I beg to move,
That this House has considered leasehold and commonhold reform.
I am grateful to the Backbench Business Committee for accepting the bid for the debate from the all-party parliamentary group on leasehold reform. I co-chair the group with the hon. Member for Worthing West (Sir Peter Bottomley), who I am happy to see is present. More than 50 Members of both Houses have joined the APPG since our inaugural meeting, which took place only a short time ago. I want to record the group’s thanks to Martin Boyd of the Leasehold Knowledge Partnership and Sebastian O’Kelly of the Campaign Against Retirement Leasehold Exploitation—Carlex—who act as our secretariat and advisers.
This debate is overdue. The front page of a library briefing makes the fundamental point. It states:
“Despite a good deal of legislative activity in this area, dissatisfaction remains.”
I am sure that, were this not the last day before the Christmas recess, many more Members would be present, because the issue affects millions of homeowners. Under the heading “The extent of leasehold ownership”, the briefing states:
“DCLG published a technical paper…in August 2014…to produce a new estimate of 4.1 million leasehold dwellings in England in 2012-13…The Leasehold Knowledge Partnership …estimated that there were around 5.37 million leasehold properties…at the end of 2013.”
On commonhold, the briefing states:
“Commonhold tenure is viewed as offering several advantages over the leasehold system. It does not remove the obligation on residents to contribute to management/maintenance and major works, but it is argued to be a more transparent system.”
Describing the advantages, it states:
“Commonhold will address the problem of lessees being beholden to an absentee landlord who cannot be bothered to carry out building maintenance and management, or who is more interested in trying to make a profit at their expense.”
I shall say much more about that later. The briefing continues:
“Commonhold will also remove the problem of leasehold property being a wasting asset. Commonholders will each have a perpetual interest, effectively akin to a freehold, in their individual unit. Standardised commonhold constitutional documents should be of general benefit.”
In my constituency, as in many, there is a mix of leaseholders: those who have bought former council properties under right-to-buy legislation—perhaps second, third or even fourth purchasers—and/or those who have either bought new properties built in east London as part of its regeneration, or bought into converted warehouses and the like which have been transformed into homes. The constituency contains the second highest number of leasehold properties in England, after Cities of London and Westminster.
Common issues affecting both types of property, new private sector and former public sector, include the length of leases, service charges, insurance fees,
refurbishment costs, recognition rights, ground rents and dispute resolution procedures. I shall deal with all those briefly, but I shall not cover event fees, forfeiture or retirement homes, because I am much less familiar with those problems and I know that other Members intend to raise them.
The length of leases varies from 99 to 999 years. Many people who buy their homes under leasehold believe that they are purchasing their property, but they are not; they are leasing it. Because some ground rents double every 10 years, mortgages can be more difficult to secure later in the lease for resale. As for service charges, in the former public sector there have been improvements in recent years, with more transparency of costs and detail to show reasonableness of charges. Previously, constituents of mine have been charged for lifts in blocks with no lifts, and for garden upkeep in places with no gardens. Despite the improvements, however, there are still anomalies. The HomeOwners Alliance writes:
“Many new build freehold houses…on new housing estates are being sold by developers subject to a requirement for the owners to pay maintenance/service charge for common areas on the estate…freeholders in this situation (unlike leaseholders) are unable to bring claims to the Property Tribunal if they feel these charges are unreasonable.”
My wife and I own such a freehold property.
Also in the private sector, I have tried to help residents on two large sites in my constituency, Canary Riverside and West India Quay. Both are controlled by a gentleman—well, I would rather say a person—called John Christodoulou, under the Yianis group. LKP has been very involved in assisting the residents. Both sites have tried to work constructively with the landlord’s managing agents over many years, but have suffered from very poor management. Both had not had accounts for years, regardless of what the legislation may say is required. Only when the Canary Riverside site took its latest action through the tribunal process, to replace the landlord’s agent through fault, did the accounts emerge, and what they showed was a far from pretty picture. In the decision, the tribunal was highly critical of many aspects of the landlord’s management, including the fact that it had not had a professional planned maintenance programme and then, having obtained one, had failed to implement it.
Since the court’s appointment of a new manager, which began in October this year, the landlord’s solicitor, a Mr David Marsden of Trowers & Hamlins, appears to have bombarded the court-appointed manager with a huge number of emails: 22 in October, 29 in November, and 37 so far this month. It strikes me as very important that when the landlord’s management is removed through fault, as happened in this case, the tribunal should act to protect the court-appointed manager from what appears to be little short of harassment. The residents at Canary Riverside wrote to me yesterday, saying:
“In addition to bombarding our Tribunal-appointed Manager with emails, the Manager is being ground down by the continuous litigation being brought by the landlord in an attempt to undermine the FTT’s”—
first-tier tribunal’s—
“decision and frustrate the new management.
There is a real risk that Canary riverside lessees could find themselves in a worse position than if we had never taken the Section 24 action: i.e., back under the management of a landlord who knows the law does not protect lessees in large mixed-use developments.
The FTT-appointed Manager is increasingly finding himself in an untenable position, forced to spend more time dealing with the landlord’s demands and injunctions than resolving the estate management issues he was appointed to remedy.
Section 24 appears only to work if the landlord agrees, even if a decision is unequivocally in lessees’ favour.
Christodoulou is currently seeking a Judicial Review in an attempt to undo the FTT’s decision (having had three appeals fail at the FTT and Upper Tribunal).
He is also taking every opportunity to apply to the High Court to chip away at the Manager’s powers. On Friday he obtained an injunction that effectively granted him and his staff unfettered access to the Canary Riverside estate. An estate he no longer manages.
The lessees at Canary Riverside spent over two years securing the FTT’s decision—at a considerable cost, both financially and in respect of the time and energy needed to pursue legal action. It has been a huge endeavour.
But it seems the…hearing was just the beginning of our legal battle. The landlord’s fees were £335,000 for the FTT hearing. Since then there have been three appeals, a Judicial Review pending, and several High Court injunction hearings. Legal fees could easily top £500,000, and our (billionaire) landlord knows that the more legal resources he throws at winning, the more likely he is to win.
Section 24”—
and I say this to the Minister—
“is not fit for purpose, and we”—
the residents—
“will end up over £500,000 poorer”—
half a million pounds worse off—
“and with nowhere else to turn.
None of this impacts the value of Christodoulou’s investment—the only people damaged by poor estate management and high service charges is the lessees.”
I should welcome the Minister’s comments on that.
Over at West India Quay, Christmas eve will mark a new and dismal milestone: the sixth year of accounts will become overdue. The residents have had none since 2010, and more than £10 million of their cash is unaccounted for. In its 14 years of occupation, their building has never been subject to a planned preventive maintenance report. I ask the Minister, “How can that be allowed?” In fact, it can be allowed because there is no enforcement action for the residents to try to ensure that the property managing agents and owners do something about it.
Those are two examples of the problems faced by residents who are up against powerful, uncaring and unscrupulous landlords.
In 2012, the consumer organisation Which? estimated that £700 million was being overcharged in service charges each year. That was when everyone thought that there were between 2 million and 2.5 million leasehold homes. Given the size of the sector as we now know it to be, that suggests that £1.4 billion may be being overcharged each year. That cannot be right either.
Freeholders in one block in my constituency were asked for £78,000 to insure a building containing about 32 flats. Several of them worked in the sector, and they were sure that £15,000 would have been a more appropriate charge. They settled for £22,000 after negotiation.
Refurbishment costs mostly affect former council blocks, and leaseholders are almost at the mercy of councils or housing associations. Trying to secure detailed bills or tenders, guarantees on completion of work being undertaken and assurances of the quality of the work being undertaken has proved very difficult and unreasonable, especially from public sector organisations. Fortunately, this is changing, but progress is very slow.
Recognition rights is a source of much consternation in both the private and the public sectors. I have one group of residents in Campbell Road who won the first-tier tribunal for recognition of their residents association, but their social landlord, Tower Hamlets Homes, is appealing against the ruling. There is an inbuilt sense of reverse snobbery and prejudice against leaseholders among some in the social housing sector.
There is recognition resistance in the private sector, too. One of my first such cases, nearly 20 years ago, was from residents in the Cascades block, the first high-rise private residential block on the Isle of Dogs in docklands. The freeholder was harassing them in an attempt to frustrate their efforts to set up a residents association to represent them on service and maintenance charges.
On dispute resolution procedures, I have mentioned the problems at Canary Riverside and West India Quay, but the costs of high-powered barristers defending freeholders at tribunal is now a disgrace. The procedures were originally supposed to be relatively informal. That has totally changed. A constituent of my hon. Friend the Member for Wolverhampton South West (Rob Marris), Paddy McHugh, has written to me saying:
“Any lessee who files a case at tribunal can expect to face a Barrister acting for the landlord. The costs in issue can outweigh paying for legal representation while a landlord is usually free to put his legal costs onto the service charge even against lessees not party to the case, whether or not the landlord is the respondent.”
This surely cannot be right either. Where is the justice in a system that favours billionaires protecting their profits over ordinary working people trying to protect their homes?
Ground rents have been the subject of a number of articles in the press and media reports recently.