My Lords, I am grateful to all noble Lords for their very valuable contributions and for setting my expectations for the depth of scrutiny in Committee. It has been extremely helpful to hear all noble Lords’ views.
I pay tribute to my noble friends Lord Blencathra and Lord Young, who in many ways set out the historical context for this modest first step in the Government’s programme of leasehold reform. It has taken nearly 1,000 years to establish landlord and tenant law. We started with the Domesday Book of 1089 and then gravitated to the Middle Ages and the feudal system, when the words “freehold” and “leasehold” were formally established. I am surprised that my noble friend Lord Blencathra did not mention copyhold, the form of tenure whereby a serf received a copy of
the manorial roll as an indication of where they should live—so they had absolutely no rights at all. That was true serfdom.
In his speech, my noble friend Lord Young showed the relatively recent steps that we have taken. In the year of my birth—1967—nearly 54 years ago, the first Act was passed, and we saw the legislation that he brought in in 1993 and, obviously, the Commonhold and Leasehold Reform Act 2002. That is a little over half a century to reform, so I argue that reform of a system that has taken over 1,000 years to establish is not—and can never be seen as—a quick fix. Certainly, I prefer the description of the noble Baroness, Lady Grender, of this as a small but significant step, as opposed to the metaphor used by my noble friend Lord Blencathra, which I will not repeat.
To return to some of the points made, the noble Baronesses, Lady Andrews, Lady Pinnock, Lady Ritchie of Downpatrick and Lady Wheatcroft, and the noble Lords, Lord Berkeley, Lord Stunell and Lord Kennedy, all pushed for an indication of when wider leasehold reform would take place. Essentially, the Law Commission has made it very clear that bringing in the more detailed legislation will take at least a year, so, ideally, we hope to get this through quickly—notwithstanding the depth of scrutiny in Committee—so that we can bring the second step of the legislation in the next Session of Parliament. That is our objective; of course, events may take place that steer us away from that, but we certainly want to move at great speed to establish that very important second stage.
The Government are committed to reforming the leasehold system. It is complex, and it will take time to get the detail right because, as referenced by the noble Lord, Lord Best, commonhold has not taken root, even though it was introduced and established in 2002. We want to get it right this time: this is very much a first step in getting leasehold reform to work and in the widespread adoption of commonhold.
The noble Baroness, Lady Pinnock, the noble Lord, Lord Stunell, my noble friend Lord Blencathra and many others mentioned and asked about existing leaseholders, who are unhappy with ground rents that their lease requires them to pay. We understand these difficulties and have been working with industry to get existing leaseholds with onerous ground rent terms changed to a better deal. We are pleased that the Competition and Markets Authority is taking enforcement action in relation to two key issues: first, tackling certain instances of the mis-selling of leasehold property; and, secondly, addressing the problems faced by homeowners due to high and increasing ground rents.
It should also be noted that, where existing leaseholders have a complaint about a conveyancer, solicitor, property developer, estate agent, freeholder or management agent, there are existing routes to redress. We have worked with trading standards, which have published comprehensive information for leaseholders to access the right support.
In January 2021, we announced the introduction of a cap on ground rents in the enfranchisement valuation process. This will make it more affordable for leaseholders
to purchase their freehold or extend their lease. As we set out in January, we will bring forward those further reforms in this Parliament.
This is not the Bill to address the costs of historical fire safety defects, as raised by the noble Baroness, Lady Pinnock. We will look at measures to strengthen redress and the building regime for high-risk buildings as part of the building safety Bill that will come before Parliament later this year.
Many noble Lords, including the noble Baronesses, Lady Andrews and Lady Grender, and my noble friends Lord Hammond, Lord Young and Lord Bourne, all raised the definition of ground rent. In drafting this legislation, we considered at length whether closely to define the meaning of “ground rent” or “rent”. We concluded that such a definition would likely do little more than offer a fixed target from which a nimble operator could diverge at ease. That is our principal concern. To avoid this, the Bill adopts a flexible definition of rent, which relies on its naturally understood meaning and includes anything in the nature of rent, whatever it is called. I understand that there are some concerns around this, but I can confirm that the Bill applies only to properties that can be considered long leasehold tenure with residential use. I am happy to meet noble Lords again to discuss the matter further. My noble friend Lord Hammond of Runnymede gave an interesting “person A to person B” example involving passing on a shorter lease of some 25 years where no premium was charged and then establishing a rent. He asked whether that would be covered. We recognise my noble friend’s concern and can be clear that it is not our intention to cover market rents and restrict those to a peppercorn. The Bill is forward-looking, so current investments are protected, and it applies only to leases of over 21 years. However, I would be happy to meet him and discuss these concerns further.
My noble friend Lord Hammond also mentioned the publication of regulations. There is no secondary legislation in relation to home finance plan leases. Clause 2(8)(b) is a reserve power which will be used only if abuse occurs and the Secretary of State needs to specify further conditions to deter such abuse. We have no plans to introduce conditions on the sector.
My noble friend Lord Young mentioned buying out existing ground rents. He will forgive me if I say that it was an issue also raised by my noble and learned friend Lord Mackay of Clashfern. Leaseholders of flats can already buy out their ground rents. Leaseholders of houses can do it by buying their freehold, which I appreciate can be prohibitively expensive. In January, we announced plans to reform the valuation process, which will cap how rent is treated and reduce the premium to be paid. The Law Commission has made specific recommendations in this area, mentioned by my noble friend, which we are currently considering.
Many noble Lords, including the noble Lord, Lord Stunell, and the noble Baronesses, Lady Bowles of Berkhamsted, Lady Andrews and Lady Grender, mentioned the important issue of resources for trading standards. We are very clear that funding for new burdens and new requirements will be taken into account in future local government settlements—I
know that response was predicted by the noble Lord—but enforcement authorities will also be able to retain the proceeds of any penalty imposed by them. Penalties can be up to £5,000 per breach. If someone is doing this multiple times, they face that fine on multiple occasions. I am sure that we can explore in Committee whether we consider that to be enough, but that is currently what we have set, and it can be applied multiple times to an individual who perpetrates the breach on many occasions. We will publish guidance to local authorities and trading standards to help them enforce the Bill and work closely on implementation.
The noble Lord, Lord Best, an expert on retirement housing, asked whether the transition period was long enough. We believe that those who purchase retirement homes should benefit from the same reform as other future leaseholders. Including retirement properties in the Bill means that they are not exempt.
That does not change the way in which other types of charges such as event fees can be used in the retirement sector, but I am happy to discuss this further with the noble Lord, as he brings a wealth of experience, including in the regulation of property agents. I thank the noble Lord for the invaluable work that he led in that area, with the publication of the report on the regulation of property agents. We welcome the working group’s final report. The recommendations are with the Government for consideration, and we are committed to ensuring that those living in the leasehold sector are protected from abuse and poor service and to raising professionalism and standards among property agents.
The noble Baronesses, Lady Wheatcroft and Lady Ritchie of Downpatrick, raised unreasonable or egregious service charges. We believe very strongly that any fees and charges should be justifiable, transparent and communicated effectively and that there should be a clear route to challenge or redress if things go wrong. The law is clear that service charges must be reasonable and, when costs relate to work or services, the work or services must be of a reasonable standard. We will continue to be very vigilant on that matter and will consider any other measures that we need to take as part of our second step on the road to leasehold reform.
The noble Lords, Lord Stunell and Lord Kennedy, referred to other abuses. I point out that the Bill as drafted covers administrative fees so that we can stop freeholders who charge fees for the collection of a peppercorn ground rent, which would be frankly ludicrous, as it is a peppercorn that we do not even need to see levied. We will continue to look at fees such as those mentioned by the noble Lords, Lord Stunell and Lord Kennedy—transfer fees, permission fees and transfer charges. We welcome the report from the noble Lord, Lord Best, that looked at those issues, and we are considering his recommendations.
The noble Baroness, Lady Bowles of Berkhamsted, mentioned the estate charges scam. We intend to legislate to give freeholders on private mixed-tenure estates equivalent rights to leaseholders to challenge the reasonableness of estate rent charges, as well as the right to apply for the First-tier Tribunal to appoint
a new manager to manage the provision of services covered by estate rent charges. It is important that there is a level playing field.
The noble Earl, Lord Lytton, asked why we should not bring about a statutory redefinition of “quiet enjoyment”. We have not looked at the statutory definition of quiet enjoyment as part of the legislation; the Bill does not affect rights to charge and receive ground rents for commercial premises in mixed-use development when the lease for the commercial premises is held on a separate lease from the residential part of the development.
The noble Lord, Lord Berkeley, wanted some clarification on the scope for new leaseholders’ conversion of houses into flats and retail into housing. I can provide the assurance that the Bill will apply to all new residential long leases, including in those instances exceeding 21 years. That includes those new leases created as a result of subdivision or conversion of properties. He also asked whether we had applied for consent from the Crown and, specifically, the Duchy of Cornwall. I can say that consent was sought and granted in writing from the Crown and the Duchy of Cornwall, and no changes were made.
The noble Baroness, Lady Ritchie of Downpatrick, wanted to know about the Government’s discussions with devolved Administrations, especially Northern Ireland. I point out that the legislation applies to England and Wales only. However, early discussions with Northern Ireland officials took place to help to inform the development of the policy.
I hope I have done my best to cover the principal points. This is necessarily tightly focused legislation which will improve the leasehold system for future home owners. The Government are therefore keen to get this Bill on the statute book as quickly as possible so that the new measures can take effect. I will be grateful for the support of noble Lords in achieving this.
This is only part of the start of an ambitious package of leasehold reform, with further legislation on a wider set of measures to follow later in this Parliament. As I have indicated, this will come in the next Session, I hope. This Bill is small, but it is vital and it is a step towards the better, fairer and more transparent leasehold system that the Government are committing to delivering. Therefore, I commend it to the House, and I beg to move.