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Residential Leasehold for Flats

Volume 834: debated on Thursday 30 November 2023


Tabled by

My Lords, on behalf of my noble friend Lord Kennedy and with his permission, I beg leave to ask the Question standing in his name on the Order Paper.

My Lords, I declare my interest as a leaseholder.

The Government are extending the benefits of freehold ownership to more home owners. Reforms in the Leasehold and Freehold Reform Bill will help leaseholders to buy their freeholds and will end the sale of new leasehold houses so that, other than in exceptional circumstances, all new houses will be freehold from the outset. For flats, the Government remain committed to reinvigorating commonhold to give developers and home owners a viable alternative to leasehold should they choose it.

My Lords, I thank the Minister for her Answer. Of course, we welcome the reform of leasehold, but with 5 million leasehold properties in England, 70% of which are flats, there is disappointment that they are not included in the Bill. Also, it does not appear that the Bill bans the sale of leasehold houses, either. The Times is reporting that the Minister’s department did not have time to include the leasehold ban before the Bill was introduced this week. Can she please clarify whether it is the Government’s clear intention to ban leasehold? If so, when will we see the relevant clauses?

My Lords, I can reassure noble Lords that it is the Government’s intention to bring forward clauses to ban the sale of new leasehold houses within this Bill. We intend to bring forward those clauses during the Commons stages. When it comes to flats, on the other hand, reform is more complicated. They have shared fabric and infrastructure and therefore require some form of arrangement to facilitate management. This has traditionally been facilitated by a lease. Therefore, banning leasehold flats is inherently more complicated. We will be taking forward, at a later date, reforms to the commonhold system to allow that to replace the leasehold system.

Does the absence of these clauses lead the Minister to draw a conclusion which has general application—that Parliament is asked to consider far too much legislation, to be proceeded with at far too great a pace?

I do not draw that conclusion. Leasehold reform is complex. We have consulted widely and are taking time to get things right. I understand the desirability of bringing forward these clauses as soon as possible for Parliament’s scrutiny and that is what the Government intend to do.

My Lords, I very much welcome the provisions of the leasehold Bill, which provide a better balance between the interests of freeholders and leaseholders. However, the Bill does not do what Michael Gove said it would. He said:

“I don’t believe leasehold is fair in any way. It is an outdated feudal system that needs to go. And we need to move to a better system and to liberate people from it”.

He wanted to replace leasehold with commonhold, but the Bill does not even mention commonhold. So will my noble friend be surprised if some of us seek to amend the Bill to deliver what her Secretary of State actually wants?

My Lords, I have tried to learn not to be surprised by any amendments tabled to government Bills by your Lordships’ House, but I would like to reassure my noble friend that this Bill is focused on helping leaseholders now by making existing leases fairer and more affordable. We have focused on legislating where we can make a genuine improvement to leaseholders’ daily lives right away. For example, we are making it cheaper and easier for leaseholders to purchase the freehold of their building or a 999-year lease on their property and take control of their building’s management from the freeholder. When it comes to reforms to commonhold, we continue to consider the Law Commission’s report in detail to find the best way forward and we are committed to taking forward that additional work.

My Lords, one of the most expensive consequences of being a leaseholder, especially in flats, is the service charges that freeholders can level against you. They are completely unregulated and can be totally exorbitant. Does the Minister agree that we need to abolish service charges, especially for flats, and replace them with a commonhold system, which would be much fairer for leaseholders and would stop unscrupulous freeholders from ripping off hard-working families?

I can reassure the noble Lord that the Bill does contain provisions to bring greater transparency around how service charges are brought for leaseholders, so that there is greater accountability for what those charges go to and leaseholders have a greater ability to challenge them if they think they are unfair.

My Lords, as the Minister will know, the most frustrating thing for those of us who are leaseholders is the lack of control. There is a tried and tested formula for residents’ control, which is recognised in the Bill, and that is freehold. At the very least, will the Government consider a really simple, cost-free change to the Bill, which would be a mandated share of freehold for all new flats? That would at least prove that they are really committed to tackling the issue of getting rid of toxic leasehold for ever.

My Lords, as I have said, we believe that commonhold provides a potential way forward to move away from leasehold for flats, but there is reform of commonhold that needs to take place so that it will be fit for purpose. I reassure the noble Baroness, as I have others, that there are significant measures in this Bill that do exactly what she pointed towards, which is giving leaseholders greater control over the properties that they own and live in.

My Lords, the wider problem, of course, is that there are far too few new homes, either leasehold or freehold. Is the noble Baroness aware that France, with a population of about the same size as ours, now has 12 million more homes than Britain, and has built more than twice as many new homes as we have over the last 13 years? There has been a net addition of 2 million homes, a high proportion for social lease. I know that Ministers are not talking to their European counterparts at the moment, but does she not think that learning something from our European partners could be valuable in tackling the housing crisis?

My Lords, the Government are absolutely committed to increasing supply. The noble Lord is right that that is part of the solution, particularly when we have in place the provisions to ban new leaseholds in new houses. But the Government are delivering on that promise. We are on track to deliver our commitment to 1 million new homes during this Parliament. We are investing £10 billion in increasing the supply of homes, and in the last few years we have seen some of the highest rates of home delivery in decades.

My Lords, will my noble friend convey to Mr Gove the most generous offer made by the noble Lord, Lord Young of Cookham, on behalf of the House, which was apparent from the reaction to his question? Why does she not tell him that this House can put right what he has not yet got right?

I am sure that this House will communicate its views to the department as we progress the Bill throughout the scrutiny. It will go through the Commons first and I look forward to debating the provisions in detail when it reaches the Lords.

My Lords, commonhold is used widely across the world, so why has it taken the Government so long to consider what works so successfully across the rest of the world?

My Lords, this Bill, and the other reforms that we have made in this space, are comprehensive and complex. We have taken time to look, consult and bring forward the proposals that will have the biggest impact on leaseholders today, while also committing to ongoing reform in the future.

My Lords, the Autumn Statement contained a commitment to take forward reforms to residential estate investment trusts. Will my noble friend take forward the support the House has for leveraging significant private sector funding into much-needed residential accommodation via REITs?

Yes, the Autumn Statement set out the way forward we are going to take on that issue. We need proper financing to support our ambitions for more homebuilding. Some of that comes through government support, but the private sector is a key partner here and we need to do everything that we can to unlock investment.

My noble friend mentioned there were complications in extending freehold to leaseholders in flats. She does not have to answer everything right now, but I wonder whether she could write to me, and deposit a copy in the Library, about some of those complications, so noble Lords can better understand those barriers to extending freehold?

I would be very happy to write to my noble friend but, as I said, in looking at the distinction between houses and flats, the majority of houses have always been provided as freehold, and there are few justifications for building leasehold houses. We have seen, in recent years, this practice being exploited by developers to levy unfair charges on home owners. Flats, on the other hand, have shared fabric and infrastructure and therefore require some form of arrangement to facilitate management. Traditionally, this has been facilitated by a lease, but, as we discussed, commonhold is an alternative way to do this.