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Leaseholders: Properties with Cladding

Volume 809: debated on Thursday 7 January 2021


Asked by

To ask Her Majesty’s Government what progress they have made towards supporting leaseholders who cannot (1) sell, or (2) mortgage, their properties as a result of issues with cladding.

The Government have published supplementary guidance and the Royal Institution of Chartered Surveyors will be working with lenders, valuers and the safety bodies to develop new advice for surveyors. This will enable surveyors to take a more proportionate approach where there are concerns about cladding. Furthermore, the Government have announced nearly £700,000 to train more assessors, speeding up the valuation process for home owners where an EWS1 form is required.

I know the Minister is trying very hard, but this is a lamentable and serious situation, with numerous facets impinging on millions of people who have done nothing wrong. It has dragged on for too long. Does the Minister agree that we need energetically to find a way forward that prioritises the most important matters, does not let the best become the enemy of good, limits the scale of the problem by excluding dwellings that do not pose a serious risk from the new cladding rules, and delivers a fair financial outcome? Will he set up a task force, possibly under a leading public figure, to recommend an early package of measures to get us out of this impasse, as a whole?

I thank my noble friend for raising this topic, which we both feel strongly about. I do not think the solution is a task force; it is about taking a position to implement something that makes good policy. The approach that the Government have taken so far is to restrict demand. In the guidance being published tomorrow, we will see all buildings below 11 metres, unless there is a rare example of one coated in Grenfell-style cladding, taken out of scope at one fell swoop. The focus will then be between 11 metres and 18 metres, where the threshold is deemed to be above 25% coated in flammable materials. That takes a vast majority of the 100,000 remaining buildings out of scope. Then you are left with 11,700 high-rises, which comes to 2,000 or so buildings. We have made huge strides by managing demand in this way, sending out the clarification to the advice note and addressing the supply issue to deal with the remediation required.

My Lords, millions of home owners in this situation bought their properties in good faith. Now their properties are deemed worthless; they cannot be bought, sold or remortgaged. The freeholders and insurance companies say that it is not their problem, and mortgage lenders, through the confusion created by the Government’s changing guidance and the EWS1 certification, have exacerbated the problem. So I welcome the clarification on the guidance that the noble Lord has just given. However, will he accept that this is a bigger problem and that the Government must deal with it? They must ensure that property developers and insurance companies accept their share of the responsibility.

My Lords, I absolutely accept that a generation of people have built buildings that are not fit for purpose and, under any regime, should not have been built in this way. In recent years, developers have made profits of between 20% and 30%, so of course they should step forward and do the right thing. I absolutely share that view. The leaseholders who find themselves in this position are victims. I have said that at the Dispatch Box and am happy to commit to do everything we can to ensure that this does not fall heavily on leaseholders.

As my noble friend Lady Neville-Rolfe rightly says, this problem has dragged on too long. We need a solution that avoids the costs and delays of the courts. Should the package of measures not include further support from the Government, as with PRC houses in the 1980s, and a major contribution from the developers, as was just implied by the noble Baroness, Lady Kennedy, which have a moral responsibility and should be subjected to a levy?

My Lords, I think the solution will include a levy on the development community, but I also want to talk about construction products. Look at the margins made by those who sold some of the construction materials used on high-rises such as Grenfell Tower. They made astronomical profits. Profits have been made and the result was products that are not fit for purpose. We have seen total regulatory system failure and construction practices that require significant regulatory change. As Buildings Safety Minister, I am committed to that.

My Lords, many leaseholders are shared owners who own perhaps only 25% of their homes, because they could not afford to buy more. However, they are liable for 100% of their flat’s share of the cost—maybe £40,000 or more—to rectify defects, such as cladding replacement. Would the Minister give special consideration to rescuing these shared owners, who are disproportionately affected, with many facing bankruptcy if they are not helped?

I thank the noble Lord for his comments on shared ownership. This tenure can be particularly unfair, if you own a proportion of your property and rent the rest, but are hit with 100% with the liability, when the problem was not of your own making. I take these points on board and we will do everything we can to ensure that people in shared ownership, on the pathway to home ownership, are protected as best they can be.

My Lords, I thank the noble Lord for his answers to all the questions so far. Is there a specific issue for those who have exercised their right to buy in council blocks with this cladding, and are Her Majesty’s Government addressing it?

My Lords, I am not aware of a specific issue with right to buy, as we saw in the 1980s. If my Twitter account is anything to go by, it is not related. This is about all leaseholders, particularly those in high-rises, as opposed to those who have just exercised the right to buy. It is in all settings, both public housing and private housing.

My Lords, I rent a flat in a block of unsafe flats in London, and I am surrounded by leaseholders who suffer greatly as a result of the turmoil and fear of the consequences. Does the Minister agree that it is now time for a comprehensive financial solution to these matters, not one that tinkers around the edges? Will he tell the House what consideration he has given to the proposal he received last week from lawyers and financial advisers on behalf of leaseholders for a special purpose vehicle that would provide the £12 billion shortfall that the Government say they are unable to meet from public funds?

My Lords, I am happy to report that I spent a considerable amount of time being briefed by Dean Buckner, who is at the heart of those proposals, the Leasehold Knowledge Partnership, and the APPG on Leasehold and Commonhold Reform. I can also say that Michael Wade has been asked by my right honourable friend to look into this matter. There was a huge amount of similarity in thinking on how to move forward. In fact, we learned a lot from the discussions. At the moment, I cannot say exactly what will be put forward. That matter is obviously above my pay grade, but we are getting there.

My Lords, I draw attention to my property entries in the register. The Government have stated that they expect building owners to pay for the cost of remediation rather than passing it on to leaseholders. Despite that welcome aspiration, there is currently no compulsion for owners to cover these costs. Many are flatly refusing to take that responsibility. This has already resulted in bankruptcies and even suicides among leaseholders presented with enormous bills. What can the Government do to force building owners and the construction industry to do the right thing?

My Lords, that is a very pertinent question and I thank my noble friend for raising it. There are ways to deal with that. Frankly, they have made large sums of money in the last few years and their profits are often publicly available. There is a soft power aspect: developers want to continue to build if they are in business, and they can afford £60,000 for a fire alarm and to pay for remediation costs. They do the right thing. We saw with the aluminium composite material programme that around half of building owners did the right thing and did not to have to resort to payment and subsidy by the taxpayer.

My Lords, I refer the House to my relevant interests as set out in the register. Does the Minister agree that it is important for all building owners and managers to be open, honest and transparent with leaseholders about the fire safety defects and other risks in their buildings as part of dealing with the cladding and fire safety scandal and future problems? Will he agree to look at what specific legislative measures could be included in the building safety Bill, including serious criminal sanctions for those who fail to do so?

My Lords, there will be a lot of legislative work in the next calendar year on the building safety Bill, and we still have the Fire Safety Bill to play ping-pong with. I will ensure that we consider the noble Lord’s proposals very closely indeed to ensure that we hold building owners to account. That is the whole idea of the building safety Bill: that there is an accountable person.

My Lords, many leaseholders are suffering extreme stress. They are locked down in flats that could go up in flames but which they cannot sell. What urgent support is being given to cover all additional costs, including total waking watch costs, and to recoup long-term drops in value in their investment? Can the Minister confirm that, if their flats are now worth zero and they have been bought under the Help to Buy scheme, all repayments should have been reset to zero and reimbursed, since the scheme allowed for a drop in interest rates if the value dropped?

My Lords, I really do feel for the leaseholders. It is not 4.5 million leaseholders, because that would be every leaseholder in the country, but it is a significant number. It is a smaller number in high-rises. We have announced an interim measures package that includes a £30 million fund that will fund some 600 fire alarm systems, which is far cheaper than waking watch, where frankly the costs sometimes defy belief. We have looked into supporting them directly so that they can move to that alarm system, which is the most cost-effective way to provide interim protection.