My Lords, it is impossible to speak on leasehold matters without acknowledging the dire situation of tenants in properties with defective fire cladding, as has been ably explained by my noble friend Lady Pinnock. It is an extreme example of how leaseholders have been exploited, wronged and left to carry the financial can, and help is overdue.
I welcome the Bill’s intentions to make leasehold fairer and less exploitable, but I regret that it does not do more now. I fear that, without simultaneously plugging loopholes and dealing with legacy matters, it leaves traps and legacy exploitation in its wake. Although it tackles unfair ground rent, it leaves intact freeholders being able to impose transfer fees and other charges. The briefing from the Building Societies Association says that this could be a charge of 0.25% of the sale price, but assignment fees still run at 12.5% at the Castle Village retirement complex in Berkhamsted, and they are similar in many other places.
Ground rents have been rising unfairly in recent years but any income stream related to property, whether from ground rents or estate service charges, is often sold on, traded as a securitised income stream and disconnected from originating responsibilities, assurances and real-life implications. It becomes securitised misery with householders, too distant to be considered fairly, just being treated as commodities and cash cows.
Similar problems have crept into freehold purchases on new estates, with home owners gouged by estate charges and rents, and freeholders not yet having the same rights and protections even as leaseholders. The Building Societies Association gave examples of estate charges of £1,000 per property for maintenance of a 250-property new estate—you can bet that soon
escalates—and of ground rent charges seemingly linked to RPI, but with a minimum increase buried in the appendix and frequent reviews, every five years. There are also many reports of estate management companies being slow to provide information during resale or making charges at every turn for doing so.
I looked up some reviews of Trinity Estates, a company that is designated to take over the management of a Taylor Wimpey estate being built now in Berkhamsted, but that manages many others too. “Stay clear” is the message of the reviews, and “hard luck if you are already trapped”. When it comes to later transfers, it seems that Trinity charges £300 just to provide information in response to solicitors’ questions. Others report that, despite paying substantial maintenance charges for gates, they still get a bill every time any work is done on them and that threatening letters follow rapidly, sometimes even after payment.
Estate management company misery is still set to trap hundreds of thousands more every year with the new building that is now happening. Surely all service-type charges, whatever they are called, urgently need to come under a cost-related umbrella, whether to leaseholders or freeholders and whether masquerading as ground rent or something else. Some building societies will not lend where charges are onerous, because it erodes value. In some instances, changes get made, but not everybody has an escape possibility. New-build estate charges are a recent development, councils nowadays not routinely adopting responsibility for roads. As the Building Societies Association briefing points out, there is no council tax discount for those in new builds who do not have adopted roads. I have sympathy with the funding plight of councils, but everybody has been let down by the system that has been allowed to develop and, really, it should stop.
Leasehold is feudal and outdated. It is the only system under which total forfeiture of an asset is allowed when the debt may be only a small part. That is a threat that is waved around to frighten, even where no longer applicable, because it is all in the documentation. If it were invented today, I do not see how it would escape the human rights provisions on confiscation. Frankly, it must be brought to an end. The Law Commission has already consulted on this and found widespread consensus.
I acknowledge that there is more legislative expectation, but can the Minister guarantee that it will stop the estate charge-type scams for freeholders and will help already trapped leaseholders and home owners? When it comes to the largest purchase people make, there simply is not adequate consumer protection. That is what was said regarding PPI, but in comparison that looks mild; PPI never threatened homes.
Like others, I share the concern that councils will not be able to be proactive enforcers. Perhaps a general leaseholder and estate charge ombudsman would be an option. Going to law should not have to be the only effective option, but in the end only comprehensive legislation can stop and reverse the egregious creep of modern feudalism and exposure to extortion now endemic in housing. Will the Government’s future legislation ensure that all aspects are tackled as a matter of urgency?
4.11 pm