I understand the hon. Gentleman’s point, which he made in Committee as well, if I am not mistaken. We very much think the risk is on the other side of the scale—that is, that a Government would be tempted to set a rate that is damaging to leaseholders as a result of being lobbied by vested interests. While there is a balance to be struck, we think it is right that we put on the face of the Bill that the objective in setting the deferment rate as part of the premium calculation must be to ensure that leaseholders acquire their freehold at the lowest possible cost. Amendments 4 and 5 would ensure that that is the case and I commend them to the House.
Part 2 of the Bill makes changes to other rights of long leaseholders. It contains the four clauses in the Bill that implement Law Commission recommendations on the right to manage, several of which we have sought to improve, as well as clause 21, which makes provision for a new enfranchisement right to extinguish a ground rent without having to extend a lease. We still have absolutely no idea how this clause—or clauses 7 and 8, for that matter—will interact with any proposals that might emerge from the recently closed consultation on restricting ground rents for all existing leases. The Minister must provide further clarification on that; it cannot be right that we could be dealing with such a significant issue when we get to ping-pong stage, in due course.
We very much welcome the intent of clause 21 and schedule 7, which it gives effect to. Even if unamended, they will ensure that some leaseholders can enjoy reduced premiums and secure nominal ground rent ownership of their properties without the need to go through the challenge and expense of repeated lease extensions. However, we remain unconvinced by the Government’s proposed conferral of this new right only on those leaseholders with leases with an unexpired term of more than 150 years. In resisting our attempt to remove the 150-year threshold from the Bill in Committee, the Minister essentially made two arguments. The first was that there is a need to
“put a finger on the scale”
somewhere. In other words, the Government take the view that the new right must be restricted based on lease length. The second argument was that in determining the threshold for restriction, the primary consideration should be which leaseholders are
“unlikely to be interested in, or do not need, a lease extension.”––[Official Report, Leasehold and Freehold Reform Public Bill Committee, 25 January 2024; c. 271.]
We do not believe that either argument is particularly strong.
First, any long lease threshold for the new right is ultimately entirely arbitrary, as evidenced by the fact that the Government chose a different threshold from the one recommended by the Law Commission.
Secondly, there is a principled argument that we should trust leaseholders to make decisions based on what is right for them and their individual circumstances,
rather than denying a broad category of leaseholders a new statutory right on the basis that Ministers know best what is in their interest—a viewpoint that we would have assumed those on the Conservative Benches would support.
As I put it to the Minister in Committee, there could be all sorts of reasons why someone with a lease shorter than 150 years might want to buy out only their ground rent, including simply that they are unable to afford the premium required to secure a 990-year lease under clauses 7 and 8. Denying them that right on the grounds that other leaseholders might advertently or inadvertently disadvantage themselves by using the new right to extinguish only their ground rent strikes us as overly paternalistic and misguided.
We remain of the view that there is a strong case for simply deleting the 150-year threshold entirely given that the “remaining years” test that applies is arbitrary and that the most common forms of lease are 90, 99 and 125 years. Amendment 8 would do so, thereby making the new right to replace rent with peppercorn rent available to all existing leaseholders. I commend it to the House.
Part 3 of the Bill contains a wide range of measures relating to the regulation of leasehold. We have tabled several amendments designed to strengthen the provisions in it. Arguably, the most important are amendment 10 and new clause 3, concerning litigation costs. Although we support the aim of scrapping the presumption that leaseholders will pay their freeholders’ legal costs when they have challenged poor practice, we believe that, in merely limiting the ability of landlords to do so, the Government are creating an incentive for freeholders to litigate in a way that is likely to erode the general presumption they are seeking to implement.
As we argued in Committee, a far more sensible approach would be to legislate for a general prohibition on claiming litigation costs from leaseholders, and then to provide for a limited number of defined exceptions to that general rule by means of regulations—for example, in cases in which the landlord is a leasehold-owned company, or in which the costs are, in the opinion of the tribunal, reasonably incurred for the benefit of the leaseholders or the proper management of the building. Taken together, amendment 10 and new clause 3 would provide for that approach by leaving out clause 35 and replacing it with a new clause that provides for a general prohibition on claiming legal costs from tenants, and for a power to specify classes of landlord who will be exempted from it. I commend them to the House.
Mr Deputy Speaker, we want to see a number of other changes made to the Bill to provide leaseholders with better protection in law and to pave the way for a commonhold future. To that end, we have tabled amendments and new clauses to, among other things: abolish the draconian rent charge remedies provided for by section 121 of the Law of Property Act 1925; provide for mandatory residents’ management companies in new blocks of flats; establish a right to manage regime for residential freeholders on private or mixed-use estates; bring forward legislative options to facilitate leaseholders in new blocks of flats being granted an automatic share of freehold; and regulate managing agents.
Of particular importance to us is the need to ensure that the Bill abolishes forfeiture and the windfall it provides to freeholders. As we argued in Committee,
forfeiture is a wholly disproportionate and horrifically draconian mechanism for ensuring compliance with a lease agreement. Over the course of nearly a century, this House has taken intermittent steps to tighten the laws of forfeiture, yet its continued use and the chilling effect that results from its mere existence continues to put landlords in a nearly unassailable position of strength in disputes with leaseholders.
The Opposition are not suggesting for a moment that this House abolishes the right of forfeiture in relation to residential long leases and replaces it with nothing. There must be effective means of ensuring compliance with a lease agreement, and we are more than willing to work constructively with the Government to determine what alternative arrangements are needed to deal with breaches of covenant or unpaid arrears. But forfeiture operates to the prejudice of leaseholders; it cannot be justified, and we must use the Bill finally to do away with it. We believe there is broad consensus across the House for grasping the nettle and abolishing forfeiture, and new clause 5 would do so, and—notwithstanding the very positive noises that we heard from the Minister—I urge hon. Members from across the House to support it.
Finally, let me turn to the 100 Government amendments to the Bill that were tabled last week, 29 of which were submitted just before the deadline on Thursday. In doing so, I feel I must put on record once again the Opposition’s intense frustration at this Government’s continued practice of significantly amending legislation as it progresses through the House. The sheer volume and complexity of amendments that this Government now routinely table to their own legislation represents a departure from established practice and one that acts as a serious impediment to hon. Members effectively scrutinising legislation, and increases the risk that Acts of Parliament contain errors that subsequently need to be remedied.
The Government amendments that have been tabled for consideration today fall into three broad categories—namely, shared ownership, building safety and new leasehold houses. I will take each in turn, starting with shared ownership. Although I am increasingly personally of the view that there is a growing case—one that is reinforced by the treatment of shared ownership in the Bill—for primary legislation to address various issues arising from shared ownership as a tenure, Government amendments 24 and 29, which relate to it, are not contentious and we support them.
3.45 pm
We welcome the Government’s decision to use the opportunity presented by the Bill to make a number of changes to the Building Safety Act 2022 to ensure it operates effectively, although the very fact that Ministers are having to completely overhaul arrangements that came into force less than two years ago—for example, replacing the regime for dealing with insolvent developers and orphaned buildings by means of new clauses 34 and 35—vindicates entirely the concerns the Opposition expressed back in 2022 about the way in which the then Building Safety Bill was overhauled at pace via hundreds of Government amendments tabled in the other place, which noble Lords had relatively little time to consider carefully or properly scrutinise.
I want to raise two issues of concern about the Government amendments relating to building safety. First, new clauses 30 and 31 expand the concept of a
relevant defect to which the leaseholder protections in the Building Safety Act apply and which tribunals can order landlords to remediate. Although we obviously take no issue with amendments designed to provide further clarification on how the Act operates, I would be grateful if the Minister could tell us why the Government believe these new clauses are even necessary, given that the president and deputy president of the upper tribunal in the Olympic Village case ruled that the tribunal already has the power under the Act to order remedial works in respect of a relevant defect, where the works are designed to reduce the risk posed by that defect, not necessarily eliminate it completely. In addition, given that the Government are clearly willing to act retrospectively, I would be grateful if the Minister can tell us why they will not go further and take steps to guarantee that leaseholder protections under schedule 8 to the Act apply irrespective of when service charge demands were issued, thereby preventing the Court of Appeal from potentially overturning the November 2023 ruling of the upper tribunal to that effect.
The second issue concerns new clause 32, which expands the categories of costs that leaseholders can seek to recover by means of remediation contribution orders and will allow for the recovery of costs associated with professional expert services and any temporary accommodation. However, it will not allow leaseholders in buildings with fire safety defects to attempt to recover the significant costs associated with soaring buildings insurance premiums, which in many cases will continue to be levied after remediation works have completed. The Government are rightly trying to improve the situation in respect of insurance charges by means of clauses 32 and 33. Will the Minister tell us why they will not allow such costs to be recovered via an RCO?
Of course, not one of the eight Government amendments that relate to building safety resolves the underlying problems with the Government’s approach—namely, the detrimental impact of the decision to exclude certain categories of leaseholders and buildings from the protections that have been afforded to others under the 2022 Act. We therefore tabled new clauses 9 and 10, which would give the Secretary of State the power to bring non-qualifying leases and buildings respectively within the scope of the protections of the Act. I commend them to the House.
I turn lastly to new leasehold homes. The Government were rightly mocked in the aftermath of the Bill’s publication for claiming that it ended leaseholds on newly built houses in England and Wales, when it contained no such provision. On Thursday, they finally tabled amendments that appeared to make good on their promise. There was only one problem: their purported ban on new leasehold houses does not actually ban all new leasehold houses. Indeed, it is unlikely even to ban most of them, because new schedule 2 still allows new long residential leases of houses to be created in instances where a superior lease has been granted before 22 December 2017.
The Minister suggested in his opening remarks that the Government were thereby allowing the sale of new leasehold homes only in unusual circumstances, but they are introducing far from a limited exception. We literally have no idea how many undeveloped plots of land and properties within them might be subject to such superior leases, or how many could still be granted subject to agreements made under such terms—for
example, where a developer has purchased a pre-2017 head lease on a site but has not built it out. Given that we know that developers routinely use intermediate leases both for financial purposes and to insulate themselves from various consumer rights and protections, the prevalence of such arrangements in the leasehold housing market is likely to be high. As such, although we understand the significance of the date in question as the moment when the policy was first announced, and appreciate the need to provide for a limited number of exceptions, such as National Trust properties, surely the Government realise that the exemptions provided for by new schedule 2 are likely to render the ban meaningless and will mean that new leasehold houses are still built in significant numbers.
I have no doubt that the other place will have much to say about the new provisions, but the Minister owes this House an explanation on precisely why the Government have potentially afforded developers a means to continue building new leasehold houses in significant numbers. I would be grateful if, in providing that explanation, he told the House why on earth leasehold retirement properties have also been exempted, given the almost uniformly detrimental impact of such arrangements on older people living in those properties.
This unambitious piece of legislation is a far cry from what millions of leaseholders were led to believe would be forthcoming given the extravagant promises made by successive Ministers over the past six years. They nevertheless recognise, as we do, that this limited Bill will provide them with some relief from the unjust and discriminatory practices that our archaic leasehold system facilitates. For that reason, they share our desire for it to receive Royal Assent as quickly as possible, but we owe it to them to deliver the most robust piece of legislation that we can deliver. We have a chance today to strengthen the Bill in a number of important respects, to rectify aspects of it that are problematic, and to improve it by incorporating a small number of targeted measures that will immediately empower leaseholders and improve their rights. I urge the House to come together to do so.