend to enact.

For buyers of new flats—[Interruption.] Perhaps hon. Members would like to hear some further commitments. For buyers of new flats, we will also bring forward much-needed reforms to the commonhold system, so that flat owners and developers will finally have access to a viable alternative to leasehold. It was this Conservative Government that set up the Commonhold Council, and it has met regularly and we are working closely with it.

Several hon. Members spoke about recent reports from the Law Commission, and it is worth saying that we have been working in lockstep with the commission to ensure that our reforms are workable and deliver the outcomes we all want to see. Indeed, I take this opportunity to thank the commission for all its work in this area. It has made more than 300 recommendations for improving the leaseholder system across enfranchisement, including how valuation operates, commonhold, and the right to manage. I have no doubt that hon. Members appreciate the complexity of the reforms in this fiendishly complicated area, and it is absolutely right that we take the necessary time to ensure that they are done properly. We are unapologetic about saying that, for the sake of the owners of 5 million leasehold homes, we have to get this right, and that is what we are committed to do.

[Stephen Doughty]

I thank the Minister for giving way; she is being generous. I asked a specific question about Wales, and it is the preference of the Welsh Government that reform is brought forward on an England and Wales basis. Will she commit to doing that? Her predecessor, the right hon. and learned Member for South East Cambridgeshire (Lucy Frazer), promised that change would be coming “soon”, so why are the Government dragging their heels?

[Rachel Maclean]

I thank the hon. Gentleman for his question. He will know that we work closely with all the devolved Administrations when we bring forward legislation, and that is the right thing to do.

As hon. Members will know, it is not only leaseholders who are too often subject to unfair or outrageous practices. We should not forget the plight of freehold homeowners who pay towards shared services, such as unadopted roads, but have few rights. The Government remain committed to making estate management companies more accountable to the homeowners for whom they provide services. When parliamentary time allows, we intend to legislate to deliver these commitments, including measures that will allow homeowners the right to challenge the reasonableness of costs they have to pay. We will give them the ability to apply to the first-tier tribunal to appoint a manager to manage the provision of services.

In all aspects of this ambitious programme of reform, the Government are committed to rebalancing what has historically been a largely one-sided relationship between homeowner and landowner. We are affording peace of mind to those who have realised the dream of home ownership—something we on the Government Benches strongly support—giving them much greater control of the place where they and their loved ones sleep at night. Crucially, we are pursuing this agenda in the right way, working hand in hand with the Law Commission, the CMA and our partners across the housing sector.