New Clause 3 - Service charges

Part of Leasehold Reform (Ground Rent) Bill [Lords] – in a Public Bill Committee am 12:00 pm ar 9 Rhagfyr 2021.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities) 12:00, 9 Rhagfyr 2021

As we draw towards the end of the Bill Committee, I thank Members on both sides of the room for their considered input. We work best when we work collaboratively. As I have said a few times, this is an issue I started to champion as a Back Bencher, so it is an incredible privilege to be the Minister leading the discussions. I thank everyone for their time.

New clause 3 brings us back to the issue of service charges, and to concerns about freeholders using such charges to charge ground rent by another name. The Government believe that all fees and charges should be justifiable, transparent and communicated effectively. Service charges that have been artificially inflated to make up for lost ground rent income would not meet those requirements. If any landlord seeks to recoup what they consider to be lost ground rent or other funds through service charges or any other charge, the wide definition of the term “rent” in the Bill will allow a tribunal to take the charge into account when deciding if it is actually prohibited rent. That is why the Bill has been drafted as it has, and why we have adopted a flexible definition of rent. As I explained in a previous sitting on Tuesday, the definition relies on its naturally understood meaning and includes anything in the nature of rent, whatever it is called. Where a freeholder has attempted to get around these provisions, the definition allows the tribunal to consider, in each case, whether such a charge actually represents a prohibited rent, even if it is not explicitly called a ground rent.

As was discussed earlier in the week, the penalties for landlords who charge a prohibited rent are significant —a maximum of £30,000 per lease. If a landlord had a block of 10 flats, then the penalty they would be risking would reach a significant amount.

We have provided a robust system with not only a serious deterrent, but a route for challenging freeholders who act this way. That is all relevant to the new clause, which asks for an impact assessment. I understand the concerns that motivated the new clause, but hopefully the hon. Member for Weaver Vale can appreciate that the drafting of the Bill is intended to specifically guard against service charges being used in the way that he mentions.