Amendment 13

Leasehold and Freehold Reform Bill - Committee (1st Day) – in the House of Lords at 4:30 pm on 22 April 2024.

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Baroness Pinnock:

Moved by Baroness Pinnock

13: After Clause 25, insert the following new Clause—“Commonhold and Leasehold Reform Act 2002: commonhold threshold(1) Within six months of the day on which this Act is passed the Secretary of State must make regulations to amend the Commonhold and Leasehold Reform Act 2002 to lower the threshold of supportive eligible leaseholders needed to enter into a commonhold to 50%.(2) Regulations under subsection (1) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”Member’s explanatory statementThis amendment would require the Government to legislate for conversions from leasehold to commonhold where 50% of eligible leaseholders in a building support the conversion, rather than 100% as it currently stands, in line with the recommendation from the Law Commission.

Photo of Baroness Pinnock Baroness Pinnock Liberal Democrat Lords Spokesperson (Levelling Up, Communities and Local Government)

My Lords, this amendment is on commonhold. I was pleased to hear the Minister emphasise that the Government intend to ensure that commonhold becomes the norm, although it was unfortunate that the phrase that followed was “in due course”.

This conversation about leasehold reform has been going on for a very long time. I accept that it is complex and that that there are competing financial interests. I accept that it will be difficult to find a route to ensuring that leaseholders become commonholders. However, the legal work has been done by the extensive and authoritative report from the Law Commission, The Future of Home Ownership, which was published in July 2020. The commission published three massive reports—one of them is over 800 pages. Therefore, the Government have at their disposal the combined thoughts of the Law Commission on how home ownership should be extended to leaseholders, and it has explained how that is done in a straightforward way.

The amendment in my name presses the Government to legislate for conversions to commonhold where only 50% of eligible leaseholders in a building support the conversion—rather than having it at 100%, which is obviously a barrier to commonhold ownership—and is in line with the recommendation from the Law Commission.

Everyone in the Committee will be well aware that the leasehold/freehold arrangement is very unusual in western European countries. The historic norm in the rest of western Europe is the equivalent of commonhold; that is how people who live in flats organise their affairs. It was introduced in England and Wales in 2002 but, for various reasons explained by the Law Commission, it has not taken off as an alternative to leasehold.

I will outline the advantages of commonhold so that those who oppose the move to it, or believe the barriers are too great, will need to respond to them. The advantages of commonhold are that a person becomes a home owner, and it provides flat owners with equivalence to house owners. We on these Benches believe in that fundamental principle: that flat owners should have the same legal rights to home ownership as house owners.

The second advantage is that there is no ground rent to be paid—we will debate whether that should be abolished or limited on future Committee days. The third advantage is the control over the property that the flat owner would have as a commonholder. We have heard over long debates in this House that freeholders or their management agents are seemingly abusing service charges by raising them—we have seen sky-rocketing increases—while insurance costs arising as a consequence of the dreadful tragedy at Grenfell Tower are currently the remit of the freeholder or managing agent and not of the flat owner. That cannot be right, and it would change under commonhold.

In its report, the Law Commission states that some criticisms of freeholders with regard to, for instance, rising ground rents and inexplicable rises in service charges

“can fairly be described as abusive practices by landlords or developers”.

The Competition and Markets Authority also reported on leasehold housing in 2020, expressing concerns about—again—ground rent and services charges. Further, it reported on permission fees, whereby a leaseholder has to pay the freeholder for permission for even minor alterations within the flat that they are leasing. I find it extraordinary that in the 21st century there is still a fee to be paid to make alterations, rather than an agreement that it can be done.

The very nature of the leasehold/freehold arrangement opens the door to those who wish to derive the maximum gain from it, as both the Law Commission and CMA exposed. Of course, not all freeholders or their agents behave in this way, but the exploitative behaviour of some must be curtailed through legislation. Hence, I hope that we can have a quick, ready transition to commonhold, because that is the only way that such abuses will be prevented.

The Law Commission was very clear that this could be done. It talks about a “cultural change” being the biggest barrier to the move to commonhold, rather than legal and financial involvement, which is often seen as a barrier. The Law Commission stated that commonhold should be used

“in preference to leasehold, because it overcomes the inherent limitations of leasehold ownership”.

There is clear evidence and advice from the Law Commission, and all that is now needed is the will to implement the reform that the Law Commission has extensively reported on and shown the route map to achieving.

It is obvious that this will not be straightforward because of the financial interests of individuals and institutions in prolonging the existence of the leasehold/freehold arrangement. However, if the Government are determined, as the Minister said that they were, to create commonhold as part of a property-owning democracy—the phrase often used by the Government—the move to commonhold must be implemented, and must be implemented as speedily as possible. There must be no more delay; commonhold has been an option for over 20 years. It needs reinvigorating—the word that the Law Commission uses. It needs some of the barriers to be removed. It needs, as the Law Commission states, a cultural change in the way that commonhold and leasehold reform is looked at. That is what is needed, and the Government are in a position to do it. They have said that they want to make that change; unfortunately, the Bill does not enable it, as “in due course” will no longer be sufficient. I look forward very much to this debate and the Minister’s response.

Photo of Baroness Fox of Buckley Baroness Fox of Buckley Non-affiliated 4:45, 22 April 2024

My Lords, I shall speak to my Amendment 14. First, I apologise that I was away for Second Reading; I confess that I would probably have made a rather frustrated and angry speech at the Bill’s limitations and the waste of a chance to end leasehold once and for all. However, I come here today in a more conciliatory mood with, I hope, a constructive proposal to create a sunset clause on all new leasehold flats that would allow the Government five years to resolve any outstanding issues for present leaseholders. Because of a time limit, there would be light at the end of the tunnel, and all the rhetoric from the Government and the Opposition condemning leasehold as a feudal, unfair tenure could be turned into a concrete outcome, with no room for broken promises.

There is nothing unreasonable or radical about the amendment. The Conservative Party’s 2019 manifesto promised to enact a

“ban on the sale of new leasehold homes”— and note that the wording was “homes”, not “houses”—and the majority of leasehold homes are flats. In fact, as the noble Baroness, Lady Pinnock, pointed out, 70% of them are. We know that it is precisely in relation to flats where the real abuse occurs, where the real money is made by third parties in exploitative extraction, and where the majority are denied control of their own finances and lives. That is where this scandal lies.

What is more, the number of leasehold flats is increasing exponentially, whereas the proportion of new-build houses sold as leasehold is falling dramatically, from a 15% high in 2016 to a meagre 1% of all leaseholds in December 2022. Yet the Bill avoids the main problem, and I am hoping that this amendment will give us a way out, and that now is the time to do it. Banning new leasehold houses is not enough and does not, in my opinion, despite what the Minister assured us, uphold the manifesto commitment. The amendment would allow the Government to honour their promise but without doing it in a rush.

Not to be partisan, I was delighted when the shadow Housing Minister, Matthew Pennycook, pledged to scrap leasehold tenure within Labour’s first 100 days in office, but this appears to have been slightly rescinded or fudged. This is therefore an amendment for all sides, to ensure there is cross-party consensus that we will absolutely name the date by which leasehold will have gone—what Michael Gove, the Secretary of State, has called an “indefensible” system of tenure. As far as I can see, everyone, cross-party, agrees with that. If not now, when? This is the first piece of legislation tackling leasehold tenure for new and existing homes in 22 years, outside of building safety. Another opportunity to move against this iniquitous regime may not come around any time soon; it might take another 22 years.

I am keen to learn the lessons of history, because back in 1995, the late Frank Dobson, then the shadow Secretary of State for the Environment, and Nick Raynsford, then the shadow Secretary of State for Housing, brought out an excellent pamphlet entitled An End to Feudalism: Labour’s New Leasehold Reform Programme. It noted:

“Over recent decades the weaknesses and injustices inherent in the British leasehold system have become increasingly highlighted, but reform has been a long time coming”.

It was promised that reform would come under that Government, but reform has sadly been an even longer time coming because, despite a promise to use the 2002 leasehold Bill to sunset any new leasehold buildings, this was reneged on.

This failure to use legislation 22 years ago to resolve the situation means that over 2 million further leasehold properties have been created—the very debt traps that have caused so much misery for so many. Are we just going to allow this Bill to pass, knowing that we will create more leasehold flats, and therefore more problems and more debt traps ahead? As Sebastian O’Kelly from the Leasehold Knowledge Partnership bluntly put it to MPs:

“You’re out of step with the rest of the world, so stop creating more leaseholds”.

I was delighted to hear the Minister assure us that nobody wants this, but I want that promise to be written down rather than just stated.

I stress that the amendment is not trying to dictate how this should be done. Rather, it would give the elected Government of the day, whoever that is, the space and flexibility to decide on whatever schemes are appropriate to ensure that third-party investors—the rentiers—are no longer permitted to interfere in what will be, I hope, a thriving sector of flats throughout the UK.

The amendment is not prescriptive, as I have said. Commonhold is not even mentioned directly, even though I agree with all those who have said that it is best suited to deliver ownership and management of residential flats for the future. The main point is to set a sunset clause to ensure that, whichever party is in government, there are no more broken promises and that the “in due course” we heard about earlier has an end date. What is more, the amendment, via proposed new subsection (3)(c) and (d), would ensure that existing leaseholders are not left behind. In a way, what is not to like?

However, it is difficult to know exactly who or what I am arguing against, because I am not quite sure that I even understand why this could not have been done in this legislation. The answer has not been forthcoming. I want to look at just a couple of objections.

In this Chamber, the noble Baroness, Lady Penn, explained from the Dispatch Box earlier this year that reforming leasehold for flats is “inherently more complicated” than for houses, as they required an arrangement to “facilitate management” of the buildings. Surely the “it’s complicated” defence is a red herring. There have been endless consultations and commissions, and decades-worth of academic and policy research, as we have heard from the noble Baroness, Lady Taylor of Stevenage, and as the noble Baroness, Lady Pinnock, pointed out. We have had the Law Commission, with its 121 recommendations. An expert advisory group, the Commonhold Council, was launched in May 2021 by the Government precisely to prepare home owners and the market for widespread uptake of a collective form of home ownership. So, as the former Housing Minister, Rachel Maclean, told the other place at Second Reading:

“All the work has already been done”.—[Official Report, Commons, 11/12/23; col. 676.]

For the remaining complexities, this amendment would give Parliament one more term as a reasonable timeframe to work at any outstanding issues—for example, around the complications of shared ownership, which we heard about earlier.

I also want to challenge the notion that the management of blocks of flats is so complicated that it is untenable in the short term. I fear that this hints at a prejudice about whether commonhold will lead to poor property management—something that is often wrongly equated with amateur management. This is a flawed argument that is sometimes put forward by the freeholder lobby. It is patronising and patrician and, in any event, it ignores what is happening worldwide. If you buy a flat in the majority of cities in the world, it will be held in commonhold, and the buildings are not all falling down or neglected.

Groups of flat owners are more than capable of bringing in professional management companies to organise repairs. The Commons Select Committee said, back in 2018-19, that it was

“unconvinced that professional freeholders provide a significantly higher level of service than that which could be provided by leaseholders themselves”.

To be honest, it is the opposite. At present, leaseholders are being charged for services that they do not receive.

In conclusion, what is not complicated is that owners of flats are a safer bet for maintaining and managing their own homes than those developers and freeholders who have given their own profession a bad name. It is why this scandal is being discussed in the first place. I suggest that we simply say that in five years’ time this will be put to bed and finished with, and then no one can accuse whichever Government are in power of breaking promises again.

Photo of Baroness Jones of Moulsecoomb Baroness Jones of Moulsecoomb Green 5:00, 22 April 2024

My Lords, I do not have an amendment in this group, but it is almost therapeutic when your Lordships’ House is asked to consider a rare Bill such as this, where, instead of the Government seeking to do something really quite nasty, they are merely failing to do the best possible thing that they could.

The amendments in this group reveal that the Government have failed to bring in any proposals to replace leasehold ownership of residential property with commonhold ownership. It is obvious that there is a political consensus—at least on this side of the Chamber and partly on the other side—that commonhold should be the main model of ownership for multi-unit residential properties. However, 20 years since commonhold was first introduced, and four years since the Law Commission published legislative proposals to enable more widespread adoption of commonhold, it looks as though this Government have chosen to leave this issue to the next Government to sort out. That might be the best thing—I do not know—but, quite honestly, this Government have had the option, even in this Bill, to do the right thing.

Housing is part of survival: it is a human right and you have to get it right. It is time to end the commodification of housing by international finance and to end the feudal model of land ownership, which facilitates developers extracting as much money as possible from home owners while providing little or no value in return. Forgive me, I should have declared an interest as a leaseholder.

I would like to ask the Minister some questions; others have probably asked these questions before, but I just want to be specific and get clear answers. When do the Government expect the Commonhold Council to complete its work on the implementation of commonhold for new housing supply? When do they expect the completion of the work on conversion to commonhold? Why is it taking so long?

Photo of Lord Young of Cookham Lord Young of Cookham Deputy Chairman of Committees, Deputy Speaker (Lords)

My Lords, I will make a brief intervention to support the thinking behind Amendment 14, in the name of the noble Baroness, Lady Fox. We all understand the disappointment that it has not been possible to make progress with commonhold in this Parliament. We all understand that it would be impossible to try to retrofit commonhold into the existing legislation. One thing we have learned over the last two parliamentary Sessions is that the capacity of the department to produce legislation that does not need wholesale amendment as it goes through is limited. We all bear the scars of the levelling-up Bill.

We have also seen the number of government amendments that have already been tabled to this Bill. What ought to happen, and I wonder whether my noble friend would smile on this, is that at the beginning of the next Session, a draft Bill should be published on commonhold. That would enable us to iron out all the wrinkles and expedite the passage of an eventual commonhold Bill when it came forward. There is all-party agreement that we need to make progress with commonhold, so urgent work now on producing a draft Bill is time that would not be wasted. It would mean that early in the next Session of Parliament we could produce a draft Bill—we have the Law Commission’s work, which we could build on—and iron out all the wrinkles. Then, when the actual Bill came forward, we would be spared, I hope, the raft of government amendments. I exempt my noble friend on the Front Bench from responsibility for this; it would be a faster destination.

By way of comment, what has happened to draft Bills? When did we last see a draft Bill? If you look at the Cabinet Office’s recommendation, I think in 2022 it said that they should be part of a normal legislative programme; there should be a number of Bills produced in draft, which we can get our teeth into. All my experience as chairman of the Parliamentary Business and Legislation Committee is that when you have a draft Bill, the actual Bill goes through much more quickly. Again, my noble friend has no responsibility for the legislative programme, but I think we need to spend more time as a Parliament looking at draft Bills rather than at Bills that have been drafted in haste, and then having to cope with a whole range of government amendments.

Photo of The Earl of Devon The Earl of Devon Crossbench

My Lords, I too was unable to speak at Second Reading, and I apologise for that. However, I was able to attend much of the debate and to listen to a number of your Lordships’ speeches. I noted the numerous times in which leasehold tenure was described as “feudal”; we have heard this many times today. It is used as a pejorative term, which I do not strictly agree with, being a feudal Member of your Lordships’ feudal House, serving our feudal sovereign. It seems a somewhat discriminatory term to use. I also note that not all feudal rights are bad; we laud the Magna Carta, the right to trial by jury, and the rights of habeas corpus, all of which are essential feudal rights. I would hazard that leasehold tenure is similarly a feudal right that we should be particularly proud of, like your Lordships’ feudal House.

That said, I realise that the days of leasehold are numbered, but we should not remove such an important element of our residential housing market without ensuring that there are at least adequate alternatives that are fit for purpose. There currently are not. I believe it a mistake to dismantle leasehold tenure without ensuring that the commonhold alternative is fit for purpose.

Here I note my interests: in 2003, as a junior property barrister, I was a contributing author to a handbook on the exciting new tenure of commonhold. Since then, and despite our best hopes, the book has sold barely a copy, and I understand that commonhold has been adopted by hardly anyone. In 2015, and again more recently, the Law Commission has explored the shortcomings of commonhold, and has, as we have heard, identified numerous ways in which the law could be amended to make it better. I believe the Government are therefore wrong not to have grasped the nettle and made commonhold fit for purpose at the same time as, if not before, introducing this piece of legislation.

For this reason, I support the probing amendment of the noble Baroness, Lady Taylor, with respect to the publication of a commonhold strategy. Without that viable alternative, I am particularly concerned that the leasehold reforms will have the unfortunate effect of decreasing the available housing stock, and will drive up the price of housing, which will decrease the number of homes that are affordable. I note my interests as a member of the Devon Housing Commission, ably chaired by the noble Lord, Lord Best, which is exploring why there is so little housing available in the county for people who actually live there.

I have a question for the Minister: have the Government sought to measure the likely impact of the Bill on the availability of new housing, and the willingness of freeholders to make land available for development?

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Chief Whip (Lords), Deputy Chairman of Committees, Deputy Speaker (Lords)

My Lords, I have a number of interests to declare: first, as a leaseholder, secondly, as chair of the Heart of Medway Housing Association and, thirdly, as a non-executive director of MHS Homes Ltd.

I spoke at Second Reading and I am sure that, as we go through these few days in Committee, we will largely agree with each other that there is a major problem. We all want to see leasehold reform and commonhold reform. Everybody backs it. I know that the noble Baroness, Lady Scott, and the noble Lord, Lord Gascoigne, back it. The problem is that we are not doing anything about it. That is the shame here.

The amendment from the noble Baroness, Lady Fox, absolutely takes us forward. She includes a day to end leasehold flats, which would deliver that Tory party manifesto commitment. We should all back her if, as I hope, she divides the House at the next stage. Her amendment would deliver the Tory party manifesto commitment, but will the Government support it? Of course not. We know that. We all agree in these debates, but what we will get from the Government Front Bench is, “When parliamentary time allows”, “The next steps will follow in due course”, “We are keeping it under review”, or “We will get back to you”. That is the problem.

This is a golden opportunity that the Government have completely failed to deal with. We have sat here for years. I have asked question after question. I have been assured, “It is coming” or “Don’t worry, don’t ask questions, we are going to sort it all out”. Yet here we are and what do we get? A Bill that delivers very little. On the point about service charges and transparency, I can assure the Government Front Bench that if a leaseholder has problems with the service charge, they know they have problems. What they want from the Government are the tools to sort them out. The Government have not delivered that. They can give more transparency—great, but we need the tools for the job and they are not doing that for us.

This is very frustrating. I think we will have lots of agreement but very little action. I hope that, when we get to Report, a number of amendments will be passed and many members of the Government will support us in delivering the commitments that their party made to leaseholders at the last general election. The amendments from the noble Baroness, Lady Fox of Buckley, in particular, are really good, giving an absolutely clear cut-off date.

My noble friend Lady Taylor of Stevenage asked the Government to set out their strategy for commonhold. What is it? I hope they can tell us. The current strategy seems to be, “We will get back to you. We know it is important, but we can’t do anything about it at the moment—sorry”. That is just not good enough. There are lots of great amendments here, but we need some action from the Government. I hope that, when we get to the next stage, we will divide the House many times. Where we have got to at the moment is just not good enough.

In 1880 Henry Broadhurst was elected as the Member of Parliament for Stoke-upon-Trent. He was then elected as a Member of Parliament for Nottingham West. He raised the problems of leasehold in the other place. We are still talking about them today. He was elected in 1880, and we have still made only limited progress. It is about time we made some progress here. We want more transparency and we want the Government to deliver their commitments. We want commonhold, and we want it now.

Photo of The Earl of Lytton The Earl of Lytton Crossbench

My Lords, I agree fundamentally with the point made by the noble Baroness, Lady Taylor of Stevenage, and with what other noble Lords have said with regard to the desirability of a transition to commonhold. I say that because, apart from anything else, conventional leasehold has clearly got itself an extremely bad press. Like it or not, that is something we have to take account of. However, although it is poorly regarded among leaseholders, it happens to be the commercial preference and the model on which a great deal of leaseholder and freeholder value rests. We have to be a bit careful about that.

My interest here is very much about consumer protection. I do not want us to enter a brave new world in which the existing leasehold situation is seen as in any way second class. Comments are made about the evils of monetisation of the management process, but I think that is a slightly different issue. I do not see that as intrinsic in the tenure. I see that as an abuse, a lack of transparency and another area in which consumer protection has not operated.

If we transition to commonhold as seems to be now proposed, leaving existing leasehold and freehold situations in place—particularly the leasehold situation—it would create a market of commonholders and leaseholders. It would certainly add the interesting, if not potentially perilous, market dimension of an additional tenure. We have to consider whether we do the whole of it in one job lot—in other words, get all the pain done, convert all the existing leaseholds and deal with it that way—or whether we deal with it by a thousand cuts, in which case you may end up with part of the market sector not being liked by the finance houses, lenders, banks, insurers and people like that. In that case, which camp is it going to be? Is it going to be traditional leasehold that becomes eschewed in favour of commonhold or is commonhold to be one of those unfortunate experiments that nobody really wants to buy into, because it is seen as a novelty? We really have to be extremely careful about that, which is the main reason why I support the approach of the noble Baroness, Lady Taylor.

The second thing here is that whatever you have, commonhold or leasehold, does not of itself guarantee good management, which requires something different; I made that allusion in what I said previously. Whatever the tenure, the question of ongoing building safety remediation, which we know is floating around in the system, does not get resolved. I know that the noble Baroness, Lady Pinnock, is particularly concerned about that because of its pernicious and corrosive effect on people’s lives—their livelihoods, life chances and everything else in their own homes. Whether you are in commonhold or traditional leasehold, it does not disappear. The legal construct does not govern the physical effects of bad construction from some previous time by some person who, in nine cases out of 10, is not themselves party to the leasehold or freehold arrangement. It does not go away.

We also hear much about commonhold being nearer to outright home ownership and ought to be very careful about what we are trying to promise in that respect. Unit ownership and occupation within a larger block—a unit that may be one of dozens or hundreds—does not align perfectly with block ownership and control. It will never totally align, and the question of who does the management may not of itself answer that problem.

There is an essential conundrum here. If you have a residential unit and are in a collective with a lot of other people—with common parts and possibly with bits going forward that have larger elements of commercial property within them, up to 50%—it is about the management style and how that is seen to be objective for the building and the collective of its occupiers and tenants, rather than simply approached on the basis of saying, “We want to do what’s good for the residents and never mind the commercial element” or “We want to do what’s for the benefit of this particular group of residents and not for the others”.

I am grateful to the Minister for allowing a meeting earlier today in which I aired some of this, but one comes across situations in which parts of a building are older and less modern and the residents have a different set of objectives from those in the other parts of the building. I well remember that from a situation in Brighton that I had experience of, where part of a building had had a bomb dropped on it in the Second World War and been rebuilt after the war, but the other bit was inter-war. The residents of the two bits could not agree on the priorities for management and maintenance.

If we allow the residents themselves, the vox populi, to vote for whatever the immediate purpose is—the maximum number of goodies for its vote—that is not necessarily a stable thing. However, I would be the first to agree that residents have the far greater stake by value, often by floor area and by the fact they sleep there and are more vulnerable in that respect; they are more easily hurt by things going wrong. It is right that they should have a substantial say, but to make the decision-making in some way mutually exclusive is very difficult. Getting the balance right between particular groups of residents is not automatically a given. Another dimension is involved, which is not answered simply be altering the tenure. I feel the need to spell that out from my own experience of dealing with these things over many years.

That is not to say that commonhold is in any way wrong. I do not think leasehold is particularly good; I certainly do not subscribe to much of what is going on at the moment. However, I suggest we concentrate on the process of consumer protection. That is why the noble Baroness, Lady Taylor of Stevenage, has got it right. We need to get more feedback. I take the point made by the noble Baroness, Lady Fox, that we probably need a sunset date to force the political decision-making so that we know that we will get to an endpoint and will not still be talking about this in 10 years.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Chief Whip (Lords), Deputy Chairman of Committees, Deputy Speaker (Lords) 5:15, 22 April 2024

My Lords, I forgot to mention earlier how much I support the noble Lord, Lord Young of Cookham. I think the last draft Bill we had here was the Modern Slavery Act. There was a draft Bill and a Joint Committee of both Houses on it. The work of that committee ironed out all the wrinkles; we got a much better Act of Parliament, and it had a much easier passage through both Houses. The committee was able to look at the issues and deal with them, which was really important.

It would be lovely to hear the Minister say that we will have a draft Bill for commonhold. Again, that would really help us. We could have a Joint Committee of both Houses that could take evidence and work through all the problems. Then, when we got the proper Bill, we would get it much more smoothly and easily through this House and the other House.

I suspect we will not get that, but it is the way forward. Having more draft legislation enables us to sort things out. The Law Commission has worked on the two other Bills we need. We would benefit from having draft Bill committees. It would be much easier for the Government and for everybody to get stuff through and to deal with the problems we all want to solve.

Photo of Lord Khan of Burnley Lord Khan of Burnley Opposition Whip (Lords), Shadow Spokesperson (Levelling Up, Housing, Communities and Local Government)

My Lords, I thank the noble Baroness, Lady Pinnock, for introducing this group of amendments. It has been a fantastic, constructive debate, with some excellent points made across the Committee. I do not want to repeat the arguments, but I will speak particularly to the amendment in the name of my noble friend Lady Taylor of Stevenage, which many noble Lords have spoken about. I remind the Committee that this amendment would require the Government to set out a strategy for making commonhold the preferred alternative to leasehold, as recommended by the Law Commission in its report, Reinvigorating Commonhold: the Alternative to Leasehold Ownership.

The amendments in the name of the noble Lord, Lord Bailey of Paddington, and the noble Baroness, Lady Fox of Buckley, are both important. They all point towards a particular focus: that commonhold should be the future. We should help the move towards commonhold; it is overdue. The Government have had 14 years to deliver and have broken their promises to leaseholders, as mentioned by my noble friend Lord Kennedy of Southwark. Let me remind the Committee that an incoming Labour Government would be left to pick up the pieces should we have the opportunity to serve.

On these Benches, our commitment, as reiterated by my noble friend Lady Taylor of Stevenage, is to have comprehensive leasehold reform, and this has not changed. We will bring forward ambitious legislation to enact all the Law Commission’s remaining recommendations at the earliest opportunity if we are privileged enough to serve.

The important point made by my noble friend Lord Kennedy about not having a strategy is why, on these Benches, we have brought forward an amendment asking for a strategy as part of this Bill. It has been so long; commonhold was introduced in 2002 as a way of enabling the freehold ownership of flats and avoiding the shortcomings of leasehold ownership. However, fewer than 20 commonhold developments have been established since the commonhold legislation came into force. Flats in England and Wales continue to be owned, almost inevitably, on a leasehold basis.

Unlike practice in most other countries across the world, flat owners in England and Wales continue to hold leasehold interests that will expire at some point in the future, and landlords make the key decisions about the management and costs of their buildings. Commonhold enables flats to be owned on a freehold basis, so that owners’ interests can last for ever and gives decision-making powers to home owners.

The Law Commission published its final report in July 2020, in which it makes numerous recommendations that seek to make commonhold not only a workable but a preferred form of home ownership to residential leasehold. Its recommendations include measures designed to make it easier for leaseholders to convert to common- hold and gain greater control over their properties; to enable commonhold to be used for larger, mixed-use developments that accommodate not only residential properties but shops, restaurants and leisure facilities; and to allow shared ownership leases to be included within commonhold. The recommendations would give owners a greater say in how the costs of running their commonhold are met, and ensure they have sufficient funds for future repairs and emergency work. They would provide owners with flexibility to change the commonhold’s rules, while improving the protections available to those affected by the change.

I ask the Government whether they disagree with the benefits I have just outlined? If they do not, why are they not doing this? That is the fundamental question from this debate that numerous noble Lords have alluded to. There was clearly some appetite for it a few years ago, so why are they not doing this? Have the Government changed their mind or are they just not brave enough to do it?

In May 2021, the Government had even established a Commonhold Council as a partnership of industry, leaseholders and government that would prepare home owners and the market for the widespread take-up of commonhold. I ask the Minister what has happened to that council. When did it last meet and how often does it meet?

It is widely accepted that, in terms of this Bill, we will not have commonhold brought in now. However, there is still much miscommunication around commonhold in the industry. There needs to be more education and an awareness campaign. As contributions have highlighted today, commonhold is so much easier. You do not have complex laws; you talk to one another and work problems and disputes out. You have meetings and laws are prescribed so that it is easy for people to know what to do at each step of the way. There are things that could be done with commonhold in this Bill to strengthen it and pave the way to commonhold happening en masse. The amendment in the name of my noble friend Lady Taylor would help the Government ensure that there is a strategy in this Bill and fulfil their manifesto promise, as mentioned previously. I commend the amendment in the name of my noble friend, and I look forward to hearing from the Minister.

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

My Lords, Amendment 13 concerns the conversion of existing leasehold buildings to commonhold. I thank the noble Baroness, Lady Pinnock, for raising this important subject. In future, the Government would like to see widespread use of commonhold for new and existing buildings, empowering consumers to fully own, control and manage their buildings. Reforming the route through which existing leaseholders in England and Wales can convert to commonhold will be a crucial stepping stone on this path to commonhold. The Government welcome the Law Commission’s excellent work on this subject, and continue to consider its recommendations in this space.

It is important to note that reform to conversion is not a simple task that can be achieved overnight; substantive legislative work will be needed to ensure that when leaseholders convert to commonhold, they will be left with the very best tools to manage their blocks effectively. Crucially, beyond lowering the threshold for conversion, new provisions will also be required with regard to the status of non-consenting leaseholders. This includes whether such non-consenting leaseholders should be compelled to change their leasehold interest to a commonhold interest against their wishes, or how workable in practice operating both leasehold and commonhold in a building may be, and the implications of such a model for the smooth management of the block.

The Government wish to extend the benefits of freehold ownership to more home owners. Reforms set out in the Bill will help leaseholders buy their freeholds and will ensure that all new houses are freehold from the outset, other than in exceptional circumstances. I reiterate that the Government remain committed to widespread take-up of commonhold for flats. As I have said before, we have been reviewing the Law Commission’s recommendations to reinvigorate commonhold as a workable alternative to leasehold, and will respond in due course; we will set out next steps in due course as well.

Amendment 14 seeks to ban the sale of leasehold for flats from January 2029. I thank the noble Baroness, Lady Fox, for her intention to encourage consumers towards a fairer system of ownership. To extend such a ban to flats will significantly impact the housing market. Any transition away from leasehold would need to be managed in a way that protects the legitimate property interests of both leaseholders and developers. For example, there are many new leasehold developments already at the planning stage, and to ban all leasehold homes without due consideration could impact the value and saleability of those developments.

Any such wholesale ban would also need to include consideration of the need for any exceptions. For example, home purchase plans rely on a lease, and we would need to consider how to allow aspiring home owners who are unable to acquire a mortgage for faith-based reasons to purchase a property. If we banned new leaseholds, this limitation could prohibit groups across England and Wales from getting on to the property ladder. More widely, it will be crucial to ensure that a robust and fully workable alternative to leasehold is in place before a ban is in force; otherwise, developers of flats will have nowhere to go. We believe that the alternative is a reformed commonhold tenure, the likes of which are found in countries all over the world. In short, extending a ban on new leasehold houses to include new leasehold flats, without a viable alternative in place, could damage the much-needed supply of new homes.

I thank the noble Lord, Lord Khan, for introducing Amendment 15 on behalf of the noble Baroness, Lady Taylor of Stevenage. The amendment would require the Government to set out their strategy on transitioning from leasehold to commonhold. As I hope I have made clear, the Government are committed to commonhold and are carefully considering the detail of the Law Commission’s proposals for reform, including conversion. This Bill prioritises the most significant measures that will help existing leaseholders now.

The noble Lord, Lord Bailey, did not speak to his Amendments 15A and 105A but I shall respond to them. Amendment 15A would require a 990-year lease term for new flats, and I thank him for the amendment. I understand the noble Lord’s desire to make sure that leaseholders have long-term security in their homes, and we share this aim. However, the Government are not able to accept the proposed new clause.

First, the provision would be a very blunt requirement, and there could be cases where this is genuinely not appropriate. For instance, a developer may not be the freeholder itself, and so may not have a long enough interest in the land to grant a 990-year lease. The Government would need to undertake detailed policy development work to make it a more workable proposal. Careful consideration would also need to be given to such a mandate to understand the impact on development viability and to ensure that planned developments do not stall. I hope my noble friend therefore agrees with me that it would not be appropriate to mandate a 990-year lease in all cases, and will agree to not move his amendment.

Amendment 105A would require the Government to publish a report setting out proposals for reforms to shared ownership, mandating a share of freehold or granting a 999-year lease as a default, and to set out plans for the widespread adoption of commonhold for all new flats by 2030. Under Amendment 105A, the Government would have six months to publish this report following Royal Assent to the Bill. To reiterate, 999 years may not work for all developments and may act to prevent new housing coming forward in some cases. I hope that the noble Lord will agree with my previous comments on the complexities of mandating lease lengths. Likewise, I noted issues with mandating the share of freehold under Amendment 12. I will spare noble Lords from listening to my comments in great detail again; none the less, I restate that the Government believe that commonhold has significant advantages over shared freehold.

The Government have heard the strong voices of those advocating for commonhold reform in the Bill. We thank them for their support in considering the future of flat ownership and welcome the views of Members across both Houses as we move forward with the Bill. I assure noble Lords that the Government are carefully considering next steps for commonhold, with a view towards its widespread use, especially for new flats. For shared ownership leaseholders, we have already enabled a right to a 990-year lease extension in the Bill. As for the amendment regarding adjusting shared ownership service charges for the proportion owned, we consider that that would be a general shared ownership regulation, and so would be outside the scope of the Bill.

On one or two issues have come up. First, I can say to the noble Lord, Lord Khan, that the Commonhold Council is still meeting—I think the noble Baroness, Lady Jones of Moulsecoomb, brought this up as well. It last met in September.

The noble Earl, Lord Lytton, is right, and what he said supports the issue that I have continually spoken about—complexities in the system and the fact that we need to get this right. It is a huge change to the housing market. The noble Earl also brought up the issue of building safety, but that will come in future groups.

The noble Lord, Lord Young of Cookham, supported by the noble Lord, Lord Kennedy, brought up the issue of draft Bills. I shall certainly take this back to the department, discuss it, and come back to noble Lords.

Lastly, the noble Earl, Lord Devon, asked whether these reforms would have an impact on the supply of new homes. We do not expect them to have any significant impact. Developers are already bringing properties to the market with 999-year leases, resident management companies in place and no ground rents payable, so these reforms will likely accelerate this trend. Investors and developers have previously adjusted their business model in response to reforms in the housing sector, including the Leasehold Reform (Ground Rent) Act 2022, so we are not expecting any significant changes in that regard.

With all these assurances in mind, I ask the noble Baroness kindly to withdraw her amendment.

Photo of Baroness Fox of Buckley Baroness Fox of Buckley Non-affiliated 5:30, 22 April 2024

My Lords, I forgot to declare my interest as a leaseholder. I feel as though I might have to declare an interest to the noble Earl, Lord Devon, as a serf, or at least somebody who is rather pleased that democracy has allowed me to move from that particular interest.

In her response, the Minister said that all this change needs to be managed. In response to my amendment, she said there should not be a ban without due consideration. Fine, but this was a sunset clause in five years; it is hardly rushing it. The endless contributions that have been made suggest that this has been talked about for a very long time. The noble Lord, Lord Kennedy, made the point that we can all go back. This sort of response, saying that we need to go slowly and that it needs to be managed, makes it seem a little unclear as to what the Government are responding to. Nobody here is exactly rushing through.

Also, can I have some clarification on the idea of a danger to the supply of new homes? I was glad that the Minister responded to the noble Earl, Lord Devon, saying that there does not appear to be any evidence of that, but she said we had to be careful about a ban without due consideration. She herself said that it could damage the supply of new homes, and to be honest I think that is an unjustified threat—although not by the Minister. I keep hearing this: “If we rush this through, nobody will ever build a flat again. We have a housing crisis; what are we going to do?” I know the developers are saying that, but I was interested in the fact that Lendlease is one of those saying that this may disrupt building supply, but actually it seems to be building away and thriving, with massive developments in Australia, where it is from and where, indeed, there is a form of commonhold of which Lendlease was supportive. It is not going to stop the development of houses. We can build, build, build—just not build, build, build leaseholds, surely.

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

My response to the noble Earl, Lord Devon, was a response on commonhold. My response to the noble Baroness, Lady Fox, was more about the fact that her amendment would just ban the sale of leasehold, which I suggest would give an uncertainty to the market.

Photo of Lord Bailey of Paddington Lord Bailey of Paddington Conservative

Maybe my noble friend the Minister can give us some detail on the Government’s new-found support for commonhold. It would be easier not to move my amendment if I had some idea of the progress of the Government’s thinking, the timetable and how they intend to increase the adoption of commonhold, because that would make my amendment largely unnecessary.

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

I thank my noble friend for that. As I have said, we are working on it, we are working on further changes and we will come back in due course.

Photo of Lord Khan of Burnley Lord Khan of Burnley Opposition Whip (Lords), Shadow Spokesperson (Levelling Up, Housing, Communities and Local Government)

If I can just probe the Minister on the answer she gave me, that the Commonhold Council met in September, can I just confirm that she is chairing that Commonhold Council? The government website still has the noble Lord, Lord Greenhalgh. As the Commonhold Council advises the Government, what advice did it give in relation to the plan for commonhold? Surely it was not, “Take your time”, was it?

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Chief Whip (Lords), Deputy Chairman of Committees, Deputy Speaker (Lords)

Can the Minister tell the Committee whether the Government have a strategy for commonhold?

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

Yes. The noble Lord knows, and I have said it enough times at this Dispatch Box, that the Government fully support commonhold. It is a matter of getting through the complexities and ensuring that it is delivered in a safe, secure way for the future.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Chief Whip (Lords), Deputy Chairman of Committees, Deputy Speaker (Lords)

It is good to hear that they have a strategy; maybe the Minister can explain to the Committee what the strategy is. All I see at the moment is that there is a lot of support for commonhold—everyone is committed to it and wants to bring it in in due course—but I would like to see some sort of timeline. When are we going to get it? They will have had this report from the Law Commission for four years in July. Where is the plan? If they had a plan they could set out for the Committee, I am sure they would get a lot of support from us here, but the worry is that we will be sitting here in another four years. What is the plan from the Government?

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Chief Whip (Lords), Deputy Chairman of Committees, Deputy Speaker (Lords)

I am sorry, but I asked a couple of questions there and I am hoping for a response.

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

I am sorry, but I have made it very clear that the Government are fully in support. I am trying to remember whether it was 219 or 120, but large numbers of amendments were required to be put into place to ensure that, while we have commonhold in this country now, it can be delivered across all our leasehold flats. We do not have the time on this Bill to do that amount of legal work, and that is why we are not promising it at present, but we want to get as far along that journey to commonhold as we possibly can within the Bill.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Chief Whip (Lords), Deputy Chairman of Committees, Deputy Speaker (Lords) 5:45, 22 April 2024

But we are not, are we? That is the whole point. We are not getting anywhere, just making commitments and promises with no timescale, no plan, nothing. That is the problem and why we are getting so frustrated here. They have had the Law Commission report for four years. What have they been doing for the last four years?

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

Working on getting towards commonhold, which is what the Government want for this sector.

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Shadow Chief Whip (Lords), Deputy Chairman of Committees, Deputy Speaker (Lords)

The noble Baroness will obviously know this really well, then: how many more years do we need before we get a Bill to deliver this?

Photo of Baroness Pinnock Baroness Pinnock Liberal Democrat Lords Spokesperson (Levelling Up, Communities and Local Government)

My Lords, the purpose of Amendment 13 in my name was to encourage a debate on commonhold and the route to achieving it, and in that it has been successful. I am pleased about that and thank all noble Lords for their involvement. It has been a long time since the first legislative proposal was made to abolish leasehold. I think it was in the Liberal Government of 1906, so we are going back a long way.

Photo of Baroness Pinnock Baroness Pinnock Liberal Democrat Lords Spokesperson (Levelling Up, Communities and Local Government)

I do not think that that was a legislative proposal—I was very careful in the words I used. What this debate has achieved is that it is very clear across the Committee that there is overwhelming support for the move to commonhold. That is very positive. The next achievement is that it has brought forward three different ways, or perhaps four, in which the Government can move. One is a draft Bill, which seems to me to be a very interesting proposal and one that again I think would get support across the House, because the move to commonhold is complex. I and everybody else who has spoken accept that, so let us find a way of working together to achieve that common end.

The second proposal was a “Let’s get something done” type of proposal for a sunset clause. If nothing else happens, let us adopt that. The third proposal, from the noble Baroness, Lady Taylor of Stevenage, was similar to a draft Bill: to get the Government to agree a draft strategy. Unfortunately, the Minister used the phrase “in due course” a number of times. The trouble with “in due course” is that the due course can go on for a very long time, as it has already. Some of us are concerned to enable all existing leaseholders to achieve commonhold and be part of home ownership. The party opposite always talks about that, so you would think it is in its interest to push it. That is why it is very disappointing to hear the Minister say “in due course” and, “We are considering the recommendations of the Law Commission”, which was four years ago now.

Finally, we have heard from various Members on the Labour Benches that, if they ever have the privilege to serve—that is the phrase they are using—this will happen quickly. I look forward to maybe 2025 when we might see whether the Minister will bring forward a proposal for a draft Bill on commonhold or whether somebody from the Labour Benches will do so, in which case we will make progress. We on these Benches will hold both parties to account if they fail to do that at the earliest possible moment. I beg leave to withdraw the amendment.

Amendment 13 withdrawn.

Amendments 14 to 15B not moved.

Clause 26 agreed.

Clause 27: Removal of restrictions on repeated enfranchisement and extension claims