April 25, 2017

Realities of leasehold spelled out during the Housing Bill

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– Commons urged to back amendment to abolish leasehold by 2020 in favour of commonhold
– Tchenguiz, Peverel and Cirrus get another Commons naming
– McCarthy and Stone told to explain collapsed second-hand values of retirement flats
– Leasehold Knowledge Partnership praised, and thanked for reasonably accurate figures for leasehold sector

Jim Fitzpatrick: fighting for leaseholders in east London

Jim Fitzpatrick: fighting for leaseholders

Labour MP and LKP patron Jim Fitzpatrick pushed leasehold to the fore in yesterday’s debate over the Housing Bill in the Commons. Hansard here

He urged an amendment to abolish leasehold altogether by 2020 and promote commonhold instead. It failed, as anticipated, but successfully raised the issue.

Mr Fitzpatrick said: “There are major anomalies and weaknesses in leasehold regulation, including the amount paid in service charges, as well as insurance, ground rent and forfeiture charges, all of which mean that leaseholders are vulnerable to unscrupulous freeholders.

“Sadly, there are too many such freeholders, even though they are in the minority.”

Mr Fitzpatrick was backed from the other side of the House by fellow LKP patron Sir Peter Bottomley (Conservative, Worthing West).

Sir Peter said: “His new clause 3 talks about commonhold. The Act on that of about 13 years ago did not work. I ask the Government to make sure that by the time this Bill gets considered in the House of Lords, they will put in the simple changes that will make commonhold accessible, before we even get to the point made in the hon. Gentleman’s amendment, which is to transfer all long leaseholds to commonhold.”

Sir Peter added: “The scandals attached to this situation are set out in my contribution to the Queen’s Speech debate in June 2014, when I listed the kind of things that the Tchenguiz interest got involved in, when the old Peverel and Cirrus call button scandal was going on.

“I make this warning to those who are accumulating bunches of freeholds because they think they are going to get an extraordinary return from charges other than simple ground rent: do not expect that to be left alone by Parliament or the courts.

“I hope that by the time this Bill gets into the House of Lords, the Law Commission proposals on event fees can be put into legislation, rather than having to wait two or three years for another Bill to come by, and I make this point: any kind of unfair clause should be declared ineffective by the property chambers, the High Court, the Court of Appeal and the Supreme Court because for too long bad freeholders, sometimes with incompetent managing agents, have exploited leaseholders, whether previously from council homes or in the private sector.”

In reference to the retirement sector, Sir Peter said:

I say to McCarthy and Stone, who have come back and may go for a flotation this year, “You try to explain why it is that so many retirement properties that come on to the second-hand market do so at a far lower value than when they were first sold.” Solicitors should warn their clients about the problem. We can solve the problem so that McCarthy and Stone, and our constituents, can have a better future.

Barry Gardiner made the point that had commonhold been made compulsory in the 2002 “that would have effected the step-change many of us wanted to see at the time”.

Mr Fitzpatrick was also backed by Labour MP Catherine West (Hornsey & Wood Green):

“With 4.5 million people living in leasehold properties, it has become, like the private rented sector, the new normal. A third of all residents living in social homes in some of our London boroughs are leaseholders, so we need to look further at providing some form of regulation to deal with service charges and ground charges, and to control the interaction between the freeholders and the leaseholders.

“A number of leaseholders have come to me with specific questions in circumstances where it is plain that the freeholder is not being a good landlord.

“We need to deal with that, and we need some kind of cap on what can be charged where the freeholder is a private entity and leaseholders are at their mercy when it comes to repairs, unreasonably high bills and general lack of rights.

“Being a Member of Parliament with just one caseworker in a constituency where there are thousands of unhappy leaseholders is not good. [Laughter.] Everyone is laughing because they know what the situation is like for leaseholders.”

Jim Fitzpatrick’s full speech

“… I want to speak on new clauses 3 and 4, which stand in my name. I express my appreciation to Mr Glenn McKee in the Public Bill Office for his expert assistance in drafting them. I thank the Leasehold Knowledge Partnership for its encouragement in making sure that we have new clause 3 on leasehold reform.

Poplar and Limehouse has the second highest number of leasehold properties in the country, so this is a matter of great constituency significance. In relation to new clause 4 on tenants’ rights, 50% of the properties are social-rented, so that is also a big issue locally.

I am pleased that the Government have recognised the scale of the leasehold reform issue. The hon. Member for Worthing West (Sir Peter Bottomley) has led on the issue, having campaigned on leasehold reform for many years.

I am pleased to support him, backed up by the Leasehold Knowledge Partnership, which is organised by Martin Boyd and Sebastian O’Kelly. The hon. Gentleman and I have arranged a number of open forums here at Westminster for parties interested in leasehold reform.

They have been attended by professional bodies, individual leaseholders and others who have raised these matters with the civil service and with Government.

I am grateful to the Minister for affording us a number of opportunities to meet him and civil servants at DCLG to explore these issues and try to identify a way forward.

One of the major successes that we have had in the past 12 months is that although the Government initially estimated that there were between 2 million and 2.25 million leaseholders, it has now been recognised that there are now at least 4.5 million.

That demonstrates that this is a bigger problem than perhaps the Government thought it was before.

Of course, that does not take into account the nearly 2 million leaseholders of former council properties who exercised right to buy or who subsequently bought those properties, so we are talking about nearly 6 million households, which means that a significant number of our citizens are affected by leasehold regulation.

The issue affects my constituents, among whom are not only very wealthy professionals who live in smart and very expensive properties in Canary Wharf, but a number of pensioners in the east end who exercised right to buy and who own former council properties. They clearly do not have access to the resources, assets or finances available to some of my constituents.

The issue also affects retirement homes.

Leaseholders are represented in every strata of society, from the poorest right the way to the richest, so nobody is excluded from being exposed to the vulnerability of living in a leasehold property.

I use the word “vulnerable” because the lack of protection and the informal dispute resolution procedure, which is abused by unscrupulous freeholders who employ high-powered barristers, affects ordinary leaseholders, whether they be professionals, rich or poor.

I see that Conservative Members are smiling because they are either vulnerable leaseholders or freeholders.

I will not say that they are unscrupulous, because that certainly does not apply to the hon. Member for Bromley and Chislehurst (Robert Neill), who I know, as a fellow West Ham United supporter, would never be unscrupulous when it comes to his properties.

There are major anomalies and weaknesses in leasehold regulation, including the amount paid in service charges, as well as insurance, ground rent and forfeiture charges, all of which mean that leaseholders are vulnerable to unscrupulous freeholders. Sadly, there are too many such freeholders, even though they are in the minority.

It is appropriate to recognise that the sector has been attempting to improve its performance and raise its game with a new voluntary code.

Significant progress has been made, but leasehold reform should be on the Government’s radar, especially given that leasehold has been increasingly used over many years.

Six major statutes, a number of statutory instruments and dozens of sections of other Acts of Parliament have dealt with the issue. Previous Conservative Administrations—notably in 1985, 1987 and 1993—and Labour’s Commonhold and Leasehold Reform Act 2002 all tried to address that which is recognised collectively as an area that needs attention, but we have signally failed to protect leaseholders. I would be interested to hear the Minister’s response.

New clause 3 proposes to abolish leasehold by 2020. I hope—I am sure that other colleagues do, too—that it will galvanise the Government into asking why nothing has happened in respect of commonhold.

I understand that the Government have been having key discussions on moving responsibility for commonhold legislation, which still falls under the Ministry of Justice, to the Department for Communities and Local Government and the housing department.

It would make sense to place such responsibility for housing in that Department. At the end of the previous Administration, with the general election approaching, all three main political parties supported moving that responsibility to DCLG, but there has been no movement. I would be grateful to hear the Minister’s response.

New clause 4 is far less complex, but I am disappointed that there has been no movement on the issue, because it is very much one of localism and community empowerment. One of the few existing protections for leaseholders—it is, however, very difficult to implement—is the right to sack property management companies responsible for the upkeep of residents’ homes.

There is provision within legislation for ballots to take place, and a simple majority allows residents to look for a new property management company to manage their properties. However, as I have said, it can very seldom be used.

In recent decades, many thousands of tenants in my constituency have voted in stock transfer ballots to move responsibility for their homes from the council to
housing associations.

That was one of the mechanisms that the Labour Government between 1997 and 2010 used to deal with the 2 million homes we inherited that were perceived as being below the decency threshold. That led to upgrades of nearly 1.5 million of those properties by 2010, including new kitchens and bathrooms, double glazing, new security and all the rest of it.

Most such schemes were successful. However, in a small minority of transfers, the offer provided by the housing associations when seeking the support of local tenants was not delivered.

There is no provision for those tenants to express their disappointment and to sack their registered social landlord.

This is a basic element of consumer protection. For any product
that one buys on the open market, there are protections in consumer law—the ability to return the product, and to seek a refund, redress or compensation—but for a home, and a council tenant who has voted to move to a new registered social landlord, there is nowhere else to go once they have been transferred. A leaseholder at least has such a provision, even though it is rarely used.

With my new clause 4, I am trying to introduce an provision—with, I suggest, a five-yearly review—to give council tenants an opportunity to say to the housing association or their registered social landlord that is supposed to deliver the services for which tenants are paying, “You are not doing a good enough job. If you don’t up your game, we will have a ballot in five years’ time. We can then sack you and move to a new housing association, go back to the council or set up a tenant management organisation.” That would basically give tenants the right to hold their housing association to account.

The current protections are to complain to the Housing Ombudsman Service, the Homes and Communities Agency or the regulator. It is very difficult to go to such lengths, however, and the regulator is very reluctant to transfer ownership and responsibility from one housing association to another. New clause 4 suggests that tenants should have the right, when the registered social landlord or housing association is not delivering, to say, “You’re not doing a good enough job. We want somebody else to manage our property.”

On new clauses 3 and 4, one of which is very complex and the other relatively straightforward, I am very disappointed that the Government have not seen it to be in their interest to introduce such provisions. I am sure that there will be some interest in them when the Bill makes progress in the other place. I will be very interested to hear the Minister’s response to the points I have made in supporting my new clauses.