Clause 8 - Duty to inform the tenant

Leasehold Reform (Ground Rent) Bill [Lords] – in a Public Bill Committee at 10:45 am on 7th December 2021.

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Question proposed, That the clause stand part of the Bill.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Is the Government Minister absolutely sure that he wants to vote aye to clause 8?

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

I will suspend the Committee until this matter is resolved, which I hope will be done extremely quickly.

Sitting suspended.

On resuming—

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

I am going to start that debate again. We now come to the Question that clause 8 stand part of the Bill. I call the Minister.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

Mr Hollobone, I apologise sincerely for that small confusion on my part.

Clause 8 imposes on landlords a duty to inform whereby they are required to inform an existing leaseholder of the changes introduced by the Act, but only if those provisions in the Act have not yet come into force. This amendment was passed in the other place, and I support the principles behind the Lords amendment. It is vital that there is transparency in the leasehold system. However, there are doubts as to whether the amendment is the most effective means of achieving that objective. As drafted, it places a duty on all landlords. The amendment does not specify how—

Photo of Maria Eagle Maria Eagle Labour, Garston and Halewood

Does the Minister mean the clause? I cannot see an amendment to clause 8.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Order. What we are debating now is that clause 8 stand part of the Bill. No amendment has been moved to clause 8. We are debating whether clause 8, as inserted by the noble Lords, stays part of the Bill.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Order. I am going to speak with the Clerk.

This is most unsatisfactory. The Minister can redeem himself by talking about “the clause”, not “the amendment”. If there is any more inappropriate language, I have a mind to suspend the sitting for the rest of the morning until the Government sort themselves out. The clause was tabled as an amendment in the Lords, but is now a clause in the Bill. If the Minister refers to it as “the clause”—we are debating clause stand part—I will allow him to continue.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

That is very kind, Mr Hollobone; thank you.

I support the principles behind the clause—it is vital that there is transparency in the leasehold system—but there are doubts as to whether the clause is effective in achieving that objective. It places a duty on all landlords but does not specify how each landlord must satisfy that duty. Furthermore, it relates only to the short period between Royal Assent and the peppercorn limit coming into effect. It would therefore place a significant burden on enforcement authorities for a limited period. Additionally, the changes that the clause requires for the penalty enforcement process to align with the rest of the Bill would delay the implementation of new peppercorn rents.

We are looking closely at how to best achieve the objectives that informed the clause. On Second Reading, Stephen Hammond raised very good points about the importance of transparent, objective legal advice during the purchase process.

I firmly believe that the Government’s provisions will lead to fairer, more transparent homeownership. I hope the Committee will agree that the clause should not stand part.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

I thank the Minister for his explanation. He referred to the fact that I and a considerable number of other Members spoke about this matter on Second Reading and have done so throughout the campaign to reform the feudal leasehold system. I cannot quite understand the objection to the clause, given that the lack of transparency has been a major factor in the leasehold landscape—we have referred to the CMA investigation and mis-selling by solicitors. The clause would help to improve the landscape and improve the situation for leaseholders. It makes perfect sense to include provisions on transparency of information in the Bill that the Government are arguing for and which we are scrutinising and challenging. We support clause stand part.

Photo of Maria Eagle Maria Eagle Labour, Garston and Halewood

I have some concerns about the Minister’s suggestion that we should not keep clause 8 in the legislation, partly because of the exchange that we just had on clause 7. I expressed a little sedentary shock that six months may pass between Royal Assent and the commencement of clause 7. A lot of leases can be signed in six months, which I consider an extended period, and clauses that will become prohibited may not be at the time.

Leases are difficult enough to read as a layperson without having to be aware that the law has been changed to prohibit a particular clause and that a rent set out in a lease should be replaced with a peppercorn rent. One would have to follow Hansard reports of Bill Committees carefully, as well as the commencement of legislation, to have an understanding that there was a prohibited clause in a lease that one had just signed. Even then, one must understand the legal language in leases, which is not the easiest thing for lay people, perhaps first-time buyers. It is extremely useful to have a provision such as clause 8 in the legislation to make it clear that there is an obligation on landlords to inform tenants of this interim period of time.

If the Minister had said in our debate on clause 7 that the delay was going to be a week or two weeks, then perhaps I would not have risen to support this clause, but we are talking about six months. Many leases have clauses that are to become prohibited later on, but the tenant who signed them may not understand that. We wish that were not the case but there are some landlords out there who wish to induce people to sign leases with charges attached that are shortly to become unlawful. Perhaps then there will be some money paid over, and it is more difficult to get that back than not to pay it in the first place.

Given that there is likely to be a period of up to six months between Royal Assent and commencement of the legislation, clause 8 is a valuable provision to keep in the Bill. I cannot understand why the Minister wants it removed. I would be happy if he were to tell me that commencement of the legislation would take place within a week or two of Royal Assent. I would not then be so concerned about this gap. I am concerned that we are creating or allowing too many loopholes that enable our constituents who are signing new leases to fall into traps that those who wish them to sign leases want to induce them into. The fewer loopholes, the better. Clause 8 is an important provision to leave in the Bill and I would vote for it to stand part of the Bill.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

Clearly, six months is the limit that we have set. I am sure that people will be working assiduously to try to ensure that that period is minimised. The suggestion that the hon. Member for Garston and Halewood made—that she would be reassured to hear that it would be a week—is nigh on impossible. We will continue to work hard to limit that period. During that time, we will communicate regularly with professional bodies to ensure that all solicitors are informed of and understand the changes that are coming.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

We are placing a duty on the landlord, and the unintended consequences might be that there are a number of cases that are highlighted and then brought to a tribunal in a very condensed period of time, placing an unnecessary burden. I think it would make for a slightly chaotic approach to the system. We are aiming for a smooth transition. Given the effort that we have put into communicating with legal bodies and the work that hon. Members are doing to highlight the changes the Government have made, it feels like an unnecessary process. However, we will continue to work with the hon. Member during the passage of the Bill to see if there is anything else we can do to meet the objective of the clause.

Question put, That the clause stand part of the Bill.

Division number 2 Leasehold Reform (Ground Rent) Bill [Lords] — Clause 8 - Duty to inform the tenant

Aye: 7 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 7, Noes 9.

Question accordingly negatived.

Clause 8 disagreed to.