Leasehold Properties: Mis-selling

Housing, Communities and Local Government – in the House of Commons on 22nd July 2019.

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Photo of Mark Garnier Mark Garnier Conservative, Wyre Forest

What steps he is taking to tackle the mis-selling of leasehold properties.

Photo of James Brokenshire James Brokenshire The Secretary of State for Housing, Communities and Local Government

I am pleased that the Competition and Markets Authority is investigating mis-selling and onerous leasehold terms and looking at whether such terms are deemed to be unfair, and we will consider further action when it reports. That work supports a strong package of reforms to promote fairness and transparency for leaseholders.

Photo of Mark Garnier Mark Garnier Conservative, Wyre Forest

I am grateful to the Secretary of State for his comments but, despite those efforts, buyers of brand-new properties in Kidderminster in my constituency still believe that they have been misled in terms of leasehold contracts and contracts relating to communal services charges on new build estates. Given that we agree that we need to increase house building significantly across the country, does the Secretary of State accept that the apparent mis-selling must be properly investigated and brought to an end once and for all before the scandal affects millions upon millions of future homebuyers?

Photo of James Brokenshire James Brokenshire The Secretary of State for Housing, Communities and Local Government

I absolutely do. Unfair practices in the leasehold market have no place in modern housing, and neither do, for example, excessive ground rents that exploit consumers who get nothing in return. I called on the Competition and Markets Authority to look into this issue, and I am pleased it has now responded, also reflecting the calls from the Housing, Communities and Local Government Committee—I note that the Chair of the Committee, Mr Betts, is in his place this afternoon.

It is right that we get to the bottom of this, that we challenge it and that we respond to these unfair practices firmly and effectively.

Photo of Lucy Powell Lucy Powell Labour/Co-operative, Manchester Central

When will the Secretary of State introduce regulation to give leaseholders redress? The leasehold valuation tribunal is toothless and, frankly, worthless. Whether it comes to erroneous charges, mis-selling, dangerous cladding or expensive charges, leaseholders have nowhere to go. There needs to be urgent regulation.

Photo of James Brokenshire James Brokenshire The Secretary of State for Housing, Communities and Local Government

I recognise the hon. Lady’s call, which is why we have taken a number of steps and will be bringing forward legislation to ban new leases on houses and to reduce future ground rents to zero monetary value. The Select Committee obviously highlighted the issue of existing leases as well, and we therefore now have a pledge in place and a number of people are coming forward to provide that direct response. I keep this issue under continual review as to what further steps are needed to change the situation for the future, as well as providing support for those already in this situation.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

My right hon. Friend and his team have, over the past year or so, made more progress than was made in the previous 20 years, which is greatly to be welcomed. May I ask that he continue showing the open-mindedness, flexibility and drive that are necessary to undo some of the past misdeeds, whether by declaring clauses to be unfair, and therefore unenforceable, or by finding simple, low-cost ways of righting wrongs that have been around for far too long?

Photo of James Brokenshire James Brokenshire The Secretary of State for Housing, Communities and Local Government

I am grateful to my hon. Friend for his comments. We have firmly focused on this issue of leasehold, and I know the close attention he pays to the steps that have been taken. Obviously, the Competition and Markets Authority will be looking at this issue of unfairness. In relation to the Select Committee’s response, there are legal complexities with existing contracts, but I assure him that we will continue to focus on this to provide that effective response.

Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs)

Hundreds of my constituents have written to me similarly feeling that they have been mis-sold their freehold, so I have written to the Competition and Markets Authority asking it to extend its inquiry to cover freehold, where people have to pay excessive and ever-escalating management and service fees. Will the Secretary of State support me in this?

Photo of James Brokenshire James Brokenshire The Secretary of State for Housing, Communities and Local Government

I certainly support the hon. Lady in seeing that inappropriate or unfair practices are properly investigated and properly responded to. If she is willing to share with me the details of the complaints she has received from her constituents, I would be happy to look into this further.

Photo of Eddie Hughes Eddie Hughes Conservative, Walsall North

In my excellent recent private Member’s Bill, I suggested that ground rent for leasehold properties should be set at the lower of £250 or 0.1% of the property’s value. Does the Secretary of State agree with that suggestion?

Photo of James Brokenshire James Brokenshire The Secretary of State for Housing, Communities and Local Government

I commend my hon. Friend Eddie Hughes for his private Member’s Bill setting out the steps that are needed to bring the leasehold market into an appropriate space. He will have heard what I said about bringing ground rents down to zero. We have given that commitment, and the right thing is that we move forward with our proposed legislation. I am sure that, with his ingenuity, he will be able to scrutinise it and, no doubt, come up with further proposals to ensure that legislation is effective.

Photo of John Healey John Healey Shadow Secretary of State for Housing

This session may be the swan song of the Secretary of State and his team. We certainly hope not, and we wish them all well in the Tory turmoil to come.

Photo of John Healey John Healey Shadow Secretary of State for Housing

Indeed.

The CMA’s inquiry is certainly welcome, but it is action by Ministers that homebuyers ripped off in the leasehold system need most. The Secretary of State’s predecessor said in 2017 that the Government would stop new leasehold houses, but nearly 3,500 were sold last year. The Secretary of State himself said a year ago that he would end the use of Help to Buy for new leasehold houses, but he had to admit to me afterwards that that will not happen until 2021.

As the Secretary of State reflects on his time in this job, will he concede that any Government action has been too slow and too weak and has totally overlooked the needs of current leaseholders locked into unfair contracts?

Photo of James Brokenshire James Brokenshire The Secretary of State for Housing, Communities and Local Government

No, I do not accept that. I direct the right hon. Gentleman to the action that has been taken and the fall that has been seen: the proportion of new build leasehold houses has fallen from 11% in quarter 4 of 2017 to 2% in quarter 4 of 2018, which was the lowest quarter so far for leasehold houses in the Help to Buy equity loan scheme. The right hon. Gentleman issues a challenge on the existing Help to Buy scheme; he will have noted that I have asked Homes England to look into how we can renegotiate some of those contracts, because I was clear that there should be no new Government funding for schemes that promote leasehold, and that remains a firm commitment. Equally, we are taking action on the scheme now to confront some of the abuses that there are.

Photo of John Healey John Healey Shadow Secretary of State for Housing

Well, lots of warm words and fresh reviews, but no action. There have been 19 Government announcements on leaseholds in the 15 months that the right hon. Gentleman has been Secretary of State, but there is still no sign of change for current leaseholders, or of the legislation to make it happen. Is not the hard truth that Conservatives cannot help leaseholders because they will not stand up to the vested interests in the property market? Do not homeowners who are looking for justice and radical, common-sense changes have to look to Labour to set a simple formula for people to buy their own freehold; to crack down on unfair fees and give homeowners the right to challenge high costs or poor performance from management companies; and to put an end, finally, to the broken leasehold system?

Photo of James Brokenshire James Brokenshire The Secretary of State for Housing, Communities and Local Government

Clearly, the right hon. Gentleman has not been looking at the practical steps we have taken and, indeed, the performance that we have seen. Perhaps that is because of the turmoil in his own party—there has been plenty on the Opposition Benches. I direct the House to the steps that have been taken, the commitments that have been made and the effect that all that is now having. We are championing the cause of leaseholders and confronting some of the really unfair practices. We are seeing the effect that that is having as a result of the steps we have taken, rather than the hyperbole from the Opposition and the continuing turmoil that we see among them.