Amendment 8

Leasehold and Freehold Reform Bill - Report (and remaining stages) – in the House of Lords at 3:45 pm on 24 May 2024.

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Lord Bailey of Paddington:

Moved by Lord Bailey of Paddington

8: After Clause 25, insert the following new Clause—“Mandatory share of freehold on new enfranchisable blocks of flats(1) A person may not grant or enter into an agreement to grant a restricted long lease of a flat in a qualifying building on or after the day on which this section comes into force, unless the freehold estate in the building is held by a Shared Freehold Company.(2) The appropriate national authority may make regulations providing for—(a) the content, form and effect of the articles of association of Shared Freehold Companies, which may include provision which is to have effect for a Shared Freehold Company whether or not it is adopted by the company;(b) a provision of the articles of association of a Shared Freehold Company to have no effect to the extent that it is inconsistent with the regulations;(c) the exemption of Shared Freehold Companies from the strike-off provisions of section 1000 of the Companies Act 2006;(d) the automatic acquisition and termination of membership in a Shared Freehold Company by tenants and initial subscribers; and(e) restrictions on the terms or effect of any agreement, lease or rentcharge to which a qualifying building or its appurtenant property is subject.(3) The articles of association of any Shared Freehold Company must provide that—(a) all tenants under long leases of flats in the relevant qualifying building will be voting members of the Shared Freehold Company; and(b) no other person will be a voting member of a Shared Freehold Company where more than one year has elapsed since its incorporation.(4) Regulations under this section are subject to negative resolution procedure.(5) In this section—“appropriate national authority” is—(a) in relation to England, the Secretary of State;(b) in relation to Wales, the Welsh Ministers;“effective date” means the day three years after the day on which this Act is passed,“exempted building” means any building in which a freehold estate is held by—(a) a Commonhold Association, or(b) a Community Land Trust satisfying the definition in section 2(7A) of the Leasehold Reform (Ground Rent) Act 2022;“flat” has the same meaning as in section 101 of the Leasehold Reform, Housing and Urban Development Act 1993;“long lease” has the same meaning as in sections 76 and 77 of the Commonhold and Leasehold Reform Act 2002;“qualifying building” is a building which meets the following conditions—(a) it would constitute premises to which Chapter 1 of the Leasehold Reform, Housing and Urban Development Act 1993 applied if each flat in the building had a qualifying tenant within the meaning specified in section 5 of that Act; and(b) the first long lease granted over a flat in the building was granted on or after the effective date; and (c) it is not an exempted building;“restricted long lease” is a long lease which does not fall into any of the categories in Schedule 1, where the terms of the lease do not prevent the flat from being occupied under that lease as a separate dwelling;“Shared Freehold Company” means a limited company established for purposes connected with holding the freehold of a specific qualifying building, where membership in the company is referable to holding a leasehold estate in one or more flats in the qualifying building.”Member's explanatory statementThis amendment requires new blocks containing leasehold flats to be mutually owned (commonhold, Community Land Trusts, or shared freehold), but exempting Schedule 1's “permitted leases”, and optionally permits regulating Shared Freehold Companies, analogously to existing powers over RTM companies. This facilitates commonhold adoption, while preserving the option of shared freehold arrangements which have evolved through private initiative.

Photo of Lord Bailey of Paddington Lord Bailey of Paddington Conservative

My Lords, this Bill is suboptimal. It is not the revolution that many leaseholders across the country have been desperate for, but it is the only game in town—a game that has taken 22 years to get to this point—and the Government should be commended for some things.

I have tabled this amendment because a share of freehold is more flexible and means that owners of flats can make any company arrangements that they wish, whereas commonhold is more top-down and restrictive. Residents would also have insolvency protection, which is always a good thing. Importantly, all leaseholders must be members of that share of freehold company to maximise alignment of interests and block any residents’ disputes. Forfeiture, as I have said before, is a gangster-like power. It needs to go, and I cannot see why that is not in this Bill.

Photo of Baroness Fox of Buckley Baroness Fox of Buckley Non-affiliated

My Lords, it is very difficult for us at this stage because a huge number of amendments have suddenly emerged. When I heard that the Government were putting forward so many, I was quite pleased, because I had had a very productive meeting with the noble Baroness, Lady Scott; I thought that we had made some strides in Committee and that there would be an attempt by the Government to strengthen the Bill for leaseholders. Then I saw all the amendments. I confess that I do not understand all the technical implications, but I know that, as the noble Lord, Lord Kennedy, pointed out, the things that the Government have talked about in only the last couple of weeks—ground rent, forfeiture and so on—are not there.

I am delighted that this is in wash-up. I will not be able to speak on every group because, at this point, I just want to get the Bill through and do not want to do anything to delay it. I had hoped that the Government would be amenable to some of the constructive amendments, such as this one from the noble Lord, Lord Bailey, to give a bit of extra heft to a Bill which says the right things at the top but has left so many leaseholders frustrated. The Bill has left things dangling in front of them—“suboptimal” is entirely the right description.

When the Minister comes back, perhaps he could indicate whether there are any grounds for hope rather than that we end up spending too long on this discussion and somehow it does not even pass in the suboptimal state that it is in. How should we even view this discussion today? Is anyone listening?

Photo of Lord Hacking Lord Hacking Labour

Yes, we are listening.

Photo of Baroness Fox of Buckley Baroness Fox of Buckley Non-affiliated 4:00, 24 May 2024

I do not want to just go through the motions. I just want to understand the process so that we do not bother speaking to every group of amendments just for the sake of it. Clarity would be helpful on the Government’s attitude to the positive amendments that have been put in by the likes of the noble Lord, Lord Bailey. I thank my heckler as well. It is always appreciated.

Photo of Lord Moylan Lord Moylan Chair, Built Environment Committee, Chair, Built Environment Committee

My Lords, I speak in support of the two linked amendments tabled by my noble friend Lord Bailey of Paddington. It is perfectly clear that leasehold is unlikely to be the path of the future. My objections to this Bill, apart from some that are to do with practicality—such as the one I spoke on in the last group, where clarity is still needed from the Government—are about the retrospective meddling with private property rights and existing private contracts.

It is perfectly clear that leasehold has probably had its day and that my noble friend is correct in saying that future buildings—blocks of flats or whatever—should be constituted under some such regime as commonhold, or at least shared freehold with 999-year leases or some other such provision as he has mentioned here in his amendment. I would very much hope that the Government and the Opposition would take this on, and certainly if my noble friend were to divide the House, I would support him in the lobbies on Amendment 8 and the associated consequential amendment.

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

My Lords, we have come to the last stages—the last rites—of this important Bill, which we on these Benches support, despite the fact that there are serious omissions to it. It is fascinating to me that it is Members of the Government’s own side who are raising all the issues at this late stage, and perhaps trying to delay the passage of this Bill.

On the amendments proposed by the noble Lord, Lord Bailey of Paddington, we on these Benches support the move to commonhold. It is one of the principles on which the leasehold reform Bill was to be based. It is most unfortunate that, because of the difficulty in overcoming some of the issues in reaching the ability to move to commonhold, this Bill does not include it. However, I am glad that both the Government Benches and the Labour Benches are saying that they support the Bill and want to make further changes, whoever comes into power on 5 July. We on this side are making lots of notes so that we know that, whoever it is, we will hold them to account, to bring these back so that we have a leasehold reform Bill that everyone across the House can support. It should include commonhold.

Photo of Lord Gascoigne Lord Gascoigne Lord in Waiting (HM Household) (Whip)

My Lords, I thank my noble friend Lord Bailey of Paddington for his amendment, and indeed all noble Lords who spoke in this relatively brief group. We appreciate the benefits that a share of freehold arrangements has over ordinary leasehold arrangements with third-party landlords. That is why we are making it simpler and cheaper for leaseholders of flats to collectively enfranchise and therefore achieve a share of freehold arrangements. Making a share of freehold arrangements compulsory would require us to construct a legal framework on the same scale and complexity as commonhold. That would include not only making the regulations that my noble friend is taking the power for, but much else as well. It is not a quick or easy fix.

The commonhold framework has already been designed as the optimal legal vehicle for the collective ownership of flats. By comparison to moving to commonhold, making share of freehold arrangements compulsory would be, I am afraid to say, an inferior but not an easier outcome. As such, the Government want to see the widespread take-up of commonhold and for it to be the future preferred tenure for the owners of flats, rather than a share of freehold.

We are sympathetic to the sentiments expressed mainly by my noble friend Lord Bailey and the noble Baroness, Lady Fox. I, too, would like to have gone much further in many areas—but I am afraid that wash-up means that we are where we are. With that, I hope that my noble friend Lord Bailey is able to withdraw his amendment.

Photo of Lord Bailey of Paddington Lord Bailey of Paddington Conservative

My Lords, the House knows two things about me—that I am new and procedure is not my thing and that I am prone to a belligerent outburst. My noble friend Lord Young kindly pointed out to me that forfeiture comes later on in this process so I would like to hear what the noble Lord has to say about that in response and I reverse my earlier comment.

A share of the freehold is the quickest, most elegant way to get to the halfway house before we go to commonhold, which is why I am so passionate about it. It goes to my theme on all of this Bill—where the small man or woman in the street is concerned, it is about control, and this would hand back control very quickly. I beg leave to withdraw my amendment.

Amendment 8 withdrawn.