Amendment 13

Part of Leasehold and Freehold Reform Bill - Committee (1st Day) – in the House of Lords am 4:30 pm ar 22 Ebrill 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Baroness Pinnock Baroness Pinnock Liberal Democrat Lords Spokesperson (Levelling Up, Communities and Local Government) 4:30, 22 Ebrill 2024

My Lords, this amendment is on commonhold. I was pleased to hear the Minister emphasise that the Government intend to ensure that commonhold becomes the norm, although it was unfortunate that the phrase that followed was “in due course”.

This conversation about leasehold reform has been going on for a very long time. I accept that it is complex and that that there are competing financial interests. I accept that it will be difficult to find a route to ensuring that leaseholders become commonholders. However, the legal work has been done by the extensive and authoritative report from the Law Commission, The Future of Home Ownership, which was published in July 2020. The commission published three massive reports—one of them is over 800 pages. Therefore, the Government have at their disposal the combined thoughts of the Law Commission on how home ownership should be extended to leaseholders, and it has explained how that is done in a straightforward way.

The amendment in my name presses the Government to legislate for conversions to commonhold where only 50% of eligible leaseholders in a building support the conversion—rather than having it at 100%, which is obviously a barrier to commonhold ownership—and is in line with the recommendation from the Law Commission.

Everyone in the Committee will be well aware that the leasehold/freehold arrangement is very unusual in western European countries. The historic norm in the rest of western Europe is the equivalent of commonhold; that is how people who live in flats organise their affairs. It was introduced in England and Wales in 2002 but, for various reasons explained by the Law Commission, it has not taken off as an alternative to leasehold.

I will outline the advantages of commonhold so that those who oppose the move to it, or believe the barriers are too great, will need to respond to them. The advantages of commonhold are that a person becomes a home owner, and it provides flat owners with equivalence to house owners. We on these Benches believe in that fundamental principle: that flat owners should have the same legal rights to home ownership as house owners.

The second advantage is that there is no ground rent to be paid—we will debate whether that should be abolished or limited on future Committee days. The third advantage is the control over the property that the flat owner would have as a commonholder. We have heard over long debates in this House that freeholders or their management agents are seemingly abusing service charges by raising them—we have seen sky-rocketing increases—while insurance costs arising as a consequence of the dreadful tragedy at Grenfell Tower are currently the remit of the freeholder or managing agent and not of the flat owner. That cannot be right, and it would change under commonhold.

In its report, the Law Commission states that some criticisms of freeholders with regard to, for instance, rising ground rents and inexplicable rises in service charges

“can fairly be described as abusive practices by landlords or developers”.

The Competition and Markets Authority also reported on leasehold housing in 2020, expressing concerns about—again—ground rent and services charges. Further, it reported on permission fees, whereby a leaseholder has to pay the freeholder for permission for even minor alterations within the flat that they are leasing. I find it extraordinary that in the 21st century there is still a fee to be paid to make alterations, rather than an agreement that it can be done.

The very nature of the leasehold/freehold arrangement opens the door to those who wish to derive the maximum gain from it, as both the Law Commission and CMA exposed. Of course, not all freeholders or their agents behave in this way, but the exploitative behaviour of some must be curtailed through legislation. Hence, I hope that we can have a quick, ready transition to commonhold, because that is the only way that such abuses will be prevented.

The Law Commission was very clear that this could be done. It talks about a “cultural change” being the biggest barrier to the move to commonhold, rather than legal and financial involvement, which is often seen as a barrier. The Law Commission stated that commonhold should be used

“in preference to leasehold, because it overcomes the inherent limitations of leasehold ownership”.

There is clear evidence and advice from the Law Commission, and all that is now needed is the will to implement the reform that the Law Commission has extensively reported on and shown the route map to achieving.

It is obvious that this will not be straightforward because of the financial interests of individuals and institutions in prolonging the existence of the leasehold/freehold arrangement. However, if the Government are determined, as the Minister said that they were, to create commonhold as part of a property-owning democracy—the phrase often used by the Government—the move to commonhold must be implemented, and must be implemented as speedily as possible. There must be no more delay; commonhold has been an option for over 20 years. It needs reinvigorating—the word that the Law Commission uses. It needs some of the barriers to be removed. It needs, as the Law Commission states, a cultural change in the way that commonhold and leasehold reform is looked at. That is what is needed, and the Government are in a position to do it. They have said that they want to make that change; unfortunately, the Bill does not enable it, as “in due course” will no longer be sufficient. I look forward very much to this debate and the Minister’s response.