New Clause 1 - Ground rent for existing long leases

Leasehold Reform (Ground Rent) Bill [Lords] – in a Public Bill Committee at 11:30 am on 9th December 2021.

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“Within 30 days of the day on which this Act comes into force, the Secretary of State must publish draft legislation to restrict ground rents on all existing long residential leases to a peppercorn.”—(Mike Amesbury.)

This new clause aims to ensure that the Government introduces further legislation to remove ground rent for all leaseholders, whereas the Act currently only applies to newly established leases.

Brought up, and read the First time.

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

I beg to move, That the clause be read a Second time.

Today is the last day of the Committee—I know people will be disappointed about that—and my last day sitting opposite the Minister. Indeed, it is my last day shadowing the housing brief, a role I have thoroughly enjoyed. I hope that I have made some difference with challenge and scrutiny in the building safety crisis and on leasehold reform. I wish the Minister and his departmental team well, and I urge them to be bolder in their response to the crisis. Ultimately, of course, Opposition Members and I want to secure a Labour Government in the not-too-distant future, although I know that not everyone in Committee shares that objective.

Not long ago, the Minister and I sat opposite each other in the Building Safety Bill Committee, which took up a lot of our time, and rightly so. It is an important piece of legislation, which is continuing on its journey through Parliament. This Bill is shorter than that one. I genuinely wish it were longer, because it represents an opportunity to bring forward full leasehold reform for existing leaseholders, not just new leaseholders. As I have stated before, this Bill is not for the many, but for the new. Labour Members and many campaigners have campaigned to remove ground rents by means of the introduction of one peppercorn, so we welcome that aspect of the Bill, but it is too narrow in scope.

The Bill does not attack the plethora of issues that leaseholders face aside from ground rent. Management agents’ fees—we have spoken about them—non-transparent service charges, the costs of enfranchisement, obscure penalty clauses and historical remediation costs, to name but a few, are not touched by this Bill. We all experience the pervasive toxicity of the building safety crisis and this feudal system.

At this stage, the Bill does not put an end to the feudal system of leasehold once and for all, although that was the clarion call of many who submitted evidence to the Housing, Communities and Local Government Committee inquiry of 2018 and the National Leasehold Campaign. I had the honour of serving on the Select Committee in the past, and my hon. Friend the Member for Liverpool, West Derby, who is a good friend, serves on it at the moment.

The remarkable campaigners at the National Leasehold Campaign, Catherine Williams, Katie Kendrick and Jo Darbyshire, have waited long enough. Martin Boyd, Sebastian O’Kelly, the late Louie Burns and all at the Leasehold Knowledge Partnership have dissected and exposed this issue and educated us all for long enough, and the all-party parliamentary group on leasehold and commonhold reform has put this into the DNA of our parliamentary system and the body politic for long enough. Surely, England and Wales can finally catch up with the rest of the world and set leaseholders free from this relic of the past.

The Competition and Markets Authority action—brought about by the very campaigners that Members from both sides of the Committee acknowledge—exposed the biggest property mis-selling scandal in our history, and I look forward to further enforcement action in the not-too-distant future. Today, all Members of this Committee can rebuild the trust of so many who are trapped in this leasehold system, and set them free. I have tabled new clause 1 in that spirit.

The new clause means that all leaseholders will be made equal, at least in terms of ground rents. Many campaigners across the country—especially in my own region of the north-west, with 270,000 leasehold houses, and in north Wales, which has a similar amount—have been fighting tooth and nail to ensure that the Government introduce this legislation. Those campaigners have succeeded in ensuring that the sale of new leasehold houses has all but stopped, with the market responding to that, and that the Government have introduced these reforms. It is ironic, however, that that will not improve their own situation or the situation of hundreds of thousands of others who are already trapped in the scandal of spiralling ground rents, while offshore leaseholders retain their cash cow status—in some cases, tax free.

One such example from my own patch is that of Tracy Whittle, who bought her home in Northwich in 2016 only to find that her freehold had been sold on by a developer and would cost twice as much. She pays £250 a year in ground rent. I know other hon. Members have examples in their constituencies that they can refer to.

In the evidence submission that we received over the last day or so, Steve Wills referred to his experience with Persimmon Homes plc, who sold the freehold over to a leasehold company called Tapestart Ltd. He argues that

“as a result of the profiteering from this obscene company, they have quoted an extortionate amount to change the lease”.

He rightly argues that more should be done for leases that were created and then sold to those investment companies, but the Bill does not rectify that situation. The amendment would ensure that the Government and the Minister quickly brought forward legislation to end this practice once and for all for everyone.

I know the Minister will respond by saying that more reforms will be set out in due course, but that simply is not good enough for leaseholders such as Tracy and Steve Wills, who are paying extortionate costs because of a system that prioritises housing as an investment rather than a home. They want to know when and how, and they also want to know how the Minister will respond to the issue. I ask hon. Members to support the amendment for the many leaseholders, not just the few.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities) 11:45 am, 9th December 2021

The hon. Gentleman said that I would respond by saying there will be more reforms in due course, and I think this should be something to be welcomed. What is sad, following what he said, is that he will not necessarily be part of the discussions, because I have found it incredibly helpful to work with somebody who is pragmatic, challenging and reasonable—it has been a real privilege.

New clause 1, which was tabled by the hon. Gentleman, would require the Government to produce draft legislation within 30 days of the Bill coming into force to restrict ground rents on all existing residential leases to a peppercorn. He will know that that is beyond the scope of the Bill. The Government share his concerns about the substantial difficulties that some existing leaseholders face, including burdensome lease terms and high premiums to extend their lease and buy the freehold.

The scandal of high and escalating ground rents is a serious concern, too. Indeed, that is a big part of why we are here today to debate the Bill. Some existing leaseholders are faced with high charges, which is why we asked the Competition and Markets Authority to carry out an investigation. As hon. Members will know, the investigation of potential unfair terms and mis-selling is ongoing, and my Department follows it closely. Indeed, I met the CMA last month to receive a progress update. It might benefit the Committee if I expand on the investigation and the progress we have seen so far.

In early 2020, the CMA’s report identified a number of serious concerns, including high and increasing ground rents. Following that report, it opened enforcement action involving four leading housing developers. I know that hon. Members will join me in welcoming the progress that the CMA has made since then. The CMA’s work is not to be underestimated. It has secured settlements with two leading housing developers and an investor in the leasehold sector, which have committed those parties to changes that will benefit thousands of existing leaseholders. The developers have agreed to refund homeowners who saw their ground rents double, and to allow leaseholders to buy the freehold of their property at a discount. Those landmark commitments will ensure greater transparency for the affected leaseholders, helping future buyers to make informed decisions without feeling pressured by time constraints. The CMA has made excellent progress, and that is just the start. We support the ongoing investigation and believe it will send a clear signal to others in the sector to follow this lead.

I referred earlier to the problem that some leaseholders face: a very high premium to buy their freehold—a process known as enfranchisement—or simply to extend their lease. The hon. Member for Weaver Vale will be aware that, earlier this year, we announced a package of reforms of the valuation process that is used to calculate those premiums. Our changes to the enfranchisement valuation process, including abolishing marriage value and prescribing calculation rates, will result in substantial savings for some leaseholders, particularly those with less than 80 years left on their lease. In fact, existing leaseholders can already buy out their ground rent when they extend their lease.

Importantly, we have announced that we will cap the treatment of ground rent in the premium calculation. This means that, in effect, the cost of buying out the ground rent will be reduced for many leaseholders, particularly those with onerous ground rents. We have also committed ourselves to enabling all leaseholders to buy out the ground rent without needing to extend their lease. That will be the case for houses and for flats.

I appreciate the urgency in wanting to address issues faced by existing leaseholders—indeed, I campaigned on that as a Back Bencher—and I reassure hon. Members that the Government are working at pace to bring forward wider leasehold reforms. However, I must once again state that I do not think that the arbitrary deadline in new clause 1 would be useful in that context. As members of the Committee will know, and indeed as, the hon. Member for Garston and Halewood, who is not in her place, said this earlier this week, leasehold law is extremely complex.

Photo of Neil Hudson Neil Hudson Conservative, Penrith and The Border

I echo the Minister’s comments and thank the hon. Member for Weaver Vale for his service in his Front-Bench role. I also thank Opposition Members for the constructive approach they have taken to looking at the Bill; we have moved together positively. I also echo the Minister’s comments in saying that this tightly worded Bill is an attempt to address future wrongs, but I am encouraged to hear that the Government will take comments on board and look at existing wrongs as they move forward with leasehold reform.

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

I thank my hon. Friend for his endorsement and will turn to him for advice and support as we formulate that policy. However, we do need to take time to get the reforms right. Hon. Members can rest assured, though, that reforming the leasehold system is a high priority for the Government. I therefore ask the hon. Member for Weaver Vale to withdraw the motion.

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

In this case, I am going to agree to disagree. The measures in the new clause are a fundamental aspect of legislation. We have spoken about how all leaseholders should be equal, and indeed collectively we want to ensure that the feudal leasehold system is left in the history books once and for all.

On Second Reading, the former Secretary of State, Robert Jenrick, said that the Bill was

“the appetiser for the main course” while I referred to the desire of Opposition Members and, importantly, the desire of the constituents we represent, for an

“all-you-can-eat buffet of reform.”—[Official Report, 29 November 2021; Vol. 704, c. 714-33.]

We have waited long enough. Indeed, we have had this nonsensical, unjust system for hundreds of years in England and Wales, and I know that none of us is proud of it, so I will not withdraw the motion. The Minister has examples on his patch where existing leaseholders will be trapped in the current system, but over the road or in another phase of a development, properties will be ground rent free. That is wholly unjust and has real consequences. I encourage all members of the Committee to support the new clause.

Question put, That the clause be read a Second time.

Division number 3 Leasehold Reform (Ground Rent) Bill [Lords] — New Clause 1 - Ground rent for existing long leases

Aye: 6 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 6, Noes 9.

Question accordingly negatived.