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Leasehold Reform: Forfeiture Provisions

Volume 823: debated on Monday 20 June 2022


Asked by

To ask Her Majesty’s Government what plans they have to reform the forfeiture provisions of leasehold housing.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as a leaseholder.

My Lords, I declare my residential and commercial property interests as set out in the register. The Government believe that forfeiture is an extreme measure which should be used only as a last resort. In practice, forfeiture happens very rarely, and the leaseholder may apply for relief from forfeiture subject to the court’s discretion. We asked the Law Commission to update its 2006 review of forfeiture law, Termination of Tenancies for Tenant Default, to account for wider leasehold reforms currently under way, and we are considering what action may be needed.

My Lords, there is a desperate need for root and branch leasehold reform. Does the Minister agree that the execution of forfeiture, or even the threat of forfeiture of a lease on a home, to recover a debt or deal with a dispute is totally disproportionate in comparison with the value of the asset, and that what should be in place is a simple procedure to recover the debt or deal with the issue at hand commensurate with the issue or the value of the debt concerned?

My Lords, I agree with the noble Lord that forfeiture is an extreme measure. We have asked the Law Commission to look into this and it has come back not with removing forfeiture but with simplifying the process, making it more transparent and coming up with a mechanism that is more proportionate. We are considering these as part of the second stage of our leasehold reform.

My Lords, does my noble friend recall saying on 9 June last year that it was the Government’s aim to complete the leasehold reform programme in this third Session of Parliament? Is that still the case, because the Bill was not in the Queen’s Speech? If it is not, can we at least have a draft Bill in this Session so that we can hit the ground running in the fourth?

I always thank my noble friend for his interventions. We want to move forward with the second stage of leasehold reform. It will not be part of the third Session but there is a commitment to this Parliament. My noble friend is right that we can use this time to get a Bill drafted. We will take time so that we can get it through Parliament as soon as possible at the beginning of the fourth Session.

My Lords, I look forward to the leasehold reform.

Two weeks ago, I attended a meeting of leaseholder residents in a block of retirement flats. It will be no surprise to the Minister that their main complaint was the exorbitant increases in management fees, with no transparency of cost or answers as to why the increase had in one year gone from 5% to nearly 16%. When will the Government finally put a stop to this obfuscation and general bad practice by regulating management companies, as advised by the Government’s own expert working group, chaired by the noble Lord, Lord Best, back in 2019?

Once again, the noble Baroness is right that we need to sort out some of the practices that we see among managing agents. We are still considering how to take forward the recommendations of the noble Lord, Lord Best, but as noble Lords know, there is also a move to introduce voluntary codes, which I hope will elevate this. Overall, we need to see professionalisation of managing agents.

My Lords, with vulnerable, low-income elderly groups in this highly inflationary period facing unaffordable, escalating service charges and possible loss or even forfeiture of their homes, why not promote or sponsor a national scheme for elderly leaseholders that rolls up service charges in the form of a debenture against property title—effectively a rising legal charge? The debenture holder would pay the service charge on behalf of the resident, and then claw back payments—interest-serviced or otherwise—on death or even before.

I thank the noble Lord for some exciting policy ideas. It is important that we recognise that forfeiture is a very lengthy process, and there are ways in which we can cover debt. In fact, where there is an outstanding mortgage, you typically find that mortgage companies step in and pay off any remaining amounts, because they want to protect their financial interest in a property that is worth far more than the debt. But it is an idea that I will take back to the department.

My Lords, I declare my interests as set out in the register. I support fully the Government’s intentions for urgent leasehold reform; I look forward to seeing the legislation. Does my noble friend agree that it is really important to ensure that landlords are still incentivised to let their properties? With the shortage of housing that we have, it is important to balance the interests of leaseholders and freeholders. There are really important areas of reform, such as have been raised, that need attention for this market to function much better than it does.

I thank my noble friend for once again underlining that, when we reform landlord and tenant law, we need get the balance of interests right. As a Government, we have committed to a number of ways in which we try to get that balance right and, indeed, to move away from the idea of having leasehold as the tenure of choice to an era where we have full-throated commonhold, which I hope has the support of many Members of this House.

Does my noble friend agree that there is great interest in leasehold reform? Would not this be an ideal opportunity to take advantage of a procedure which we have always had and greatly valued, pre-legislative scrutiny? If, indeed, there is to be a Bill in draft, perhaps this procedure could be used to let the House look at this in the round, which is urgently required.

My Lords, I thank my noble friend for raising that. I am conscious of that way of starting the process; when you get the Bill written, pre-legislative scrutiny is a good way of getting broad support. In fact, that is how we started the process of scrutiny for what is now the Building Safety Act.

My Lords, as we are not going to have the Bill in this Session of Parliament, which is very disappointing, would the Minister welcome seeing a number a campaigners to discuss the reform with him, so as to get ready for the Bill period in the last Session of this Parliament?

My Lords, I reassure the House that, as the Minister with responsibility for leaseholds, I engage regularly with campaign groups, including the National Leasehold Campaign, and, of course, the Leasehold Knowledge Partnership, but I am always happy to meet other campaigners so that we get the reforms right. This is a once-in-a-generation opportunity, and it is important that we listen to those stakeholders.