I beg to move,
That this House takes note of the Twelfth Report of the Housing, Communities and Local Government Committee, HC 1468, on Leasehold Reform and the Government’s response, CP 99; welcomes the Competition and Markets Authority investigation into the extent of any mis-selling and onerous leasehold terms; believes there is no reason why the majority of multi-occupancy residential buildings could not be held in commonhold; calls on the Government to remove the incentives for developers to build new leasehold properties; and further calls on the Government to bring forward legislative proposals to amend onerous permission fees and ground rents in existing leases.
In March, the Housing, Communities and Local Government Committee published its 12th report following a six-month inquiry into leasehold reform. We received more than 700 submissions in initial evidence, and during our evidence sessions many leaseholders got in touch with us saying “Me too! I am in exactly the position that is being explained to you by the witnesses.” We have now received the Government’s response. While we are pleased by their support for some of our recommendations, we feel that more could be done for existing leaseholders, and I shall say more about that in due course.
Might I intrude on the previous debate, Mr Speaker, and refer to the issue of devolution? Yes, in England we are interested in it. Indeed, the Select Committee announced today its intention of holding an inquiry into devolution in England, which I think is a positive development. [Interruption.] I am sure that the hon. Member for Perth and North Perthshire (Pete Wishart) will read about this tomorrow in Hansard.
The Committee uncovered a scandalous situation—or, rather, scandalous situations, because they varied in many respects. Developers often sell their properties, funded by the Help to Buy scheme, and give purchasers inducements to use a solicitor of the developer’s choice who does not explain to the purchaser the full impact of the purchase, does not give the full information about ground rents or permission fees, and sometimes does not even make clear the difference between leasehold and freehold. Purchasers are promised that “it will be all right, because you can buy your freehold following a given period and for a given sum”, only to find when they try to do it that the freehold has been sold on to a third party. We heard about some other really bad examples: for instance, people in flats were being faced with unexplainable and unjustifiable service charges, and, of course, excessive commission fees as well. In the worst cases, people have been left trapped in unsellable and unmortgageable homes.
The Committee concluded that
“too often leaseholders…have been treated by developers, freeholders and managing agents, not as homeowners or customers, but as a source of steady profit.”
That is simply unacceptable. We also concluded that there was no link at all between the ground rents that were paid and the service that was delivered to the leaseholders. We were completely unconvinced that, in most circumstances,
“professional freeholders provide a significantly higher level of service than that which could be provided by leaseholders themselves”.
Ours is a comprehensive report with a great many recommendations. I shall list some but not all of them, because there are so many. I pay tribute to the work of the all-party parliamentary group on leasehold and commonhold reform, many of whose members are present today and who did an awful lot of work, to all my colleagues on the Committee—this is a unanimous report, although it contains controversial and far-reaching recommendations—and to the Leasehold Knowledge Partnership and the National Leasehold Campaign, which have done a great deal of work to put this issue into the public domain.
In their response, the Government are generally positive about new properties, but probably less committed to certain recommendations for existing leaseholders. They have agreed to a ban on leasehold on new houses, which is certainly needed. In the case of future leaseholds, there should be a peppercorn rent; the Government’s original proposal was a £10 charge. We have asked for clear standardisation for leaseholders when they buy their properties. The Government have accepted the recommendation in respect of new purchases, but not for resales. We may need to return to that issue, because it is important.
We have not made as much progress on commonhold. We were positive about its future, suggesting that it should become the primary form of tenure; the Government called for it to be a “viable alternative”. We know that there is work to be done on the legal position relating to commonhold and the availability of mortgages, but the Government ought to be a bit more enthusiastic than perhaps they have been so far. We also called for a ban on inducements for purchasers to use particular solicitors. The Government have not gone that far; they have talked about better redress, greater transparency and asking the regulators to be more proactive. We do not think that goes far enough.
We also called for any permission fees that are in the original lease to be no higher than the administrative costs of those fees. The Government have said that that is a matter for Lord Best’s review of the regulation of property agents. We hoped that the Government would say that they were looking forward to implementing recommendations from the review, but they have not gone that far either.
On existing leaseholders, we still have more progress to make. We recognise the complications of this. Nevertheless, we also recognise the suffering of leaseholders at present that does need to be addressed. On the positive side, we called for the Competition and Markets Authority to conduct an inquiry into mis-selling. I met Lord Andrew Tyrie. He is committed to the inquiry that he has announced. He wants to do something. He recognises the problem and we look forward to that. I hoped the Government would have said, “Yes, we want the inquiry and we want to implement what it finds.” Instead we are in a, “We look forward to the inquiry, but are not quite sure what we are going to do with it when we get it” situation.
We have also called—these are important issues—for onerous ground rents and onerous permission charges to be dealt with retrospectively. They both need addressing. We could do it in the human rights legislation. We took detailed advice and evidence on this. Again, the Government’s response seems to be, “Well, voluntary deals are being done with various developers about this.” Frankly, we are concerned about the level of trust the Government are placing in the same industry that created the onerous leases in the first place. The Government do not go far enough. Often the links to the retail prices index can lead to high figures. Often deals do not apply to the resale of property and of course they do not cover permission charges or any of the arrangements that have been arrived at. So we certainly want to go a lot further than that.
On permission fees and retrospective action, the Government said, “Look for the CMA report.” We understand that that report will be about not just mis-selling, but whether the conditions so far imposed are unfair in consumer law. We will want to have a look at that when it comes out. We hope the Government will act quickly on that report and the report being done in parallel by Lord Best, the review of property agents, which will look at permission fees as well.
Some of those fees are scandalous: £3,500 to put a conservatory in, before starting with the cost of the conservatory; £68 for a doorbell; £100 to answer an inquiry. These are outrageous fees. They are not justifiable. They are unfair and scandalous, and action needs to be taken on them.
We have clearer statements from the Government on some areas and we should recognise that. The Government want to see standardised forms for service charges. We received lots of evidence that service charges just came out of the blue; it was not possible to explain what they were or justify the amounts—in some cases it was not even possible to find the service being charged for. So that needs to be addressed. Lord Best’s review is looking at that and we hope that the Government act quickly when it is published.
We said that, where a freehold was bought, some of the freehold agreements themselves kept service charges and permission fees embedded in them. We could see no justification for that and the Government agreed with our position. We called for greater clarity on communal areas on freehold estates in terms of who was responsible when the council and the developer did the initial planning agreement, and the Government supported action there.
Enfranchisement is a big issue. We know that the Government agree with our recommendation for a clearer and simpler system. Again, the Government are waiting for the Law Commission, but we hope that their commitment in principle will soon produce action. We also recognise the Government’s commitment to change the current system: there is only first refusal for flat owners in terms of the sale of freehold; in future that will apply to houses as well, which is a step in the right direction.
We also recognise the Government’s commitment in most cases to ban the freeholder collecting from leaseholders the costs of going to a tribunal when the freeholder loses. That is an important step. It is frankly outrageous that someone can win a case in a tribunal and then find that they are paying the price of winning through extra lease and service charges.
The Government are being a bit mealy mouthed on forfeiture, even though it is completely wrong and unjustifiable. It might not happen very often, but the threat of forfeiture forces many leaseholders not to challenge and to back off, so we need action there as well. An important issue that is often forgotten about is sinking funds. They can be very large, and they are currently unregulated. The Government have suggested that Lord Best’s review should look at the issue. We look forward to that review because there are a lot of things it will have to look at.
There are many other issues. I cannot go into them all in detail, but there is a very long list of recommendations and responses from the Government. The Government are positively trying to look at the issues around redress, but I ask them please to get on with the housing court. Having a housing court would mean that people who had problems with their housing, whether as tenants, leaseholders or in other circumstances, knew where to go for a simple and effective form of redress. We welcome the Government’s commitment to this in principle, but that principle has been sitting there for a long time and we need some action on it.
In the end, the Government are right to say that this is a really complicated area of law. There are lots of Acts of Parliament and lots of regulations, so what we in the Committee have suggested is very simple. Let us recognise the changes that need to happen, but let us also recognise that there will be enormous long-term benefit for everyone if we have a wider review of all the legislation on leaseholds. We should give the Law Commission the funds to do that, but again the Government have really backed off the proposal. I ask the Minister at least to agree to that today, because it is a very simple suggestion that could have enormous long-term benefits.
Order. A five-minute limit on Back-Bench speeches will need to apply with immediate effect.
Thank you for allowing me to catch your eye, Mr Speaker. I am really pleased to follow the hon. Member for Sheffield South East (Mr Betts). As Chairman of the Select Committee, he is one of the most knowledgeable people in this House, and I pay tribute to him for the excellent work that his Committee has done in this field. I am one of the few chartered surveyors in the House, and I draw hon. Members’ attention to my entry in the Register of Members’ Financial Interests. I have managed properties of all sorts for more than 40 years and I therefore have a degree of knowledge in this area.
The basic property law in this country dates back to the time of William the Conqueror, and in particular to 1086, when the Domesday property book listed every property in England. The law has progressed since then. In particular, the law on leasehold arose because landowners wanted to come to an agreement with one or more persons to occupy their land for a variety of functions. Sometimes it was to farm it, sometimes it was to build buildings and sometimes it was to run a business, and the leasehold law arose. It has been amended many times since then, as the hon. Gentleman has said.
In recent years, there have been a number of scams in my constituency relating to the leasehold law and, in particular, to the freehold law, and I want to go into one or two of those. As the hon. Gentleman said, the two areas in which these leasehold scams arise are ground rents and service charges. The ground rents in older leases tended to be a fairly small proportion of the total cost, but in recent years modern developers have hiked the ground rents, often doubling them every 10 years. The so-called proposals to modify this with reference to the retail prices index could lead to an even greater scam, because if inflation started to rise, ground rents could double not every 10 years but every five years. We need to look very carefully at that proposal. There are other proposals to make ground rents more moderate.
The other area, which is perhaps a bigger concern, is that of service charges. They can often be completely unknown, and they can include elements that are not immediately apparent to the person buying a leasehold. Those elements include administration fees, accountancy fees, commissions, insurance—the list goes on forever. The problem with all that is that a purchaser’s solicitors often assume that their client has a greater knowledge than they really have and are not explicit about what the obligations amount to.
I will move on quickly, because time is running out. I have constituents in the Gallery who have had equal and similar problems with scams relating to freeholds. Freeholders buy their properties with a covenant—many covenants in some cases—that contain unquantified and unspecified obligations relating particularly to the common parts of their estate. When pressed, the smart salespeople in the smart furnished flat or house on the estate often say, “Well, it’s only a small amount. It will amount to a few hundred pounds.” However, when the buyer gets their first bill, they suddenly realise what they are locked into. In some cases, the charges are so high, as they can be with leaseholds, that the properties are effectively made unsaleable.
We need to look carefully at the purchasing system in this country, and the Government need to work with the Law Society to ensure that all solicitors make it explicitly clear to their prospective purchasing clients what they are letting themselves in for. In my experience—I do not wish to knock either my own profession or the legal profession—they tend to be fairly blasé about inquiring into what the arrangements are for managing these common parts, which can be very expensive. The Government need to examine the arrangements to make it much easier for groups of people representing their estate to take over its management. What actually happens is that the management tends to be vested in a company that is owned by the estate’s original developer, and then people who cannot get out of dealing with that company are locked into whatever said company chooses to charge them.
I pay great tribute to Amanda Davies from Burton Chase and Mike South in Victory Fields for bringing some of these anomalies to me. Like the hon. Member for Sheffield South East, I have written to the Competition and Markets Authority with a draft of how my constituents think the current system is being mis-sold. I hope that the CMA will take close notice of that.
I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for presenting the report on leasehold for debate. Before I make my observations, I must declare my interest as I am one of the many thousands to have been caught in the leasehold trap. It appears that we have 18th-century practices operating at 21st-century prices and, more fundamentally, that a person’s home is not really their own, with the freedom to do within it as they please. In West Lancashire, nearly a quarter of homes sold in 2016-17 were leasehold, and the figure was still over 15% in 2018. The issue seems to be that leasehold has strayed into being an extortionate money-making racket at the expense of house owners.
Owners are forced to pay extortionate ground rents and locked into rip-off service charges, with nearly 60% of them lacking an understanding of their contractual obligations. My hon. Friend talked about inducements to use the preferred solicitor of the developer and the lack of information that follows. I can tell the House for a fact that Redrow in the north-west simply passes all its clients’ details to Bannister Preston Solicitors LLP, and it is assumed that that firm will act for them. It is time for the Solicitors Regulation Authority to wake up and act.
Perhaps leasehold would not be talked about so negatively if leaseholders did not find themselves obliged to Dick Turpin-like companies that require them to stand and deliver—in this case, it is “your money and your home” that they are after. The Government also need to look at councils that, in concert with developers, contractually agree to sell the freehold to the developer, but only when all the houses are completed. That allows salespeople to say, “We don’t own the freehold,” knowing full well that they will. They then get a huge ransom from selling the freehold on before anyone knows, and they can say that that has nothing to do with them. In Liverpool, for example, the council sold the freehold of one site to Redrow for £1, which then sold it on for £175,000, saying that that was the best price for Liverpool’s taxpayers. Where was the district auditor? My colleagues tell me that this practice is not unusual and is happening all over the country. Liverpool has banned Countryside Properties, and the Mayor has rightly said:
“We will not be making any deals...with any developers that put people at risk.”
Is it now time to ban Redrow? We need to find a way to ensure that thousands who are already caught are given an exit option on fair terms.
Everyone knows that people are being charged to receive emails. It takes four weeks for someone to come. There are no phone numbers. People pay extortionate prices to carry out work on their own property. People are being misled, being told they can buy the freehold in a couple of years’ time for a few thousand pounds, only to find the freehold has been sold on, with no first refusal being given to the leaseholder. Some do not even offer direct debit, so those who forget to pay their twice yearly charge are slapped with further charges for late payment. People are sent threatening and heavy-handed letters.
But it does not end there, because those who do engage and who manage to buy can find that they are buying not the freehold but a virtual freehold, whereby they have simply bought out the ground rent. Many of the conditions remain, with owners still being charged for work to be done, except now they have fewer legal rights to contest any excessive amounts because they entered into the freehold contract willingly and the amounts were unspecified.
Sadly, owners are being led to the slaughter, let down by conveyancing solicitors who, despite their best efforts, cannot deal with these sharks. I firmly believe that, unless strong and immediate action is taken, people will have great difficulty when they come to sell their virtual freehold homes, with the covenants and conditions still remaining, in a few years’ time. I forecast to the Government that the freehold scandal will erupt again.
We need leasehold reform now. It is in the Government’s power to do it now, and households right across the country demand that they do it now.
It is a pleasure to follow the hon. Member for West Lancashire (Rosie Cooper).
When the Housing, Communities and Local Government Committee started looking at this area, one thing the user groups that came before us wanted was the outright abolition of leasehold. In fact, they regard it as “fleecehold.” I am concerned about the Government’s responses to our detailed report, which makes excellent recommendations —I would say that, because I was party to the report and agree with every one of its recommendations. The Government have just said that they note what the Select Committee has said. There has been no commitment to action, and my request this afternoon is for the Government to take action to implement our report.
I draw an immediate distinction between the sale of houses and the sale of flats. There is clearly no justification whatsoever for a house to be sold on a leasehold basis, but there is a justification for flats. There needs to be more promotion of commonhold to encourage people to participate and use it, but we must always remember that some elderly and vulnerable people do not want to exercise more control and may be happy to have a leasehold property, with someone else managing it for them. We have to be cautious on that subject.
The Government are leaning on the fact that the Law Commission and the CMA are doing reports but, in their response to our report, they have made no commitment to implement whatever recommendations they make, and I hope we will get to that position.
The Select Committee’s report draws attention to the role of lenders and the fact that relatively few will lend on commonhold properties. That was true, but more lenders will now lend on commonhold properties. On mis-selling, most people who buy a leasehold property are first-time buyers. They are often naive and do not understand all the detail, and they learn by their mistakes. The introduction of transparency is therefore vital, as it is not good enough for developers to mislead potential purchasers. It is vital that we legislate for mandatory information, rather than relying on a voluntary code.
On the imposition of freehold purchases, a leaseholder should have the absolute right to purchase the freehold from the developer, either at the point of sale or at some future stage. During our inquiry, we had the scandal of the chief executive of Bellway Homes telling our Committee that after six months it sells all the freeholds to a finance company and washes its hands of them. I said at the time that that is a scandal and I retain that view, and Bellway Homes should stop that practice right now. Given that it does not want to do so, we should legislate.
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.
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.
Given that it is Wimbledon week, it is nice to see you in the umpire’s chair, Mr Speaker. It is a great pleasure to follow the hon. Member for Harrow East (Bob Blackman), who made a good case that I fully support. I should also compliment my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Select Committee, who, as ever, displayed a detailed and thorough knowledge of the subject.
According to the House of Commons Library, 27% of all new house sales in the north-west in 2018 were on a leasehold basis. In my constituency, about 1,320 have been sold on that basis in the recent past—261 in the past year alone. As we have heard, the current arrangements allow landowners to retain a level of ongoing management and the ability to secure income. For leaseholders, there is a range of problems, most of which we have already heard about, including with transparency on what they are charged for, disproportionate service charges and freeholds being sold on to a third-party.
Let me give a couple of examples from my constituency to show how the current situation has affected real people. Helen Spree is the owner of a Redrow property in my constituency for which she pays a ground rent. She is limited by a restrictive contract that dictates what she can and cannot do with her home. She is concerned that the freehold will be moved to a third party which, as we have already heard, happens frequently, without any notice or consultation. To purchase the freehold, it will cost her 26 times the current annual leasehold payment. That amounts to around £7,000. In addition, she would be required to pay Redrow’s legal fees, as well as her own, if she wanted to purchase it. By any standard, that is outrageous.
Another constituent of mine, from Earle Avenue, does not want to be named. He bought his property as the second owner—he was not the first person to buy it—in 2014, and planned, not unreasonably, to install a conservatory. He was told by a neighbour that Bellway would charge £350 for the privilege. When he approached the freeholder’s representative, he was informed that that £350 had gone up to £2,600. All he wants to do is build a conservatory, and he has to pay the freeholder £2,600 to do so. In addition to that, he would have to pay administration charges. Four months after he moved in, Bellway sold the freehold on his house to an investor; he found out only when we received a letter telling him so. He is restricted in respect of retaining his mortgage with his existing mortgage company, because under the terms of his lease he is required to inform the freeholder if he wants to change providers, and pay an additional £108 charge to the freeholder for doing so.
I have one further example that I will not go into at any length. A constituent of mine called Mr Eric Barry lives in a flat in Briton Court in my constituency. He is currently being charged £1,692 a year in service charges. There is a long list of things that the company, Moreland Estate Management, is supposed to do for that money, but Mr Barry contests whether it bothers to do it, or does it with the required frequency. It is an outrage. The worst thing about it is that he took the matter up with me a year ago, and I wrote to the estate management company, Moreland Estate Management, but I have still to receive a reply from them to a letter that I wrote on behalf of a constituent.
We have heard in great detail what a scandal all this is; it is about time it was sorted out.
More than two years ago, I asked Ministers what they were going to do to help existing leaseholders in my constituency who are trapped in their homes. I am still waiting for a satisfactory answer. I support the comments from colleagues: the only way we can see these people satisfactorily helped is if the Government bring forward legislation to deal with issues such as the doubling of ground rents, high permission fees and exorbitant charges to pay for the freehold.
The Government have talked about supporting those who buy in future, but we need help now for our constituents who have already bought and who are trapped. In fact, as one of them said to me, the fact that buyers are now being offered much better terms by developers, often on the same developments, has exacerbated their problems and left them in difficulties. They simply will not be able to sell their homes.
I have been given permission by Alison and David Rowlands of Sandbach to cite their experience. It is just one of many examples in my constituency, where there is a high level of house building. They say that their situation has been truly damaging to health, family life and finances. They bought their home from Taylor Wimpey in July 2011. In December 2013, they received a letter from Taylor Wimpey informing them that the freehold had been transferred. Never at the point of purchase were they told that this was something that would happen. The house is on a leasehold agreement. The terms state that the ground rent doubles every 10 years, starting at £289. That was explained to them by their solicitor, but as they expected to buy the freehold within the first couple of years or so of their ownership, they were not too concerned. However, the solicitor presumably did not know, and certainly failed to inform them, that the freehold would be sold on to a third-party investment company, which would then completely alter the estimated purchase price of the freehold that they were told about when they bought in 2011. When they bought in 2011, they were advised that it would be in the region of £5,000. After purchase by the third-party private investment company, they were told that it would be in excess of £30,000.
The alternative for the couple—they have calculated this—is to continue paying ground rent charges throughout their lifetime. We must remember that they are in a property in which they are now trapped; they cannot move out because the terms on which other similar properties nearby are being sold are so much more preferential. They have calculated that, during their lifetime, they will pay £185,850 in ground rent charges—almost the price that they had to pay for their house. Indeed, the total sum of ground rent on the property that they bought for £229,995 on a 250-year lease will be £1,837,850—the equivalent of buying their house eight times over. They say that they feel victimised and vulnerable, and, of course, they are not alone in this situation. Government need to act as a matter of justice to help these people.
Government have acted effectively retrospectively with regard to a number of individuals in my constituency who have bought properties to rent out. They bought on the basis that the mortgage interest that they would be paying would have tax relief. The Government are effectively changing that, and, as far as they are concerned, changing it retrospectively. How much more the Government need to look to help these people who are not investors—this is their home and this is the situation in which they are now trapped. As I have said, I have met Mr and Mrs Rowlands on a number of occasions. They are very genuine people—a young family seeking to settle their situation in life and become secure—and yet there they are living in their home and, as they say, feeling victimised and vulnerable. As far as Mrs Rowlands is concerned, this has had a very serious detrimental effect on her health.
I congratulate my hon. Friend the Member for Sheffield South East (Mr Betts) and his Committee on the excellent work that they have done on this issue.
Homeowners who have bought newly built houses in my constituency—and there are many hundreds of them—thought that they were buying their own homes. Technically and legally, they were buying a lease, a type of tenancy, often a long one of up to 999 years, which has left them with a landlord, the freeholder. Many property development companies and finance companies are treating the freehold reversionary interest on houses on these estates as a financial asset to be exploited to the full, with no regard whatever for the leaseholders and the families they are exploiting mercilessly. They see families in my constituency as nothing more or less than a long-term financial asset to be squeezed to the maximum for cash.
There is no reason at all to sell a leasehold house. There is only any point in selling a house as leasehold to make it into a financial asset to squeeze into the far future. Yet in the north-west, 69% of newly built houses in 2016 were sold as leasehold properties. There are already more than 1 million leasehold houses in England and Wales, so what is happening now to my constituents and other home buyers in the north-west is happening elsewhere—perhaps at a lower level, but it is happening.
There are four main areas of concern. People were mis-sold these properties—were not given the full information about what they were getting into. I have heard of many examples of conveyancers having potential conflicts of interest. I have constituents who paid deposits to secure plots in developments before they were even informed that they were in fact purchasing a lease. I have numerous examples of constituents using the conveyancers suggested by developers to guarantee the speed required to access Help to Buy, who were not even advised of how onerous some of the terms of their lease would be.
Escalating ground rents are a real problem for affordability, security of the lease and resale value. There is no reason for ground rent to go up in the way that it does—after all, the freeholder does not provide anything for these payments; it goes up because it can. It is feudalism of the worst kind. Purchasing the freehold is made very expensive and the price often seems arbitrarily high. I have had constituents whose freehold has been sold on without being offered to them. I have people on the same estate being quoted anything between £5,000 and £17,000 to purchase the freehold on identical properties. Leaseholders are being quoted 26 times the ground rent, plus freeholders’ extortionate legal costs, when the formula in enfranchising legislation uses 10 years’ ground rent as the norm.
Some of the restrictive covenants may be unfair contract terms in a legal sense, but no one has thousands of pounds to take the matter to the courts to check. I have heard examples of extortionate fees—£1,600 being demanded for granting permission to have a driveway installed. No wonder people call these properties “fleeceholds”. It is a sorry tale.
But there is an additional common problem for lease- holders, and that is that they cannot sell their properties. I have been asking myself why escalating ground rent leads to mortgage companies not wanting to lend. I have constituents whose sales have fallen through, but why? Perhaps the answer lies in the landlord-tenant relationship that is the essence of the freeholder-leaseholder relationship. I saw a piece on the website of a legal firm, Mishcon de Reya, that addressed that issue. It said that long leases can sometimes count as assured shorthold tenancies. According to the piece, that cannot be the case where the ground rent is a peppercorn, but where the ground rent is over £250, or £1,000 in London, the lease is covered by the Housing Act 1988 and counts as an assured shorthold tenancy.
I find this shocking: where ground rents escalate, the leases are likely in time to come to fall into that category of assured shorthold tenancy, and such tenancies are designed to be the least well protected. Assured shorthold tenancies can be relatively easily terminated, and therefore the lease forfeit by the landlord or freeholder. In most leases there are provisions, which are quite draconian, for that to happen. Because assured shorthold tenancies allow relatively easy termination, the 1988 Act gave courts the right to grant relief, cancelling the forfeiture if the rent was paid. However, the power to grant relief does not apply to assured shorthold tenancies if at least three months’ rent is more than three months overdue. In such circumstances, forfeiture must be ordered by the court. That raises a terrible prospect of home owners losing their homes simply because they did not realise this had happened.
The Government must do something about this, and they must do it now.
The Ministry of Housing, Communities and Local Government estimates that there are 4 million leasehold homes in England, of which 70% are flats. Because almost all flats are leasehold, leasehold transactions are more common in London. In my constituency, in the Colindale ward, there are almost 10,000 new properties—predominantly flats—on 10 hectares of land. That figure does not include the additional developments in Millbrook Park in Mill Hill, Stonegrove in Edgware and the additional properties proposed by the Mayor of London.
When I owned a flat in the Hendon area, there would always be a problem with the service charge. I had a neighbour, Les Miller, who would always challenge the service charge and speak to the managing agents, and he would always resolve the problems. Not everyone is fortunate enough to have someone like Les, but he was the perfect candidate because he was retired and could devote his time to that. However, some residents’ groups have appeared in places like Colindale. At the Colindale Village residents association at the Pulse in Colindale, Joey Sky acts on behalf of many people who have problems—especially parking problems—on the estate. That situation has arisen because there are three different managing agents for the same development, and there are just 48 parking spaces for 1,000 tenants of the properties. With the introduction of a controlled parking zone in Colindale, residents are going through hell as they simply cannot park on or off the street.
Up the road, at the development in Beaufort Park, residents are paying around £800 to park their cars. For that, they do not receive a designated parking space but are simply allowed to park in a vacant space in a parking zone. The Beaufort Park residents association is not recognised by the developers, who say that they will recognise any such group only if a percentage of the owner-occupiers come together and form it. Unfortunately, because there are so many overseas investors in the development, the residents’ concerns are ignored. That is a great mistake, as these are very sensible people who are seeking solutions to the problems that many experience.
Other parts of my constituency are having problems with leaseholds. The residents of the Edgware Green development in Edgware have been trying to buy the freehold of their properties from Barrett Evolution. The issue is complicated by the discovery that some freeholds have already been sold on to another company. Many residents were not aware of this and were not given the opportunity to purchase. The new freeholder has increased the annual ground rent by almost 32%, and the residents have had to engage a solicitor collectively to assist with their purchase, as the matter is really not very straightforward.
There is a similar situation in Cheltenham where a freehold has been passed on. The freeholder then completely goes to ground, so when my constituents try to make contact with the company, they cannot get hold of it and are unable to sell their properties. It is an appalling situation. Does my hon. Friend not agree?
I certainly do agree. It is such a frustrating scenario when it is not even possible to find out who is responsible. I think that the managing agents in that scenario will be particularly keen on sending their bills to my hon. Friend’s constituents and will not be very slow in forwarding those invoices.
Three years ago, residents at Kennyland Court in Hendon were asked by their managing agents to pay for roof repairs despite a 20-year guarantee being in place since 2003. The managing agents said in their defence that the guarantee was for 15 years and was on a reduced basis, but even my maths shows me that 2016, when the bills were issued, was still two years before the end of the guarantee. However, residents were just given two repair options and no real response to the matter of the guarantee. They felt that they were being bullied by the managing agents into accepting the repair bill without any answers to their legitimate questions.
A constituent at the Brinsdale Park development in Hendon is having difficulty with a managing agent over vague bills and a lack of invoices. She says that the managing agent has consistently sent coercive demands for what she believes to be incorrect service charges. She has now invoked sections 21 and 22 of the Landlord and Tenant Act 1985. Section 21 relates to service charge information and section 22 relates to a request to inspect supporting accounts. This all seems very reasonable: someone receives an invoice, invokes sections 21 and 22, and sees the information. However, the managing agent has responded by sending emails accusing my constituent of harassing him in seeking such information.
It appears, judging from this debate, that there is widespread dissatisfaction about the way that many of our constituents are being treated. Indeed, that dissatisfaction has been expressed by leaseholders themselves regarding service charges. Of 1,244 leaseholders surveyed by the Leasehold Advisory Service in 2016, 40% strongly disagreed that service charges represented value for money and 62% agreed that the services provided had not improved in the past two years.
The problems are quite simple. There is difficulty buying freeholds. There is a lack of transparency around the additional medium-term and long-term cost of a leasehold compared with buying a freehold. There are significant legal and surveying costs when leaseholders want to purchase part of the freehold, or, indeed, part of the land itself. There is an excessive increase in ground rents, a lack of transparency around service charges and freeholds not being offered to leaseholders before being sold off to a third party. This situation really is intolerable for so many people, particularly in my own constituency. I understand that the Government have sought a consultation. I hope that they act on it, because the way that residents are being treated is not only unfair but, in many ways, morally corrupt, and we must act sooner rather than later.
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.
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?
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.
Buying a home is the biggest single commitment that anybody will take on. In this country, 85% of people want to own their own home. We encourage people to own their own home and to make it an investment. We encourage them so that, in later life, people have security and are not reliant on the state. If we are to encourage that, we need to make sure that we are giving those people every confidence in their investment and every protection we can.
I welcome the Select Committee report. I will not go into the detail of the whole report, which would be very difficult to do in the time we have this afternoon, but I want to touch on a couple of things. Commonhold features heavily in the report. This has been available since 2002 and the take-up of it has been very small. There are lots of legal practicalities and challenges for mortgage lenders and so on. But the basic fact is that developers, particularly those developing blocks of flats, want to retain some sort of value after they have completed the development and they want to be able to profit from the value they have retained. I can understand that in certain situations, such as retirement accommodation and so on, but if we are to encourage people to go to commonhold, we will have to legislate to take away from the developer the option to retain that financial interest in the property.
I would rather go for a simpler mechanism that would basically prevent developers from continuing to hold that interest in the property so that, as soon as all the flats are developed, the freehold interest reverts to the leaseholders who buy the long lease at the outset, and that can then be managed by the leaseholders. Those would be far better arrangements and, for me, that is where most people who own leasehold property fare best.
I also want to mention the conveyancing process. I say this as somebody who acted for thousands of people buying and selling residential property over a long period. Clearly, it is the job of the conveyancer—a licensed conveyancer, a registered conveyancer or a solicitor—to protect their client and they have a duty of care to their client. In the arrangements for new developments, new developers generally have two or three solicitors on a panel of solicitors that they will recommend and, by hook or by crook, they put virtually every single person who is buying to those people. The reality is that there is a lot of pressure on those firms of solicitors to exchange contracts, to complete and to expedite matters and, within that, they are therefore not necessarily providing the best impartial service for their clients. The link between these referrals and the solicitors in the advice given to clients needs to be broken. We cannot continue with the status quo in that regard.
We need to do far more about assignment fees, notice of mortgage fees and dealing with covenants. Things must be based far more on what it costs for a freeholder or managing agent to undertake a particular process, rather than adding exorbitant fees. It is absolutely disgraceful when exorbitant fees are charged, and they always come into play right at the end of a conveyancing transaction when the managing agent has the person who is selling absolutely over a barrel.
I will quickly mention dispute resolution. I welcome the announcements that have been made about the fees on leasehold tribunals, but there needs to be a far simpler process before people get to the tribunal for leaseholders. Onerous terms of leases are also a massive problem. I am aware of several constituency cases where that has caused families a major problem.
We also need to make sure that we do not have leasehold houses; there is no necessity for leasehold houses. I know there is a cost involved, but we should move to a system where very little is provided by a managing agent and a tenant. People should get value for the council tax and we should go back to more of an estate being adopted and paid for by the local authority. People can then hold their local council to account if they are not getting what they are looking for.
I congratulate the Select Committee on its report. The fact that in 2019 so many British people owe their homes to a feudal property relationship is absolutely astonishing. I am proud that the Labour party has announced that it will end this ancient and anachronistic practice and ensure justice for leaseholders.
I want to use the brief time that I have to highlight the ongoing misery of constituents whose case I raised in my Adjournment debate of 1 November 2017; one is watching here today. As you know, Mr Speaker, the St Thomas area of Newcastle is one of the most beautiful parts of what is a very beautiful city. It has a large number of fine houses that anyone would be proud to call home, but for some they have become a prison—the families with children uncertain whether they can afford to pay mortgages that they cannot change; a refugee whose family have outgrown their home but who cannot sell it; a pensioner who wants to move to be near her grandchildren but cannot do so; and a couple in their 70s faced with six flights of stairs and rising maintenance costs. The charity that owns the freehold, the St Mary Magdalene and Holy Jesus Trust, refuses to extend their leases or sell the freehold. The trust was formed to support the Freemen of Newcastle, who also date from feudal times and the ancient guilds of our city. Today they are not generally considered to be among the poorer members of our society.
Section 172 of the Housing Act 1985 restricts the 1967 legislation to exempt charities from selling or extending the lease of houses on their land. The National Trust is in a similar position and, in response to the Committee’s consultation, offered to buy back properties whose freehold it did not want to sell. In the past, the Mary Magdalene Trust has offered to sell the freehold, but more recently it has changed its position, apparently to maximise its land assets. In so doing, it is causing misery.
The Minister is familiar with the situation and in the past has reassured me that a solution was in the works. My constituents had their hopes raised when it was reported that the trust was willing to sell the freehold, but in fact it was willing to charge residents thousands of pounds just to consider the option of perhaps allowing them to extend their leases for tens of thousands of pounds more. I hope the Minister will condemn that behaviour by the trust.
I also hope that the Minister will condemn the Charity Commission, which, in some disgraceful correspondence with me, said that it would be wrong for the trust to forgo the income that it could receive—presumably when the leases expire and my constituents are dead or on the streets. This is an organisation whose chair, Baroness Stowell, recently said:
“Charitable aims cannot justify uncharitable means”,
“All charities, not just the big ones, have to recognise that they have to demonstrate charitable behaviour and charitable attitude.”
Does the Minister view what I have described as charitable behaviour? Will she ensure that the trust follows the example of the National Trust and offers to buy back leases at market value? Will she press the charity to allow the option of enfranchisement, as committed to the Minister previously? Or will she leave the residents with no option but to await a Labour Government and justice for leaseholders?
First, I should declare an interest as I, too, am currently the owner of a leasehold property. As 66% of property transactions in Leigh now come with a leasehold, you would be hard-pushed to find someone in Leigh who is not affected.
I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for securing this important debate. I also thank my hon. Friend the Member for Feltham and Heston (Seema Malhotra) for her work on this issue. I know that she has constituents here in the Public Gallery. I thank the all-party group on leasehold and commonhold reform and the campaigners of the National Leasehold Campaign, in particular Katie Kendrick, for their work in highlighting the scandal and for providing support to constituents all over the country. Their work has brought together the real injustices facing people who own their own home.
I represent a constituency in the north-west and the leasehold scandal is hitting our residents in particular. In 2017, 31% of house transactions in the north-west were leasehold properties, compared with a national average of 3%. In Leigh alone, more than half of all property transactions came with a leasehold. To understand the anger and sense of injustice that the residents of our towns feel, we must look at the history of how we have got to this situation today.
In our proud post-industrial towns, such as the ones that I represent, properties were often utilised by the once-dominant landowners and manufacturing industries as accommodation for workers with peppercorn rents. As our industries declined and our factories closed, those leaseholds were bought up by companies that now dominate the local property market—a feudal system of old transferred into a feudal system of the modern age. As we have heard, those freeholders set into contracts new clauses that double ground rents every few years. A peppercorn payment has turned into a sizeable rent that is hitting families across our constituencies.
This real and growing crisis has led to desperate families getting in touch with me to say that they are struggling to afford those payments, on top of their mortgage and bills. This is the important aspect of this situation: there is a real human cost. A recent survey carried out by the NLC and SOS Silence of Suicide found that spiralling bills and charges are taking their toll on people’s health and wellbeing. And why? It is all down to the fact that a loophole has been exploited and innocent families have been caught up in it based purely on where they have been brought up or where they choose to live. The scandal is also having an understandable impact on our property prices and restricting the prosperity of our towns.
Earlier this week, the shadow Housing Minister, my hon. Friend the Member for Croydon Central (Sarah Jones), pointed out that the Government have made 60 leasehold announcements since they came to power nine years ago, but have taken no action to clamp down on this injustice. I am glad that the Government recognise the crisis we in the north-west in particular are facing, but their proposals simply do not go far enough. Their proposals offer nothing to help the hundreds of families in Leigh who are already stuck in these contracts, they do nothing to help with their spiralling ground rents and they do nothing to enable homeowners to escape their leasehold trap.
That is why I fully welcome and support Labour’s announcement this week that we will not only ban new leaseholds, but cap existing ground rents at £140 per year in Leigh and enable homeowners to buy their freehold at no more than 1% of their house cost. Those are the type of bold interventions that we need if we are ever going to be serious about fixing our broken housing market. From my weekly surgeries, I know how urgently we need leasehold reform. We need a radical shake-up to get our housing market working again.
I am grateful for the opportunity to speak briefly in yet another leasehold debate and I am pleased to follow my hon. Friend the Member for Leigh (Jo Platt) in this very well-informed discussion. I thank the Housing, Communities and Local Government Committee for its excellent report. I thank the Leasehold Knowledge Partnership, Martin Boyd and Sebastian O’Kelly for their analysis of the Government’s response, their ongoing expertise and their unstinting support for the all-party group on leasehold and commonhold reform. It is due to their efforts, and those of the National Leasehold Campaign and others, that this issue has risen up the political agenda steadily in recent years.
The plight of leaseholders is not new. Governments of both colours have tried in recent decades to improve the position of leaseholders and to offer them more regulatory protection. That vulnerability has increased because of the explosion of tenure as the demand for new housing has grown and the profits to be made have been understood. Some of those profits have been entirely unearned and border on profiteering and ongoing criminal exploitation.
Poplar and Limehouse has the second-highest proportion of leasehold properties of any constituency. The tragedy at Grenfell only highlighted some of the problems that leaseholders have faced from some freeholders, developers and property management companies. That is only one example of the lack of protection that the law affords leaseholders, which led this Government to set aside £400 million for the public sector and £200 million for private sector blocks for fire safety work and repairs.
As my hon. Friend the Member for Leigh has just mentioned, there has been a lot of noise from the Government on other aspects: the 2017 housing White Paper; the 2017 consultation on ground rents; the 2018 consultation on leasehold sector reform; the report on the regulation of management agents and permission fees; the Government’s engagement with the Law Commission on commonhold; their commitment to consult on enfranchisement to help leaseholders buy freehold; and the Competition and Markets Authority’s announcement of an inquiry, having been written to by the Secretary of State.
The Chair of the Select Committee did an excellent job of introducing the debate. I want to make only a few points. First, the Government have repeatedly used the defence
“as soon as Parliamentary time allows.”
That appears in paragraphs 11, 36, 89 and 96 of their response to the Committee’s report, to mention just a few, and it has been used regularly at the Dispatch Box in recent years. If not now, in this Parliament, then when?
Secondly, I would be grateful if the Minister could reassure us that Lord Best’s inquiry into the regulation of property agents, permission fees and so on is still on track for the end of this month. Thirdly, the Government have announced for a third time that leasehold house sales, with exceptions, will be banned. Can the Minister confirm that Help to Buy has shut this down in the meantime? Fourthly, lease forfeiture is a source of major abuse, as we have heard, and many well documented cases have been supplied, yet the Government still seem hesitant. Perhaps the Minister could explain why.
On a separate matter, the Minister will know that the APPG’s officers, the LKP and others have been critical of the Leasehold Advisory Service—LEASE—especially following a recent meeting. Can the Minister advise when the APPG’s officers might receive a response to our request for an apology to our secretariat?
The Labour party has published its policy platform on leasehold. Its five strong pledges are very welcome, and I commend our shadow housing team for their excellent work—I look forward to hearing my hon. Friend the Member for Croydon Central (Sarah Jones) respond to the debate.
In conclusion, the Government have an impressive list of promises—I have mentioned some, but there are also ground rents on new leases at zero, and a new housing ombudsman. I commend the hard work of the many civil servants in the Department who have worked on the programme. However, most of the Government’s programme, if not all of it, is subject to that great “Get out of jail free” card:
“as soon as Parliamentary time allows.”
Leaseholders have been waiting long enough. Surely it is now time to deliver.
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.
I am grateful for the opportunity to take part in this important debate and I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for his excellent speech and for all the work done by the Select Committee.
I took part in a similar debate in December 2017, just after the Government had announced for the first time an end to leaseholds for new-build houses, but there is a still a huge amount of work to be done to help those caught in the leasehold trap, like many of my constituents. I first became aware of the issue in 2016, when I was contacted by a constituent, Linda Barnes. She told me that her house, which she had bought from Taylor Wimpey in 2011 for £147,000, had a ground rent that doubled every 10 years and that had been sold on by Taylor Wimpey to E&J Estates. Linda had been quoted a price of £35,000 to buy the lease before it doubled—that is a quarter of the value of her house.
I heard from another constituent, Jonathan, who bought a house from Countryside Properties using the Government’s Help to Buy scheme. Jonathan said that he had been made aware that the development was to be leasehold and that an annual ground rent of £200 was payable to Countryside Properties. Six months after he moved in, Jonathan received a letter informing him that the freehold had been sold on to a company called Tuscola Ltd, based in the British Virgin Islands. He was quoted a price of more than £6,000 for the freehold. He also discovered a doubling clause in his lease which meant that by 2055, the ground rent would be £1,600 a year. That is naturally causing him a great deal of concern, because by the time he reaches retirement age, his ground rent will be unaffordable and will make his home unsellable. As Jonathan said,
“Considering the significant cost of new homes one would have thought that the last thing one should worry about is the land the house sits on and that it can seemingly be sold on from underneath you.”
I have been contacted by many of Linda’s and Jonathan’s neighbours, and they all tell the same story: that they were encouraged to use the developer’s choice of solicitor when they bought their homes, that they were not informed of the doubling clause, and that the prices that they are being quoted for the purchase of the freehold are simply unaffordable.
Many residents are rightly angry that the developer sold off the freehold to a property investment company without first consulting the homeowners and offering them the first chance of purchase. Many pointed out that the leases on their homes are for 250 years; if the ground rent doubles every 15 years, it will be £13 million by the end of the lease. If the Government do just one thing, they must ban this exponential growth in ground rents. I heard from Lee, who told me:
“We are unable to sell our house…as the true nature of this mis-selling has now been revealed. We have a 10 year doubling ground rent on our house that is now known to be toxic. The only option currently offered by Taylor Wimpey is to convert us to an RPl lease and somehow this is supposed to remedy their wrongs.”
William, who contacted me, has also been offered an RPI ground rent. He took advice from a barrister who said that although it was not a good deal, it was better than a doubling ground rent. He advised William to accept the RPI deal and take out a professional negligence claim against the solicitors, who had been recommended by Taylor Wimpey. So my constituent is now embroiled in a professional negligence claim and an unsatisfactory ground rent deal, when all he wanted and aspired to was a home of his own. He points out that he is paying, in addition to his mortgage, estate management fees, service charges and ground rent in what was supposed to be an affordable home—but it is not all about money. William said:
“This is causing so much mental stress and is affecting the quality of my life with worry.”
One of the worst scandals of all has not yet come out in this debate. When people buy their houses, part of the contract states that they must obtain a compliance certificate before they will be allowed to sell them. If they are in arrears with any of the charges that the landlord has imposed on them, if they are in dispute or if they have not paid the interest, they will not be able to obtain the certificate, and they will not be able to sell their houses.
The hon. Gentleman speaks from a position of knowledge, and I am grateful to him for introducing an issue that does not feature in my speech.
I have been contacted by many other constituents with very similar stories. Sarah said:
“The Leasehold itself makes me feel like the property isn’t ours, having to pay fees for the most simple changes to your house, like painting the door and changing its colour…The leasehold is simply a joke and should never be allowed in law to happen to New Homeowners…or anyone.”
The north-west has one of the highest percentages of leasehold new-build homes, so sadly it comes as no surprise that so many of my constituents are struggling. We in the Labour party have said that we will abolish ground rents for new leases, will cap ground rents for existing leases at 0.1% of the property value up to a maximum of £250, and will introduce a simple formula for leaseholders to buy their freehold or commonhold, capped at 1% of the property value. We will crack down on unfair fees and contract terms, and will introduce new rights for residents to take over the management of their homes themselves.
Will the current Government do the same, and end the misery of the leasehold trap? Will they also launch an inquiry into how this was allowed to happen, similar to their inquiry into the mis-selling of payment protection insurance?
I am delighted to take part in today’s debate on an issue close to my heart, having first been contacted by constituents back in March 2016 and having campaigned with the APPG of which I am proud to be the vice-chair under the wise stewardship of the hon. Member for Worthing West (Sir Peter Bottomley) and my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick). With the Leasehold Knowledge Partnership and the National Leasehold Campaign we have shone a light on these issues over the last three years. It has been a long journey. We have had some successes, but the further we have travelled the more deceptions, scams and greed we have uncovered, and the more it has become crystal clear that this has been nothing short of a national scandal.
As my hon. Friend the Member for Leigh (Jo Platt) mentioned, first there is the serious impact on mental health. A survey carried out by the National Leasehold Campaign found that 90% of leaseholders thought about their leasehold problems every single day and about a fifth thought of self-harm. We must never forget the human cost of all this.
It saddens me to say that while the Select Committee inquiry brought a sense of vindication and indeed hope among all those who campaigned on this issue, the Government response feels tepid in comparison. An example of that is the response to the Committee’s conclusion that leaseholders were treated as a source of steady profit, because it is not good enough just to say that the Government have noted the conclusions of the Committee. One campaigner said to me, “How do they think that makes us feel?” Having waited four months for a response, I agree.
We have had voluntary codes, which are doing some good, but that is not enough, and an example that has come to light recently in a new Redrow development just down the road from where I live shows why we need to do more to enforce these changes. The first phase of the development was sold on a leasehold basis—goodness knows why—but following some pressure locally, Redrow agreed that subsequent phases would be freehold and all those who had purchased leasehold properties would be able to purchase the freehold at 26 times the ground rent after two years; that was still too high, but at least Redrow was prepared to sell it back rather than send it to an offshore investor.
Several constituents have now contacted me because after the offer was made they inquired of Redrow whether they would still need to pay the ground rent during that two-year period and were told they would not need to, but now Redrow is sending out bills and denying ever having said that. That is rubbing salt into the wounds, because it has also asked for a legal contribution to its costs, and is refusing to disclose any information about other covenants that might go with the land should it purchase. That, along with the fact that Taylor Wimpey has got rid of doubling ground rents but has still left itself in control of advantageous leases, shows me why we need legislation. We cannot have confidence that the developers, who, after all, are the authors of this racket, can put right the wrongs they have created.
I look forward to hearing the outcome of the Competition and Markets Authority investigation. There is plenty of evidence out there for it to conclude that this was a deliberately constructed income-stream effort. I have seen many documents talking about leases being optimised. It does seem to me that there was a deliberate strategy here.
Does my hon. Friend agree that one of the difficulties now is that though the CMA intervention is very welcome, it is going to take time, and its consultations and engagement just put everything back? It kicks the can down the road in a Parliament where we are not doing an awful lot of legislating.
My hon. Friend is absolutely right. I do not see that we need to wait for the Competition and Markets Authority investigation to conclude before we come up with tangible legislation to help leaseholders now. It is important that that investigation is carried out, however, because I think it will shine a light on wholesale practices. I have seen evidence such as the CBRE market review of 2013 saying that “leases had been optimised” in terms of rent review clauses, notice fees and other provisions to maximise freehold sale receipts for developers. It talked about soft income being generated from insurance premiums, commission, service charges and enfranchisement premiums. There is clearly an industrial-scale racket going on, and it is important for the future of the industry that we get to the bottom of it and find out who is responsible and make sure that they never get the chance to do it again.
Perhaps what is most concerning in this respect is that evidence has emerged of what are described as forward purchase agreements. These are contracts between an investor and a house builder to acquire a scheme before the individual units have been sold off on long leases. These agreements can often be in place as construction is ongoing, or even before commencement. It would be interesting to know which developers had forward purchase agreements in place before completion of their developments, because if they did they surely had a responsibility to inform the prospective leaseholder prior to their making their purchase that such an agreement was in place.
Instead, what we have heard from constituents is that they were told the exact opposite: they were told freeholds would be available to purchase after two years. Was this a deliberate deception? What did the sales staff know? Just how deep does this scandal run? For those reasons and more, we need a fully independent inquiry into the whole scandal so that those responsible are held to account for their actions and we get a house building sector that works for everyone, not just itself.
I thank the hon. Gentleman for his contribution thus far. One aspect that has not come out during this debate, however, is the excuse used by developers about the use of common areas that need to be built on or utilised for the common purposes of all the houses in the development. Does the hon. Gentleman agree that that scandal needs to be exposed as well?
The hon. Gentleman is absolutely right to say that that is used as an excuse. When I was growing up, the common areas were usually run by a body called the local council, and rates or council tax would be paid to cover the costs. We need to look at the way that has been developed in recent years. Now, it is all about maximising profit.
I appreciate that we are pressed for time, so I will conclude by making a direct plea to the Minister. If the Government are serious about ending the abuses in the leasehold sector, they should adopt my party’s proposals to allow leaseholders individually or collectively to buy their freeholds under a fixed formula paid to the landlord. This is similar but not identical to my 2017 private Member’s Bill. The Government could also cap existing ground rents at £250 a year or 0.1% of capital value, whichever is lower, and cap the cost of buying the freehold at 1% of the capital value. Alternatively, they could just do a multiple of the ground rent. I am not precious about my private Member’s Bill; I just want to see something done—anything that gets us to a place where existing leaseholders can find a way out of this.
There are many things that can be done—there are many things that need to be done—and there is no reason why we cannot get on with them now. Parliament has been stuck in a rut for months because the Government have lost control of the Chamber, but if they came forward with a proposal along the lines we have been talking about today, there is no doubt that they would find more than enough support on both sides of the House for getting real tangible laws on the statute book as soon as possible to offer help and hope to the many thousands of people still stuck with toxic leases. I say to those on the Government Front Bench: work with us now; let us end this scandal once and for all.
The issues that colleagues have been raising across the Chamber today are very familiar to my inbox. My constituents have been affected by exactly the same issues, and I want to tell a couple of stories to illustrate them.
Mary told me that she was really lucky to be able to buy and move into her flat in 2013. Since then, her joy has been marred by the failings of the freeholder year after year. Service charges have increased by 33% in five years, with no change in the frankly dire service that is provided. Mary and other residents pay £4,500 a year but must deal with broken lifts that are not fixed for months at a time. Disabled residents have had to move out of the block. The doors to common areas have been left broken, allowing access to anyone and leaving residents vulnerable to antisocial behaviour in common areas and in stairwells. Rough sleepers understandably see this as an opportunity for shelter. We all know just how much rough sleeping has escalated over the past nine years due to austerity, but people sleeping in stairwells is an obvious fire risk, with sleeping people and belongings blocking the stairs.
Mary and her neighbours have no effective way of communicating with the management. She has not been allowed to ask about items on bills that double or triple in cost for no apparent reason. She has not been allowed to hold service providers to account—companies to which the residents pay thousands of pounds a year simply do not do their job. There is a pattern. Mary sees maintenance problems deliberately being left unfixed, because that means that residents pay a second and third time for call-out fees. As leaseholders, she and her neighbours have little power to stop people ripping them off. Three others from Mary’s block have written to me with exactly the same concerns, and one has been dealing with them for 15 years.
Another local leasehold block has cracked and faulty pipework for water and heating. Some flats completely lose water pressure, leaving residents unable to wash, clean or even fill a kettle. Others are roasting in hot weather because the heating is constantly left on in the walls—an appalling waste of energy and residents’ money, and a health risk. The average temperature in one corridor is 30°, and residents can ventilate it only by keeping a fire door open. We all know how dangerous that is. The block goes uncleaned for weeks at a time. Flawed waste disposal means that that rubbish piles up, and the block has not been decorated in years. It is dire.
The management company has a clear responsibility to provide the service, but it ain’t happening. Residents complained more than a year ago, but nothing was done and now we are back in summer when the heating and ventilation problems will again be at their worst. They come to me, but what powers do I have to make the management company behave? I do not have any, because the law is not there. The management company has a clear responsibility to provide these services. These are homes, and flawed laws should not prevent people from working together to keep their blocks clean and safe. Their only option is to write begging letters to a distant hands-off freeholder to ask them to intervene.
Rahima tells me that she feels like a prisoner in her own home because of an extortionate and, frankly, disgusting clause in her leasehold contract that doubles the ground rent. It started at £200 a year, and she was deceived into believing that it would stay that way, but actually it will keep doubling and doubling, eventually reaching £6,400 a year—completely and utterly unaffordable. It could make it impossible for her to remortgage or sell. I could go on and on because, frankly, I have got the case load. All the constituents who have contacted me have seen paltry commitments from this Government, but they are not enough to free residents from the injustice of the leasehold system.
However, I am really proud of Labour’s new proposals. When we get into government, Rahima will not be facing that doubling of ground rent, because we will cap existing ground rents at never more than £250 a year. Mary and her neighbours and many others will gain power over the management of their blocks—no more extortionate opaque service charges, but a clear right to challenge poor services, and a right to come together to buy out the freeholder and establish commonhold ownerships. My constituents need radical solutions, and if this Government will not provide them, our Labour Government will.
I congratulate my hon. Friend the Member for Sheffield South East (Mr Betts) and all the other members of the Housing, Communities and Local Government Committee on such a powerful report, and I thank the 700 or 800 people who got in touch with the Committee to give their views. We have heard this afternoon how powerful the feelings are across the country. I thank the APPG, of course, the Leasehold Knowledge Partnership, of course, and the National Leasehold Campaign, of course, all of which have done extraordinary work in this area. I also pay tribute to all the Members who have spoken today, but I give particular thanks to the Conservative Members on the opposite side of the House. It is not necessarily comfortable for an MP to stand up and call for action from their own Government, but they have done that well and with dignity and great conviction.
We have all heard some of the stories many times, and the time has come to act. One in four homes in this country are leasehold homes, which means that up to 6 million people have basically bought homes that they think they own when they do not. We have heard horrific cases of people trapped in homes they cannot sell, people being ripped off with extortionate service charges, and people being threatened with eviction for absolutely no good reason.
No other major economy has this feudal-style system. Every other major economy has moved away from leasehold and towards fairer, more transparent systems of ownership. Scotland has abolished leasehold, transferring all properties held on long leases to outright ownership, and action has been taken in Northern Ireland. Other countries have demonstrated that alternative models of ownership can work. There are co-op models, and the Australian system has spread to other countries—Canada, New Zealand and Singapore. This is being done everywhere else, but not in the UK.
This week, the Labour party announced a policy that will bring leasehold into line with every other major economy, and I brought a copy of the document with me today. We do not have many printed copies, but I have one here for the Minister, because she will hopefully appreciate reading it. We talked to the Law Commission. We spent a lot of time listening to the debates, reading the Select Committee’s report, and listening to the APPG and the campaigners, and we talked to property lawyers. Our policies are comprehensive and sensible, and worth being looked at by the Government. There are two parts, and the first is what we do with new leasehold properties going forward.
Of course, there is no argument at all for new leasehold houses. We should be looking to abolish new leasehold flats, too. The second part of the package, of course, is to help the up to 6 million people living in leasehold homes by giving them new rights and saving them thousands of pounds.
The Government have paid lip service to this. They know the system is broken and they have acknowledged the problem, but they have failed to act. As my hon. Friend the Member for Leigh (Jo Platt) said, they have made over 60 announcements on leasehold since 2010, but none of their proposals is aimed at helping the 6 million people trapped in leasehold homes right now and none of their proposals has led to any legislation.
Going beyond that, as has already been mentioned, the Government are actually propping up the system. The number of leasehold homes is increasing and £1 billion of Help to Buy money has gone directly to new leasehold homes, which is nothing less than a scandal.
As my hon. Friend the Member for Heywood and Middleton (Liz McInnes) said, Labour proposes to end the sale of new leasehold houses, with direct effect, and to legislate to end the sale of new leasehold flats. We want existing leaseholders to be able to buy the full freehold ownership of their home for no more than 1% of the property’s value. Where does the 1% figure come from? It was suggested by the Law Commission; it is well evidenced; and we think it could work.
Labour would end ground rents for new leasehold homes, and as has been said, we would cap them for existing leaseholders at 0.1% of the property’s value, up to a maximum of £250 a year. Again, where does that come from? It comes from the Select Committee, and the hon. Member for Walsall North (Eddie Hughes) has tabled the Ground Rents (Leasehold Properties) Bill, too. Again, the proposal is well evidenced and sensible.
Labour would give new rights to empower leaseholders to hire and fire their managing agent, or to take over the management of their home themselves. Importantly, we would crack down on unfair fees and contract terms by publishing a reference list of reasonable charges, not dissimilar to that which the Government introduced in the Tenant Fees Act 2019. We could have a similar system. We want to see transparency, which we would introduce on service charges, and we want to give leaseholders a right to challenge rip-off fees. As we have heard, such fees are complex, difficult and expensive.
We think the formulation of acting “whenever parliamentary time allows,” after nearly 10 years of Conservative government, is unacceptable. As the hon. Member for The Cotswolds (Sir Geoffrey Clifton-Brown) said at the start of the debate, this feudal system has been in place for around a thousand years. After a problem has existed for a thousand years, parliamentary time should allow for us to act. As my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) said, Labour Members and Conservative Back Benchers would support such legislation if it were introduced by the Government.
I end with a series of questions, which I would be grateful if the Minister answered. Does she recognise that we are the only developed country in the world that has failed to move away from the feudal leasehold model? Does she accept that the number of leasehold homes has gone up, and is still going up? Does she accept that 100,000 people are trapped in unsellable homes because of the leasehold scandal?
Some of them of my constituents.
Exactly. If the Minister does not accept that 100,000 figure, what work is her Department doing to understand what the number is? What possible reason can she give, after the 60 announcements and the body of evidence we have heard of today, for legislation not having been introduced? When will the legislation be introduced? Can she confirm that none of the Government’s proposals will help the up to 6 million people who are currently leaseholders, and what will she do about it? England is the only place in the world that has failed to move away from this system, and it is time we caught up.
First, I wish to thank all the hon. Members for their detailed contributions on an issue that affects so much of England; nobody can failed to be moved by the stories we have heard today. Obviously, I wish to thank the hon. Member for Sheffield South East (Mr Betts) for raising this issue and for his work as Chair of the Select Committee on the recent inquiry and the 18 contributors today.
There are more than 4 million leasehold properties in the UK, and leasehold tenure allows people to complete the journey towards ownership. As many Members will know, the Committee’s report contained a number of recommendations concerning both existing and future leaseholders. The Government have welcomed, considered and responded to the recommendations, and we will now press ahead with our programme of reform.
When we first announced our plans to reform the leasehold sector in December 2017, we said that we wanted to get the detail right. That is why we consulted last year on the implementation of our proposals, including the leasehold house ban and ground rent reduction. We received nearly 1,300 responses, many of which were from leaseholders hungry for change. The responses have also allowed us to fine tune our proposals, which will remove many of the current injustices from the future leasehold market.
We will go ahead with our original plan to reduce ground rents on future leases to a peppercorn, as opposed to £10. Through the Committee’s inquiry and our own consultation process, it has become clear that a peppercorn is clearly understood and is best for the consumer—this is a peppercorn of zero. In practice, this will mean that leaseholders will no longer be charged a financial sum for which they receive no material benefit. It will also remove the current financial incentive for developers to build leasehold properties, as ground rent income will no longer present a lucrative profit stream.
I will not give way, as I have a lot to get through and I believe I have some answers for people.
On the leasehold house ban, I am pleased with the profound impact our original announcement and the work of campaigners have had on the market. When we made the announcement in 2017, 11% of new build houses in England were sold as leasehold, whereas today the figure stands at 2%—I repeat that it has reduced to that level. Despite that progress, we will still legislate to ensure that in the future—save for in the most exceptional circumstances—all new houses will be sold on a freehold basis. Developers will no longer be able to use leases on houses for their own financial gain, a practice that had become the norm in some regions of the country and, as we appreciate, particularly in the north-west. These reforms will remove the incentives for developers and freeholders to use leasehold to make unjustified profits at the expense of leaseholders, and we will be pressing ahead as soon as parliamentary time allows.
On the matter of where ground rents are so high that it—
On a point of order, Mr Speaker. The Minister has just said that she would want to press ahead as soon as parliamentary time allows. I wonder whether you could confirm that the one thing this Parliament is not short of is time.
If it were for the Chair to decide, I would happily allocate time to all sorts of worthy purposes, but, sadly, the powers of the Speaker do not extend that far. If the right hon. Gentleman is bidding to increase my power, far be it for me to say no.
Thank you, Mr Speaker. Time is rocking on, so I will rush. We have been talking today about a situation where the ground rent is so high that it becomes an assured shorthold tenancy and so people can be evicted. The Government have committed to changing legislation to close that loophole, so that a leaseholder cannot be evicted on that basis. I am glad to answer that one.
We will not stop there. As our recent publications show, these reforms are only one part of the plans we have for the leasehold sector. This is why we were able to accept, in full or in part, most of the recommendations made by the Select Committee. Let us consider the work Lord Best is doing on the regulation of property agents. His working group is looking at a number of things, including having an independent regulator with a legally enforceable code of practice, which will require all property agents to register; and nationally recognised qualifications for property agents to practise.
We have also asked Lord Best’s group to look at the transparency of service charges, as well as the use of administration and permission fees, and consider in what circumstances they are justified and whether they should be capped or banned altogether. This work will allow us to raise standards of property management and give leaseholders the confidence that they are being charged fairly—both things that were called for by the Select Committee. We look forward to receiving Lord Best’s report, which will also be published for all to see very shortly.
On charges, it is unacceptable that some residential freeholders are unable to challenge excessive fees for the maintenance of their estates. I am happy to confirm that under the new legislation, freeholders will be given the right to challenge the reasonableness of such fees. They will also be able to apply to tribunal for the appointment of a new manager. This will help to increase the transparency, accountability and reasonableness of fees, which is something else the Select Committee wanted to see.
I understand that many existing leaseholders want the Government to legislate to amend onerous ground rent terms. As I pointed out previously, the inclusion of legislation to amend existing contracts presents problematic human rights implications, as has been made clear in the information put out recently by the Law Commission. Despite that, I firmly believe that doubling ground rents are unacceptable and should be varied, which is why we are encouraging the sector to voluntarily vary leases and show that it is willing to solve the problems of its own creation. I have been encouraged by the response we have received. More than 60 leading developers, freeholders and managing agents have signed a public pledge that will free leaseholders from the shackles of doubling ground rents.
Will my hon. Friend give way?
I really do not have time. Unfortunately, there is other business that needs to be done tonight.
I am aware that many leaseholders believe they were mis-sold their properties. Many people write to me to say that the leasehold tenure was not properly explained and that onerous terms were not made it clear to them. Others were promised that they would be able to buy the freehold for a certain price after two years, only to find that had been sold on buy an investor in that time. I am delighted that we have a commitment of action from the Competition and Markets Authority, which will look into the issue. It will use its consumer protection powers to determine whether leasehold terms, including onerous ground rents and permission fees, can be classed as unfair. If the evidence warrants it, the CMA will consider bringing forward enforcement proceedings. I look forward to hearing about the CMA’s progress and hope that its work complements the reforms we already have in train.
The issues I have just outlined show us that better information and advice is needed for potential and existing leaseholders, which is why we recently updated our “How to lease” guide, which now gives clear information on what leasehold tenure is, the costs associated with being a leaseholder and the rights and responsibilities that leaseholders have. This will give people a better understanding of what it means to be a leaseholder. If things go wrong, though, I want them to receive quality, free and independent advice, if they want it. I am pleased that many campaign groups have played an active role in this subject area, supporting leaseholders who have found themselves in difficult circumstances.
I specifically thank my hon. Friend the Member for Worthing West (Sir Peter Bottomley) and the hon. Member for Poplar and Limehouse (Jim Fitzpatrick) for their work as co-chairs of the all-party group on leasehold and commonhold reform, and I am grateful for their comments. We value the work of the Leasehold Knowledge Partnership and how it works with the Department. I am clear that LEASE is absolutely on the side of leaseholders. Its advice has helped many leaseholders to understand what is in their lease.
We have heard a lot today about the work of the Law Commission. The House should be confident that the Government are committed to improving the leasehold sector. Although leasehold as a tenure will continue to be used for flats, we have committed to reinvigorate commonhold, as mentioned by my hon. Friend the Member for Harrow East (Bob Blackman). The Government support the wider use of commonhold, which allows homeowners collectively to own and manage the common parts of a residential building.
Although commonhold works well in other countries, there are currently fewer than 20 commonhold developments in Wales. That is because of deficiencies in our legislation; it is clear that reform is needed. For that reason, the Government are working with the Law Commission to make the legal changes needed to see more commonhold developments emerge. The Law Commission is currently analysing the responses to a consultation on that very subject, and I look forward to receiving its report. We continue to work with the Law Commission and to fund it, and we look forward to its conclusions.
As the House can see, we are pushing ahead with our plans to improve the system for leaseholders today and tomorrow. We will create a market that really works for consumers—one that is fair, simple and transparent. We are taking action now to ban the sale of leasehold houses through Help to Buy programmes. Homes England will negotiate contracts with all Help to Buy developers to rule out explicitly the building and selling of leasehold houses, except in the very limited circumstances when it is justified. On 2 July 2018, the Secretary of State announced that no new Government funding schemes would be used to support the unjustified use of leasehold for new houses, and that includes the new Help to Buy scheme from 2021. That announcement alone has brought down sales from 11% to 2%.
The hon. Member for Newcastle upon Tyne Central (Chi Onwurah) talked about her issues with the St Mary Magdalene and Holy Jesus Trust. I am very sorry that, obviously, my letter to her had not arrived by the time that she had written her speech. I have written to her in the past three days, so I am very sorry that she has not got it. It does clarify the position.
The Chairman of the Select Committee needs a couple of minutes in which to speak, so I will conclude. We will create a market that really works for consumers: one that is fair, simple and transparent. In that spirit, I thank hon. Members for their speeches and questions today. I thank my brilliant civil servants for all their hard work. I thank LEASE and all the committed people involved in this area, and I look forward to driving ahead with our programme of leasehold reform.
To wind up, I call Mr Clive Betts, the Chairman of the Housing, Communities and Local Government Committee, an august figure in the House.
I am not sure about that, Mr Speaker.
Certainly, I thank all Members who have made their contributions today and particularly those—I think it was all of them—who have expressed support for the Select Committee’s report. I will pass those kind words back to all members of the Committee, particularly to our excellent Committee specialist, Nick Taylor, who has done so much work for the Committee on this issue.
The Minister said that we would get answers. I do not think that any of the answers went beyond what the Government have already said. I think that the clear message to the Government today is that what commitments they have made so far do not go far enough. There needs to be further action. Although we look forward to the reports from the Competition and Markets Authority, the Law Commission and Lord Best’s review, a number of very key matters need addressing. It would be helpful if, eventually, the Government got round to saying, “Yes, we are going to do them.”
There is a need to end onerous ground rents not just by voluntary agreement but legally. There is a need to end onerous permission fees not just on new properties, but on existing properties. We want the introduction of a clearer and simpler enforcement enfranchisement regime; action to achieve clarity and transparency in service charges and the process of buying leasehold properties; improvements and promotion of commonhold as the primary means of tenure for flats; and, finally, for heaven’s sake, an end of forfeiture. If anything goes back to the feudal age, that is it, and ending it would be a clear symbol that we will have real action in this area.
Question put and agreed to.
That this House takes note of the Twelfth Report of the Housing, Communities and Local Government Committee, HC 1468, on Leasehold Reform and the Government’s response, CP 99; welcomes the Competition and Markets Authority investigation into the extent of any mis-selling and onerous leasehold terms; believes there is no reason why the majority of multi-occupancy residential buildings could not be held in commonhold; calls on the Government to remove the incentives for developers to build new leasehold properties; and further calls on the Government to bring forward legislative proposals to amend onerous permission fees and ground rents in existing leases.