My hon. Friend is absolutely right, and it has been a consistent position of ours that we ensure that all leaseholders affected by the building safety crisis are protected irrespective of circumstance, including what height their building happens to be. For that reason, we will oppose Government amendment (a), tabled yesterday to Lords amendment 94, and seek to ensure that the Lords amendment remains unmodified.
I turn to the third issue we are considering this afternoon: enfranchised buildings. Under the Bill, enfranchised leaseholders will, in effect, be treated as freeholders when it comes to the costs of remediation. That cannot be right. Buildings that have exercised a right to collective enfranchisement, or those on commonhold land, may be few in number, but it has been the policy of successive Governments to encourage leaseholders to enfranchise and to promote the right to manage. Indeed, the Government have promised legislation in the next Session to make it easier and cheaper for leaseholders to buy the freehold of their building, yet the Government have put forward no solution whatever to the issue of enfranchised buildings in the Bill as it stands, and they are seemingly content, at least until this afternoon, to see such leaseholders completely excluded from the protections enjoyed by those in buildings that remain unenfranchised. We vehemently disagree with that position. It is imperative that such leaseholders are afforded the same protection as those who do not collectively own or manage their buildings. As Lord Young put it in the other place,
“it would be perverse if the legislation before us today put enfranchised leaseholders in a worse position than leaseholders who are not enfranchised”.—[Official Report, House of Lords, 29 March 2022; Vol. 820. c. 1509.]
It is essential that the service charge protections set out in schedule 8 to the Bill apply clearly to enfranchised buildings and buildings where the right to manage has been exercised, which is another reason why we cannot support Government amendment (a), tabled yesterday to Lords amendment 94, and why we will seek to divide the House on it. The Minister is right to say that pressing the amendment to a vote is not enough, and that at some point the Government will have to go further than simply accepting Lords amendment 94 or a version of it, because the Bill in its current form would not prevent resident-owned companies from making unlimited demands on leaseholders in their capacity as shareholders, to cover the costs that they would be unable to pass on via service charges if the Lords amendment, or a version of it, were to remain part of the Bill. So the Government will have to act.
I noted what the Minister said about a consultation, but I have to say that I agree entirely with my hon. Friend the Member for Sheffield Central (Paul Blomfield). It is too late in the day to consult on this matter. Four and a half years after Grenfell, the Bill needs to be amended to reflect and deal with this issue.
I turn to the fourth issue we are considering this afternoon, which is buildings held in trust. As it stands, buildings held in trust on behalf of a third-party investor,
where the landlord is a professional depository or custodian regulated by the Financial Conduct Authority, or buildings owned on trust by what I can only describe as ground rent grazers—almost invariably based offshore—do not meet any of the association tests or the net wealth test in the Bill. Unless the Bill is revised to capture such trustee arrangements, they will escape the so-called waterfall system as set out in schedule 8, and the leaseholders will find themselves picking up a proportion of the costs of non-cladding remediation. The Minister is right to say that, in the other place, the Government accepted that the Bill needed to be so modified, and yesterday they tabled an amendment to Lords amendment 98 as a result.
Let me be clear that the inclusion of Lords amendment 98, as amended in the way the Government propose, would make for a better Bill than one that has no provision addressing the trustee loophole whatever. However, the Government amendment tabled yesterday afternoon has serious deficiencies, which are almost certainly the result—I make no charge against the officials involved—of the hurried timescale in which it has been drafted and tabled. Let me take the two most obvious problems with it. First, the Government amendment covers only partnerships or bodies corporate that are a beneficiary of a trust; private individuals are entirely excluded. That cannot be right, and they must be brought within the scope of these arrangements.
Secondly, the Government amendment makes no distinction whatever between types of trusts. A local authority pension fund, for example, will be liable under the waterfall system in precisely the same way as an offshore ground rent grazer. We believe that that is wrong and that the Government should think further about how they might better protect trusts where there is a clear public interest in doing so. We will not oppose Government amendments (a), (b) and (c) to Lords amendment 98, but I urge the Minister and his officials to go away and consider whether the flaws in the Government amendment as currently drafted can be rectified as the Bill progresses.
2.15 pm
I turn to the fifth and final issue under consideration: the proposed leaseholder contribution caps. On the issue of leaseholder liability, Labour has consistently argued that all blameless leaseholders should be protected from the costs of remediating historical cladding and non-cladding defects, and associated secondary costs, irrespective of circumstance. Although we fully acknowledge that the waterfall system now set out in schedule 8 provides leaseholders with a far greater degree of protection than the Bill as originally drafted proposed, it does not protect them fully. Just as importantly, the Bill does nothing to provide redress for the countless blameless leaseholders across the country who have already been hit with huge bills and have paid out significant sums of money as a result. That is why we support Lords amendment 184, which seeks to reduce leaseholder contributions to zero, and why we call once again on the Government to think again about how leaseholders who have already paid to fix historical cladding and non-cladding defects can be provided with retrospective financial redress.
The Government’s position is that leaseholder contributions are fair in principle because they will apply only in a limited number of cases. By the Minister
for Building Safety’s own admission in the other place, leaseholders will pay only up to the cap or a proportion of the cap in a “minority of circumstances”, but that statement begs the obvious question of why the Government are so determined to force this minority of leaseholders, some of whom will be able to meet the costs of the cap whereas others will not, to pay, particularly given that the amounts raised by capped leaseholder contributions will almost certainly never cover the full costs of non-cladding remediation works in any given building, and that other sources of funding will have to plug the gap.
In responding to Lords amendment 184—or 155, as it was in the other place—the Minister for Building Safety seemed to suggest that if leaseholder contributions were set to zero in cases where there is no clear party that can pay, the full costs would be transferred back to the freeholder or the landlord. The Minister said as much in his remarks earlier, yet there is nothing on the face of the Bill that provides for that to be the case. Indeed, it is entirely unclear precisely how the funding shortfall will be made up in such cases, and the same issue arises in the case of buildings with significant numbers of buy-to-let landlords. It surely cannot be the case that the Government ultimately intend to force local authorities to carry out remediation works on this minority of buildings, so one assumes that the necessary funding shortfall will, in the end, be made up from some form of Government grant, using the funds raised by the expanded building safety levy and the residential property tax, but we cannot be certain, because the Government have not told us. This matters, because the real risk is that remediation works on such buildings simply never get done, with the leaseholders trapped in perpetuity.
Assuming that the Government believe it is critical that all unsafe buildings are remediated at pace, they need to tell us, plainly, what happens in cases where funding for historical non-cladding defects cannot be extracted from the developer or building owner, and where capped leaseholder contributions alone would not be sufficient. I hope the Minister can provide the House with some clarity on that point, because it is one of the critical unanswered questions provoked by the Government’s recent change of approach, and the Bill at present simply fails to engage with it. In such cases, when all other options have been exhausted and there is no clear party that can pay—I remind the House again that the Government themselves assert that these cases will be small in number—the Opposition believe that grant funding should be provided, because that it is the only morally justifiable solution. We want to see that backstop commitment written on the face of the Bill.
In sticking rigidly to the position that a minority of leaseholders will have to pay sums that, although capped, are still significant, to resolve a scandal that they played no part in causing, the Government are not acting equitably and will not ensure that the most vulnerable leaseholders are protected, as they claim. For that reason, we will oppose Government amendments (c) and (d), tabled yesterday to Lords amendment 184, and we will seek to divide the House on them, with a view to ensuring that all leaseholders are fully protected.
I would like to end by paying tribute to each of the noble Lords and Baronesses who worked so constructively, and on a cross-party basis, to strengthen the Bill. I also thank all the resilient and determined individuals, many
of whom have travelled to Westminster today to make their voices heard, whose unceasing campaigning has helped us to arrive at this point.
In no way does this Bill represent a comprehensive solution to the building safety crisis—not least because that will depend on a range of non-statutory Government interventions and the agreement, voluntary or otherwise, of banks and insurers—but it has been strengthened in important ways in the other place. Instead of seeking to unpick a number of those improvements, the House should vote to retain them. I urge Members on both sides of the House to join us in the Division Lobby later today to ensure that that is the case.