Part of Leasehold and Freehold Reform Bill - Committee (4th Day) – in the House of Lords at 4:03 pm on 1 May 2024.
My Lords, I will speak to Amendment 92 on behalf of my noble friend Lady Taylor of Stevenage. This new clause would ensure that leases on new flats included a requirement to establish and operate a residents’ management company responsible for all service charge matters, with each leaseholder given a share. The amendment has dual purposes. It would remedy two significant current flaws in the leasehold system that the Bill does not address, and it would provide a step forward to commonhold, without doing so in a piecemeal way.
I turn to the current flaws. First, unless leaseholders in blocks of flats acquire the right to manage, collectively enfranchise and then establish a residents’ management company, or buy a property in a development where a residents’ management company has already been set up, they have no control whatever over how their money is spent. This is despite having to pay all the costs to maintain and manage their buildings. Secondly, the rights that leaseholders do have to exercise control over how their buildings are managed—whether through a tribunal, the appointment of a manager or the right to manage—are locked behind difficult and often costly legal processes to which many will not have access.
Our amendment would address both these problems by requiring that when a new residential block of flats was constructed and its units sold the development should be a three-way lease between the freeholder, the leaseholder and the new residents’ management company. Each leaseholder in the block would then own a share of the residents’ management company, and it would be under their exclusive control, giving them full responsibility for services, repairs, maintenance, improvements, insurance and the cost of managing their building. This would give them control over how their money was spent. This ability to influence the management of their building would come at no additional cost.
The Minister will no doubt say that our amendment leaves no space either for limited cases in which a mandatory residents’ management company is not appropriate or where leaseholders simply do not want this responsibility. The Government have said many times that they are keen to give more home owners control over the management of their buildings, and we welcome that the Bill is moving in the right direction. Would it not make sense to have leaseholder management of their buildings to be the default?
Where mandatory residents’ management companies are not appropriate, could the Government not put forward such cases to be incorporated as exceptions? In the case of leaseholders not wanting to be compelled to manage their buildings, could there not be a provision for leaseholders to use the power of the management company to appoint a manager or simply return management to the freeholder? I would be keen to hear the Minister’s thoughts on these alternative options.
The real importance of this clause, however, comes from it being a key way of laying the groundwork for a future where commonhold is the default and leasehold becomes obsolete. It would help to create a cohort of leaseholders who have experience in running their buildings, as they would under a commonhold arrangement, even if that experience is limited both in time and the extent to which they have carried it out.
This is certainly not a perfect solution. It would do little for leaseholders who have already purchased their flats and do not currently have a residents’ management company. We need other solutions, building on measures already in the Bill to address the challenges they will continue to face. I look forward to the Minister’s response and beg to move Amendment 92.