My Lords, I declare an interest as a long-standing leaseholder of some 30 years. I have been a leaseholder in apartment blocks in London, Kent and Somerset, and a right-to-manage director in two apartment blocks.
I support His Majesty’s Government’s Clause 28, which seeks to raise the non- residential limit on collective enfranchisement claims from 25% to 50%, as mentioned by the noble Baroness, Lady Taylor of Stevenage. I consequentially oppose the proposal of the right reverend Prelate the Bishop of Manchester and the noble Lord, Lord Moylan, to vote against Clause 28.
Your Lordships have heard how giving more say to leaseholders in mixed blocks of residential and commercial units would be a bad idea and negatively impact on investment and the effective running of these blocks. It has been said that reform would only help some foreign leaseholders and investors and would result in fewer homes being built. That is far from the case. I have lived in two blocks of mixed developments: one was controlled by a residents’ right-to-manage company, with a NatWest bank in the basement, and another contained a number of commercial units and was 100% controlled by the freeholder. I can say categorically that the right-to-manage block was run better and with cheaper service charges. The freeholder-run block exploited the residents, cross-subsidising the commercial units at their expense and giving them no effective say over how the block was run. I point out to the noble Earl, Lord Lytton, that the difference was that the RTM block was actually run by the residents, who were managing their own money, whereas the freeholder block was run by a managing company and the freeholders were profligate with the use of residents’ cash.
Let us be frank: maintaining the 25% cap is about the freeholders retaining control and not about fairness or efficiency. If anyone lives or invests in a flat in a
block, they should have a say over how it is run. For that reason, I oppose the amendments in the names of the noble Lords, Lord Thurlow and Lord Sandhurst, which would restrict enfranchisement and further strengthen the position of freeholders by limiting the number of leaseholders who can vote on and manage their own blocks of residents. RTM directors are perfectly capable of managing mixed blocks of developments.
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Freeholders are keen to take leaseholders’ money but do not want to relinquish control. That can result in a situation where leaseholders represent 95% to 99% of the investment in a building but have no control. In contrast, the freeholder, who has an investment of just 1% to 5%, is deemed to own the building and run it for their profit, while appointing a property management company that proceeds to rip off the leaseholders via excessive service charges and insurance commissions. As I said, because it is not the freeholder’s money, they do not care—that is the difference. Any leaseholder’s attempt to challenge that is fraught with risk and a potentially ruinous cost, so this aspect also needs reform.
I am aware of a major lobbying effort by the great estates to protect their feudal privileges built up over hundreds of years—I was invited to dinner by one, but I did not go. Following the contribution of the right reverend Prelate the Bishop of Derby, I refer to the proposal in the name of the right reverend Prelate the Bishop of Manchester, who was refreshingly frank at Second Reading. He said that the system could be described as “feudal” and that some of the Church property he dealt with dated back to the 11th century. The property portfolio of the Church of England is valued at £2 billion—it is a business. It has assets of at least £6.7 billion. As we all know, the Church of England does a lot of work with charities and works with the poor, but some have already questioned whether its 105,000 acres of land could be better used, in part, to provide the social housing so badly needed by the needy and homeless.
With the great estates, the story is also about retaining their wealth, not about losing it. I have no problem with that, I just do not think that it should be at the expense of leaseholders. They need to move with the times; the old ways of fleecing leaseholders are increasingly untenable.
I was thrown by the right reverend Prelate the Bishop of Manchester not being here, as we were going to talk later about marriage value, but that is a different part of the debate.
We in Parliament have a greater duty than just to the freeholders and their interests: we have a duty to the over 5 million leaseholders to reform the fleecehold system and, preferably, abolish it altogether. We heard again at Second Reading how some freeholders seek to hide behind property rights and the European Convention on Human Rights, but leaseholders also have rights, which are being deliberately supressed.
On ground rents—again, as mentioned at Second Reading—the Competition and Markets Authority said that there was no legal or commercial reason to justify ground rents. I have just had a bill for £300 for
my ground rent, for which I receive absolutely no service. Everyone involved knows full well that ground rents provide no service, are purely rent-seeking and are a legalised scam. If pension funds are invested in ground rents, as some are, they should find a better use for their money; for example, by investing in British companies. Our pension companies invest less in our own country’s companies and stock market than any of their international competitors—shame on them.