My Lords, I thank the Minister for being so generous with her time in discussing the content of this Bill and for being willing, on behalf of the Government, to front it. As we have heard, there is wide support for the Bill, but significant shortcomings have been noted from all quarters and all sides.
Reform of this archaic property ownership arrangement is long overdue. There has been a welcome focus on general consumer rights and protections over recent years. However, the leasehold/freehold arrangement has remained largely unchanged, to the considerable detriment of leaseholders. Liberal Democrats have long supported radical reform of the leasehold/freehold arrangement. As my noble friend Lady Thornhill reminded us, it was David Lloyd George in 1909, in the People’s Budget, who first laid down that reform was essential, not just to extend, as the Bill does, the rights of leaseholders but to deal with the concept of an outmoded system that harks back to times when everyone was beholden to the landowner.
As we have heard, this is a Bill of 123 clauses and 12 schedules—and that is just at the last count. Since the Bill’s introduction in the Commons, the Government have added 224 amendments, which illustrates its complexity and, as the noble Baroness, Lady Andrews, pointed out, developing legislation on the hoof—or as my noble friend Lord Stunell said, the Government chasing their tail.
The Bill seeks a number of key changes to the leasehold/freehold relationship which are positive. Unfortunately, the Government have failed to use this opportunity to really grasp the nettle and set down a complete reform of the system. The Government have long promised a fundamental reform to replace freehold with commonhold, which is more in line with property rights across western Europe. Despite the 2022 Act, commonhold remains a rarity. Why have the Government failed to use this opportunity to end freehold and introduce commonhold for all property, including flats?
It is extremely disappointing that, according to media reports, the Government are even backtracking on reform of ground rents. The Secretary of State announced only last November that the proposal will “save leaseholders thousands” by slashing ground rents and setting them at a peppercorn. That is another promise abandoned. Evidence shows that some freeholders increase ground rents substantially year on year, as we have heard this afternoon, and yet other ground rents remain so low that they are not worth collecting but remain as a charge on the property. Ground rent really is paying something for nothing and should be confined to history. However, I accept that there are financial interests, such as pension funds and charities, the concerns
of which must be taken into account as reform proceeds. Nevertheless, a solution that achieves abolition can and must be found.
The other significant omission in the Bill is the abolition of draconian forfeiture, whereby the failure to keep up with ground rent payments can result in the forfeit of the property to the freeholder. There can be no justification in any circumstances for this to remain on the statute book. I hope that the Minister is able to respond to the numerous questions about the lack of action on forfeiture in the Bill.
This much-diluted reform Bill does, however, contain some positive changes, even if they are rather muted. Scrapping the presumption that leaseholders are required to pay landlords’ legal costs is putting right a plain wrong. Leaseholders’ service charges have been exploited by some freeholders and managing agents to such an extent that these have, on occasion, risen by up to 1,000%. The proposal in the Bill is to insist on transparency and reasonableness—but what is reasonable? How will it be defined? This leaves too many loopholes for the unscrupulous to continue to exploit. Can the Minister explain how exploitative behaviour by some freeholders, or their managing agents, will be prevented, given the wording of the clause?
That brings me to insurance charges. Since the terrible tragedy of Grenfell Tower, insurance costs for leaseholders in flats have escalated to the point at which some are paying more than £3,000 a year for buildings insurance—a travesty, considering that leaseholders do not own the bricks and mortar being insured. Of course, there must be some arrangement by which the building is insured, but to put the commissioning rights in the hands of the freeholder or agent is like putting the cat in charge of the cream. Clause 57 seeks to protect leaseholders from the worst excesses of insurance commissioning, but it is not at all clear that it will be effective. Perhaps the Minister will be able to demonstrate that the days of milking the buildings insurance to the benefit of those not paying the insurance will completely end.
So-called fleecehold is another money-making wheeze by developers and property agents. Developers, having realised that local authorities were not in a position to take on further liabilities, have devised a system whereby house owners on newly constructed estates pay a service charge for maintenance of green spaces, play areas and even roads, as my noble friend Lady Thornhill so eloquently exposed. The same householders will also be paying council tax to cover such maintenance in other estates in their district. Undoubtedly, what will happen is that, as an estate gets older, more maintenance will be required, especially if the estate road was not built to adoptable standards in the first place. The liability will fall on home owners, who may not be able to suddenly pay out for a new road. So it is good that the Bill proposes in Clause 98 to insist on a redress scheme, but how much better it would be if assets in new estates were forced to be adopted by the local authority in perpetuity.
Part 8 amends the Building Safety Act 2022 to ensure that the landlord will be responsible for remedying or mitigating relevant defects in a building. Some of us who have spoken today spent many happy hours
debating the Building Safety Bill and drawing attention to its defects at the time, and it is a great pity that the Government have failed to grasp this new opportunity to redress the serious limitations of that Act and extend rights to leaseholders in buildings under 11 metres, and enfranchised leaseholders.
The Minister will not be surprised to hear that we on these Benches will seek to put right the wrongs that have still not been addressed by the Government in their legislation. As others have said, people are living in flats that are unsafe, unable to be sold and unmortgageable because this Government have failed to deal with wrongs that are not of the residents’ making but of the making of the developers and construction firms which built those flats in the first place. We will pursue amendments along those lines.
There are some real positives in the Bill, such as removing the duty on leaseholders to pay the freeholder’s legal costs in a dispute. The various redress proposals have considerable merit. Enabling existing leaseholders to extend the lease or purchase the freehold in a new way is another positive step, as are the measures in relation to some regulation of property agents, although this does not go far enough, as the noble Lord, Lord Best, and my noble friend Lady Thornhill pointed out. I recognise that, having said at the outset that the Bill is a step in the right direction of reform, I have then spelled out the many glaring omissions and the lack of bold endeavour which are a feature of the Bill as it stands.
The debate has exposed the controversy surrounding any reform, but we on these Benches will use the remaining stages of the Bill to probe the detail and propose amendments in areas where the Bill is deficient, which are various and numerous. I look forward to the Minister’s response.
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