“(1) Section 72 of the Building Safety Act 2022 is amended in accordance with subsections (2) and (3).

(2) After subsection (2)(b), insert—

‘(c) all repairing obligations relating to the relevant common parts which would otherwise be obligations of the estate owner are functions of a manager appointed under section 24 of the Landlord and Tenant Act 1987 in relation to the building or any part of the building.’

(3) In subsection (6), in the definition of ‘relevant repairing obligation’, after ‘enactment’, insert

‘or by virtue of an order appointing a manager made under section 24 of the Landlord and Tenant Act 1987’.

(4) Section 24 of the Landlord and Tenant Act 1987 is amended in accordance with subsection (5).

(5) Omit subsection (2E).”

This new clause would provide for a manager appointed under section 24 of the Landlord and Tenant Act 1987 to be the “accountable person” for a higher-risk building.

Brought up, and read the First time.

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

New clause 40 would provide for a manager appointed under section 24 of the Landlord and Tenant Act 1987 to be the accountable person for a higher-risk building. A number of stakeholders raised in the evidence sessions that there is a major problem with the way in which the Building Safety Act 2022 is interacting with the 1987 Act, with the practical effect of depriving leaseholders of redress and the ability to replace a failed or failing freeholder from controlling their homes and service charges.

The accountable person regime of the 2022 Act has critically undermined the section 24 court-appointed manager scheme, which has been a lifeline for leaseholders who cannot afford to buy the freehold or mobilise 50% of their neighbours to participate in an enfranchisement claim but who face a predatory—or very often absentee—freeholder, have high and opaque service charges or suffer block deterioration and badly require independent and professional management. That was the whole point of having the accountable person in the court-appointed manager scheme.

The section 24 regime also gives leaseholders who do not qualify for the right to management the ability to replace freeholder management of their building and moneys by applying to tribunal to consider whether it is just and convenient to install an officer of the court—a section 24 manager—to steward the development with tribunal backing and a special management order that provides them with a bespoke scheme of management and effectively replaces the leases. The section 24 manager essentially steps into the shoes of the landlord. But the Building Safety Act has expressly disallowed a section 24 manager from double-hatting as the accountable person and the principal accountable person through its definition of accountable persons and its amendments to the Landlord and Tenant Act 1987.

That must be an oversight by Government or an unintended consequence of the Building Safety Act, because fettering a section 24 manager in this way will encourage tribunals not to grant new section 24 orders on the basis that while such an order may be just because of freeholder failure, it would not be convenient, since there would now be two squabbling managers for functions under the BSA versus a court appointee installed under the 1987 Act. Even with the reforms to enfranchisement and right to manage in this Bill, many leaseholders will still be unable to meet the qualifying criteria to remove freeholder management. We need to keep that pathway for a court-appointed manager open and accessible to leaseholders seeking relief. With the BSA, Parliament quite rightly sought to give leaseholders new statutory protections. Surely the intention of the BSA was not to take away leaseholders’ existing rights.

At Christmas, a tribunal heard about this issue as part of the long-running litigation at Canary Riverside, an estate in east London where leaseholders have enjoyed court protection via the section 24 scheme since 2016. Regrettably, it determined that section 72 of the Building Safety Act and the amendments made to section 24 by section 110 of the 2022 Act prohibit a section 24 manager from being an appointed person, and a tribunal cannot order a section 24 manager to carry out building safety responsibilities that Parliament has decided should fall outside the section 24 regime and which should be the responsibility of an AP.

The tribunal said,

“We accept that this conclusion is likely to have significant practical consequences” for the manager. It also said,

“We accept too that there is a risk of disagreement between him and the PAP as to how the cladding-removal works should be progressed.”

The 22 December 2023 tribunal decision in the Canary Riverside case has effectively given the freeholder licence to take back control of leaseholders’ homes and moneys, despite being stripped of management rights by the court in 2016 because of its poor financial transparency and non-existent accountability to leaseholders. It now runs the risk of allowing the freeholder to take up to £20 million in public money from the building safety fund. The same freeholder’s related company, Westminster Management Services, wrongly demanded £1.6 million in insurance commission and fee—a kick-back from the leaseholders, as determined by a tribunal in December 2022.

The emotional and financial cost of the arbitrary law change to leaseholders here is enormous. As the Canary Riverside leaseholders cannot easily afford legal counsel, they are using the services of a barrister under the direct access scheme, which has cost them £25,000. The leaseholders are also having to pay the section 24 manager’s costs for their solicitor and barrister, which could easily be double theirs—£50,000. For the two-day hearing and the preparation required beforehand, all the participating leaseholders and the section 24 manager will have racked up a legal bill of more than £100,000 to have a tribunal decide a very narrow legal point. Meanwhile, the leaseholders on a nearby estate, West India Quay, who have raised an impressive six-figure sum for a section 24 bid because of sky-high and escalating service charges and a rundown building, now face the invidious position of not going ahead with the application unless the law is changed in the Bill to allow a manager appointed under section 24 to be the accountable person and principal accountable person where a tribunal makes such a determination.

End Our Cladding Scandal has also made clear its opposition to this Building Safety Act policy. Leading landlord and tenant barrister Philip Rainey KC, whom we heard from in oral evidence, even provided suggestions for amendments in his testimony to the Committee. I am grateful for that and have echoed them in my new clause. It is nonsensical that a freeholder who needs to have no qualification in fire safety or management and is not vetted by a tribunal can be the accountable person while a professional property manager, who has had his or her credentials heavily scrutinised by tribunal and who has been appointed by a judge and tribunal panel because they are deemed to be a fit and proper person with suitable experience, is literally barred from taking on the accountable person and principal accountable person role.

On the point that the section 24 manager does not own the freehold or have a possession in land and so cannot be an AP or a PAP, a non-freehold-owning resident management company or right to management company can be an AP or a PAP, so the policy is contradictory. I believe that comes from a misunderstanding of section 24 and the importance of this backstop scheme for leaseholders with recalcitrant freeholders who need court protection.

Before the Minister points to the special measures manager provision in the BSA as a mitigator, that still damages the section 24 scheme because a special measures manager can be appointed by tribunal only if the Building Safety Regulator—an unknown entity—makes its own application to tribunal. Before the Building Safety Act, the whole management of a block and stewardship of leaseholders’ moneys would be decided by a tribunal in one application made by leaseholders and, if successful, all handed over to the section 24 manager. Now, the leaseholders would have to petition a separate body for a special measures manager, and there is no guarantee that the Building Safety Regulator would make such a tribunal application, especially where the tribunal has not found fault against the freeholder, because no section 24 order is in existence for the leaseholders to point to.

Naturally, cautious tribunals will refuse to grant section 24 managers going forward because the split management will be so messy and so fraught with risk. That is a travesty of the section 24 scheme, which successive Governments have sought to protect. The Government, in background notes to the King’s Speech, pledged to use this Leasehold and Freehold Reform Bill to revisit the Building Safety Act, building on the legislation that was brought forward by the 2022 Act, to ensure that freeholders and developers are unable to escape their liabilities to fund building remediation work and protecting leaseholders by extending the measures in the 2022 Act to ensure that it operates as intended.

That is what the Government said, and the Government are already moving amendments to reform the section 24 scheme, so we cannot say that section 24 is out of scope or that section 24 reform will not be pursued by the Government at this juncture. The Government’s own estimate, as of February 2021, is that there are more than 11,000 higher-risk buildings—blocks from 18 metres or 7 storeys high containing 1.31 million residents. That means that there are over 11,000 buildings where hundreds or thousands of leaseholders, at least, have had their lifeline right of applying for a section 24 court-appointed manager stripped of them by the Government by obscure clauses in the Building Safety Act.

I urge the Minister to consider the desperate situation of leaseholders who already have a section 24 manager or are, at this moment, preparing their applications to have one installed. I urge the Government to expeditiously remedy the situation brought about by major policy change that flew under the radar of Parliament, was never put out to public consultation and has affected the lifeline right for leaseholders who have predatory freeholders or are in a situation whereby management is dire and service charges excessive.

One witness told us that the Secretary of State is taking

“a personal interest in this”––[Official Report, Leasehold and Freehold Reform Public Bill Committee, 16 January 2024; c. 57, Q146.]

area and that he sent a letter to the leaseholders at Canary Riverside ahead of the December hearing. I believe that that is another of the lease extension nightmares that saw qualifying leaseholders lose their statutory remediation costs protection under the Building Safety Act because they extended their lease, and that saw the BSA amended by the Levelling-up and Regeneration Act 2023.

In the same way, Parliament could not have intended to deprive leaseholders of cost protection rights when extending their lease under the BSA. I believe that Parliament could not have intended to deprive them of the long-cherished right to secure a section 24 manager, where there is an extensive fault against their freeholder proven in a court of law. It is absolutely imperative that the Minister acts on this.

I am grateful to the hon. Gentleman for outlining that in such detail. I will be brief and to the point. We are reviewing this, and I think that an important point has been raised. In the meantime, we have asked the Building Safety Regulator to review all higher-risk buildings that currently have a section 24 manager in place, with a view to considering whether an application for a special measures order should be made for any of the buildings impacted. On that basis, I hope that the hon. Member may withdraw the new clause until we have concluded the review.

I want to press the new clause to a vote.

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

The Committee divided: Ayes 4, Noes 7.

Question accordingly negatived.