Amendment 44

Leasehold and Freehold Reform Bill - Report (and remaining stages) – in the House of Lords at 5:30 pm on 24 May 2024.

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Lord Young of Cookham:

Moved by Lord Young of Cookham

44: After Clause 46, insert the following new Clause—“Abolition of forfeiture of a long lease(1) This section applies to any right of forfeiture or re-entry in relation to a dwelling held on a long lease which arises either—(a) under the terms of that lease, or(b) under or in consequence of section 146(1) of the Law of Property Act 1925.(2) The rights referred to in subsection (1) are abolished.(3) In this section— “dwelling” means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, or outhouses and appurtenances belonging to it or usually enjoyed with it;“lease” means a lease at law or in equity and includes a sub-lease, but does not include a mortgage term;“long lease” has the meaning given by sections 76 and 77 of the Commonhold and Leasehold Reform Act 2002.”Member’s explanatory statementThis new Clause would abolish the right of forfeiture in relation to residential long leases in instances where the leaseholder is in breach of covenant.

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

My Lords, this will give my noble friends Lord Moylan and Lord Howard an opportunity to catch their breath. At the beginning of our proceedings, the noble Lord, Lord Kennedy, picked up the Marshalled List, waved it in a state of mild indignation and demanded to know where was the amendment on forfeiture. My noble friend the Minister said it was not there, but here it is, in my name rather than the Government’s.

The position on forfeiture is very simple. At the moment, a tenant can lose possession of a flat worth £500,000 for a debt of £351, with the landlord keeping the entire difference between the value of the property and the debt. At Second Reading, this was condemned by nearly every speaker who spoke on it. When the Minister wound up, she said:

“We recognise that this is a real and significant problem and that there is huge inequity at stake here”.—[Official Report, 27/3/24; col. 704.]

The issue was raised again in Committee, and again my noble friend the Minister replied:

“We recognise that there is the potential for significant inequity”— it had been a “huge” inequity; now it is a “significant” one—

“where a landlord stands to gain a windfall when a lease is forfeited. However, I reassure the noble Baroness, Lady Taylor, and the Committee that the Government have been listening to calls for us to act. The Government continue to work through the detail and we will report to the House shortly with more information

Now is the opportunity to report to the House with more information.

Of course, I hope we might have an element of surprise in our proceedings and the Minister will get up and say that this amendment can be accepted, but I fear that the script in his folder begins “resist”. I put a direct question to my noble friend: exactly what progress has his department been able to make on this subject? It was raised at Second Reading in the other place many months ago, where the Minister recognised that this was an inequity, so they have had four or five months in which to address the problem. I want to know whether sufficient progress has been made for the Government, of whatever complexion, to provide me at the beginning of the next Parliament with a Private Member’s Bill that will simply put right this inequity of forfeiture. Actually, I had a Private Member’s Bill on this subject some time ago, so there is a template on which to build. If my noble friend cannot accept the amendment, can he give an undertaking that the necessary measures have been drafted and that they will be available to any Member who is successful in the ballot at the beginning of the next Parliament so that we can introduce this measure by a Private Member’s Bill if we cannot do it today? I beg to move.

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

My Lords, the noble Lord, Lord Kennedy, also drew attention to the lack of a clause in the Bill to reduce ground rents to a peppercorn, as promised several times by the Secretary of State in the other place. There is one, as there is one on forfeiture, that I have tabled, because I feel it is an important issue to include in the Bill. I tabled Amendment 45, which would enable a transition, over five years, of ground rent to a peppercorn. There is no justification for ground rents. It is a cost to leaseholders for no service provided as a consequence. I hope, because it is clearly government policy and it is clearly supported by those on the Opposition Benches and certainly by ours, that the Minister can stand up and have at least one amendment today that he does not have the word “resist” against.

Photo of Lord Bailey of Paddington Lord Bailey of Paddington Conservative

My Lords, I will speak to Amendments 51 and 52. I will not rehearse the arguments that I made in Committee, but I still have a major concern around the removal of any criminal sanction against bad landlords for service charge abuse. I want to be quite clear that this is not a crusade against landlords; landlords are often small family businesses, which are very good and want to help their tenants. However, a significant number of landlords have their leaseholders by the short and curlies, to coin a term that was sent to me by a suffering leaseholder. He was trying to get across just how powerless leaseholders are in this situation.

At a time when we have the likes of Alan Bates and sub-postmasters actively considering bringing private criminal charges against the Post Office, why would we remove that tactic from another set of people in our society who are roundly abused all the time? It is very simple: all this, for me, is about control. We need to give people who have paid this money control over their own future and their own money.

On Amendment 52, if a landlord does not pay back their overcharging within two months, they should face interest charges. This is to incentivise a landlord who has lost in an open, professional tribunal, who then drags their feet and forces leaseholders to launch other legal proceedings to reclaim money that they are rightfully owed. Again, this comes down to letting the little man or woman in the street have some control over their future. Perhaps my noble friend the Minister will comment on why the Government would not support these two reasonable, necessary measures, and send a signal to the country that the law is on the side of the small person who has ploughed all their savings into their home and who has no recourse.

Photo of Lord Truscott Lord Truscott Non-affiliated

I will speak in support of my Amendment 66. In doing so, I remind the House of my interest as a long-standing leaseholder. At the outset, I thank the Minister, the noble Baroness, Lady Scott of Bybrook, who is not in her place, for her diligence and engagement on the Bill. I also thank noble Lords who have worked so hard to improve the Bill as it has progressed through your Lordships’ House.

I welcome the Bill, even in its current form, as it at last heralds the beginning of the end of the outdated feudal leasehold system. Despite a determined rearguard action, we leaseholders have seen exploitation for hundreds of years. Enough is enough. In that sense, I agree with the noble Baroness, Lady Fox.

I must admit that, like many noble Lords and Members of the other place, I was rather taken aback by this cut-and-run election, which leaves so many pieces of legislation up in the air. My wife’s reaction was that Mrs Sunak has simply had enough and wants to have a good, long, normal family holiday. There seems to be no other, political logic for it.

Like many noble Lords, I would have liked to have seen further improvements to the Bill, especially clarity—ensuring that leases were truly faster, cheaper and easier to extend. The situation in which it is left to the discretion of the Secretary of State to set the deferment rate, replacing marriage value, remains unsatisfactory. In that sense, I agree with the noble Lord, Lord Moylan.

Incidentally, I see no type of expropriation taking place in this Bill. Pension representatives have already said that the proposals in the Bill will not significantly impact them or their members.

Similarly, I would have liked to have seen ground rents reduced to a peppercorn which, as was mentioned by the noble Lord, Lord Kennedy of Southwark, we were initially promised. For that reason, I support Amendment 45 in the name of the noble Baroness, Lady Pinnock.

On my own amendment on forfeiture, I believe it is unacceptable that people should lose their homes for sometimes minor rent or service charge arrears. The figure of £300 was mentioned and there are recorded cases of it being a pittance. However, rents and service charges are necessary for building maintenance, fire safety, cleaning and other services, so they should be paid.

My amendment calls for the Secretary of State to publish a report within 12 months on how rent and service charge arrears can be expedited by the courts. This is particularly important given the current crisis in our court system, which is overwhelmed by backlogs. For other breaches of the lease, forfeiture should remain until a system is devised that can swiftly resolve breaches of the lease without recourse to lengthy and costly proceedings in the High Court. This can cover matters such as repeated and threatening antisocial behaviour and illegal ultra-short lets in residential blocks. As the noble Baroness, Lady Scott of Bybrook, previously said, there are approximately 100 cases of forfeiture every year and 5 million leases, and cases can be discontinued if the leaseholder simply abides by the lease. I look forward to the response of the noble Lord, Lord Gascoigne.

Photo of Lord Moylan Lord Moylan Chair, Built Environment Committee, Chair, Built Environment Committee 5:45, 24 May 2024

I am grateful to my noble friend Lord Young of Cookham for giving me a breather. I entirely agree with his amendment in relation to forfeiture, which is clearly a completely over-the-top response. Landlords and managers should be entitled to recover their costs, but not at the expense of the tenant having their home seized or taken from them. Other ways must be found of doing that. If they made an effort, the Government would be able to find such ways. It might be through attachment of earnings or whatever, but forfeiture is clearly completely over the top and should go. I do not see why the Government cannot simply agree with what my noble friend Lord Young has said.

Photo of Lord Truscott Lord Truscott Non-affiliated

I think the noble Lord misunderstood to a certain extent what I was saying. Forfeiture rarely happens; that is the point. It is merely the threat of forfeiture that ensures that people abide by their leases, and at the moment, as he mentioned, there is no system in place to ensure that people abide by those leases unless you go to the High Court, which is a very lengthy and expensive process. Without some such system, you will increasingly have anti-social behaviour and bodies such as Airbnb installed in residential blocks, and at the moment, there is very little recourse.

Photo of Lord Bailey of Paddington Lord Bailey of Paddington Conservative

Forfeiture is regularly used as a threatening tool so, although it does not land in court all the time so people have their property seized, it is often spoken about to pull people into line or to force people to pay bills that are, at best, iniquitous. It is used very regularly. I accept the noble Lord’s point that there needs to be another system, but forfeiture needs to go, even if that system does not exist, because its effect on leaseholders is broad, deep and very unpleasant.

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

My Lords, these are very welcome amendments that try to address two of the problems I referred to in my remarks on group 1. I still hope that the noble Lord, Lord Gascoigne, will jump up in a moment and say that the Government accept Amendments 44 and 45—that it was an error that the Government did not put their name to them—because they are exactly the things that the Member for Surrey Heath has been promising for months. I cannot remember the number of times I have heard in TV studios and the newspapers that he wants to do both these things. Here we are now with the mechanism to do it. All the Government need to do is accept the amendments and we can move forward.

As the noble Lord, Lord Moylan, said, anyone who is owed a debt should be able to recover it, but the threat of taking all the property away is completely wrong. Even on that one, I do not understand why the Government have not come forward with an amendment on it. It is absolutely bizarre. I think nobody in this House would oppose it, and it would be accepted. We want people to be able to recover their money, but this threat is totally over the top. We all agree on that.

What is even more frustrating is that, when I leave the Chamber and walk around the building, many Members actually agree with us, and say: “You’re absolutely right, Roy. This should happen”. I have even had Members of the Government Front Bench—not in the House at the moment—say to me: “The problem is, Roy, we agree with you, but Michael just goes off and makes these claims and pledges and promises without them being signed off”. It is no way to do business. We need to get these things done properly. This needs to be done. I do not understand why it cannot be done if everyone supports it. It is beyond me, really, that we operate like this. That is the whole frustration about this Bill. Promises and pledges and articles to say that we are going to do this and we are going to do that—I am sick of hearing it. And then when they get the chance, they do absolutely nothing.

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

My Lords, I thank all noble Lords for their contributions in this group. I thank my noble friends Lord Young and Lord Bailey of Paddington, and the noble Lord, Lord Truscott, for their amendments regarding forfeiture and service charge enforcement.

The upkeep and safety of buildings is paramount. Landlords, be they private companies or resident management companies, need an effective mechanism to recover unpaid debts, lest their costs fall to other leaseholders or to the detriment of the building’s upkeep. It is important to consider resident management companies in particular, which often have very limited access to other funds to cover any shortfall in the service charge fund. Having a robust and efficient way to enforce unpaid charges is therefore critical to ensure the efficiency and solvency of these resident-led companies. Equally, there are other breaches—unauthorised alterations, anti-social behaviour and use of a property for immoral purposes—that can be difficult and even impossible to remediate. In such cases, forfeiture may be the only effective way of putting a stop to the breaching behaviour. While well-intended, we do not believe that the abolition of forfeiture without a suitable replacement would ultimately serve the best interests of leaseholders, and in particular resident management companies.

My noble friend asked about progress in drafting. I hope he appreciates—it is with respect that I say this—that I do not think I am able to comment on what may happen or where that is, simply because I do not know who will be lucky enough to serve in the Government and answer that question after the election.

I turn to the amendment tabled by the noble Lord, Lord Truscott. Unfortunately, we believe that this amendment does not achieve its stated aim of protecting leaseholders, crucially against forfeiture over non-payment of service charges. The Government recognise that those home owners who pay rentcharges face the threat of forfeiture. Part 7 of the Bill already removes the risk of forfeiture for unpaid arrears of income-supporting rentcharges, since the remedy is so disproportionate to the sums owed. The Bill also contains a robust package of protections for home owners who pay estate rentcharges.

I now move to the amendment tabled by the noble Baroness, Lady Pinnock. Noble Lords will be aware that the Government do not believe that it is appropriate that many leaseholders face unregulated ground rents for no clear service in return. The Government have already legislated to put an end to ground rents for most new residential properties in England and Wales through the Leasehold Reform (Ground Rent) Act 2022. We have also encouraged work led by the Competition and Markets Authority to investigate abuses of the system, such as the mis-sold doubling ground rent leases, securing commitments from freeholders to remove these costly terms, benefitting more than 20,000 leaseholders. Given where we are in the parliamentary timetable, I hope noble Lords will understand that we cannot accept an amendment on complex new policy at this stage.

I turn to Amendments 51 and 52 in the name of my noble friend Lord Bailey. I fully agree that it is important to have effective enforcement measures in place. Amendment 51 seeks to retain criminal sanctions for failure to provide information to leaseholders in a timely manner. The existing measures, including the statutory offence under the existing Section 25 of the Landlord and Tenant Act 1985, have historically proven to be ineffective. Local housing authorities, as the enforcement body, were reluctant to bring prosecutions against landlords, and the cost and complexity of doing so were a significant barrier to leaseholders bringing a private prosecution. That is why we are replacing it with a more effective and proportionate proposal, set out in Clause 57.

Amendment 52 would require landlords to account to all leaseholders where costs were found to be unreasonable and would impose a two-month limit on repayments to leaseholders. It would introduce a power to enable the appropriate tribunal to award interest on any determination in favour of the leaseholder, where a leaseholder has made an application. While I agree that there must be a robust regime in place to challenge service charges, we do not think that this is the right approach.

Landlords may wish to compensate leaseholders by offering a credit against future service charges rather than returning money, and a leaseholder may prefer this. In addition, the Court of Appeal held in 2022 that a tribunal decision of the type to which my noble friend refers is a determination of whether the service charge is payable and not of whether it is due. Therefore, although the amendment is well-intentioned, it would not be possible to implement in the form drafted.

As I have said, I would have liked to go further, and indeed that was the intention, but we are in wash-up. With that, I hope my noble friend will withdraw his amendment.

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

I am grateful to my noble friend for responding to the debate and to all those who took part, particularly my noble friends Lord Bailey and Lord Moylan for supporting my amendment on forfeiture, as well as the noble Lord, Lord Kennedy. Interestingly, we have had a debate on protecting the interests of leaseholders wedged between a series of debates on protecting the interests of freeholders.

I was a little disappointed by my noble friend’s reply, because Ministers have conceded that we have an inequity here. It is my view that, had we had a normal Report stage at the beginning of next month, the Government would have come forward with their own amendment to deal with what they conceded was an inequity. I was gently trying to find out what progress had been made with drafting a clause to deal with this, and whether sufficient progress had been made for a Private Member’s Bill to be brought forward in the next Parliament. I understand that my noble friend can make no commitments about who will be at the Dispatch Box, but it would be in the general interest, given that there is unanimity that this is a bad law and should be repealed, if we could be told that good progress had been made in government and that legislation was available. Having grumbled about that, I beg leave to withdraw my amendment.

Amendment 44 withdrawn.

Amendment 45 not moved.

Schedule 10: Right to vary lease to replace rent with peppercorn rent

Amendments 46 to 48 not moved.