Amendment 13

Part of Leasehold and Freehold Reform Bill - Committee (1st Day) – in the House of Lords am 5:15 pm ar 22 Ebrill 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities) 5:15, 22 Ebrill 2024

My Lords, Amendment 13 concerns the conversion of existing leasehold buildings to commonhold. I thank the noble Baroness, Lady Pinnock, for raising this important subject. In future, the Government would like to see widespread use of commonhold for new and existing buildings, empowering consumers to fully own, control and manage their buildings. Reforming the route through which existing leaseholders in England and Wales can convert to commonhold will be a crucial stepping stone on this path to commonhold. The Government welcome the Law Commission’s excellent work on this subject, and continue to consider its recommendations in this space.

It is important to note that reform to conversion is not a simple task that can be achieved overnight; substantive legislative work will be needed to ensure that when leaseholders convert to commonhold, they will be left with the very best tools to manage their blocks effectively. Crucially, beyond lowering the threshold for conversion, new provisions will also be required with regard to the status of non-consenting leaseholders. This includes whether such non-consenting leaseholders should be compelled to change their leasehold interest to a commonhold interest against their wishes, or how workable in practice operating both leasehold and commonhold in a building may be, and the implications of such a model for the smooth management of the block.

The Government wish to extend the benefits of freehold ownership to more home owners. Reforms set out in the Bill will help leaseholders buy their freeholds and will ensure that all new houses are freehold from the outset, other than in exceptional circumstances. I reiterate that the Government remain committed to widespread take-up of commonhold for flats. As I have said before, we have been reviewing the Law Commission’s recommendations to reinvigorate commonhold as a workable alternative to leasehold, and will respond in due course; we will set out next steps in due course as well.

Amendment 14 seeks to ban the sale of leasehold for flats from January 2029. I thank the noble Baroness, Lady Fox, for her intention to encourage consumers towards a fairer system of ownership. To extend such a ban to flats will significantly impact the housing market. Any transition away from leasehold would need to be managed in a way that protects the legitimate property interests of both leaseholders and developers. For example, there are many new leasehold developments already at the planning stage, and to ban all leasehold homes without due consideration could impact the value and saleability of those developments.

Any such wholesale ban would also need to include consideration of the need for any exceptions. For example, home purchase plans rely on a lease, and we would need to consider how to allow aspiring home owners who are unable to acquire a mortgage for faith-based reasons to purchase a property. If we banned new leaseholds, this limitation could prohibit groups across England and Wales from getting on to the property ladder. More widely, it will be crucial to ensure that a robust and fully workable alternative to leasehold is in place before a ban is in force; otherwise, developers of flats will have nowhere to go. We believe that the alternative is a reformed commonhold tenure, the likes of which are found in countries all over the world. In short, extending a ban on new leasehold houses to include new leasehold flats, without a viable alternative in place, could damage the much-needed supply of new homes.

I thank the noble Lord, Lord Khan, for introducing Amendment 15 on behalf of the noble Baroness, Lady Taylor of Stevenage. The amendment would require the Government to set out their strategy on transitioning from leasehold to commonhold. As I hope I have made clear, the Government are committed to commonhold and are carefully considering the detail of the Law Commission’s proposals for reform, including conversion. This Bill prioritises the most significant measures that will help existing leaseholders now.

The noble Lord, Lord Bailey, did not speak to his Amendments 15A and 105A but I shall respond to them. Amendment 15A would require a 990-year lease term for new flats, and I thank him for the amendment. I understand the noble Lord’s desire to make sure that leaseholders have long-term security in their homes, and we share this aim. However, the Government are not able to accept the proposed new clause.

First, the provision would be a very blunt requirement, and there could be cases where this is genuinely not appropriate. For instance, a developer may not be the freeholder itself, and so may not have a long enough interest in the land to grant a 990-year lease. The Government would need to undertake detailed policy development work to make it a more workable proposal. Careful consideration would also need to be given to such a mandate to understand the impact on development viability and to ensure that planned developments do not stall. I hope my noble friend therefore agrees with me that it would not be appropriate to mandate a 990-year lease in all cases, and will agree to not move his amendment.

Amendment 105A would require the Government to publish a report setting out proposals for reforms to shared ownership, mandating a share of freehold or granting a 999-year lease as a default, and to set out plans for the widespread adoption of commonhold for all new flats by 2030. Under Amendment 105A, the Government would have six months to publish this report following Royal Assent to the Bill. To reiterate, 999 years may not work for all developments and may act to prevent new housing coming forward in some cases. I hope that the noble Lord will agree with my previous comments on the complexities of mandating lease lengths. Likewise, I noted issues with mandating the share of freehold under Amendment 12. I will spare noble Lords from listening to my comments in great detail again; none the less, I restate that the Government believe that commonhold has significant advantages over shared freehold.

The Government have heard the strong voices of those advocating for commonhold reform in the Bill. We thank them for their support in considering the future of flat ownership and welcome the views of Members across both Houses as we move forward with the Bill. I assure noble Lords that the Government are carefully considering next steps for commonhold, with a view towards its widespread use, especially for new flats. For shared ownership leaseholders, we have already enabled a right to a 990-year lease extension in the Bill. As for the amendment regarding adjusting shared ownership service charges for the proportion owned, we consider that that would be a general shared ownership regulation, and so would be outside the scope of the Bill.

On one or two issues have come up. First, I can say to the noble Lord, Lord Khan, that the Commonhold Council is still meeting—I think the noble Baroness, Lady Jones of Moulsecoomb, brought this up as well. It last met in September.

The noble Earl, Lord Lytton, is right, and what he said supports the issue that I have continually spoken about—complexities in the system and the fact that we need to get this right. It is a huge change to the housing market. The noble Earl also brought up the issue of building safety, but that will come in future groups.

The noble Lord, Lord Young of Cookham, supported by the noble Lord, Lord Kennedy, brought up the issue of draft Bills. I shall certainly take this back to the department, discuss it, and come back to noble Lords.

Lastly, the noble Earl, Lord Devon, asked whether these reforms would have an impact on the supply of new homes. We do not expect them to have any significant impact. Developers are already bringing properties to the market with 999-year leases, resident management companies in place and no ground rents payable, so these reforms will likely accelerate this trend. Investors and developers have previously adjusted their business model in response to reforms in the housing sector, including the Leasehold Reform (Ground Rent) Act 2022, so we are not expecting any significant changes in that regard.

With all these assurances in mind, I ask the noble Baroness kindly to withdraw her amendment.