Gareth Bacon

“I thank the hon. Member for Vauxhall and Camberwell Green (Florence Eshalomi) for securing and leading this important debate. I pay tribute to the work of the Housing, Communities and Local Government Committee under her leadership, which generated a 159-page report containing a series of recommendations. I am conscious of time, Madam Deputy Speaker, so I will not comment on the remarks made by Members from all parts of the House, but I extend my thanks to all those who made considered and important contributions. The Opposition support leasehold reform. As we have heard many times, there are approximately 5 million leasehold properties in England and Wales, and it is clear that the leasehold system comes with problems and requires change. For too many leaseholders, the costs just keep piling up. In 2023-24, the average ground rent paid by a leaseholder in England was £304. Alongside that, there was a 5.8% increase in the annual service charge, taking the average annual cost to nearly £3,000. In London, those costs are even higher, with an average of £412 charged for ground rent and service charges sitting at about £8,000 in some modern high-rises. Even at their highest, the costs continue to rise, bringing more uncertainty for leaseholders. Service charges in particular can rise astronomically, leaving leaseholders having to pay thousands of pounds more than they ever intended or believed they would pay, and some flats virtually impossible to sell. On top of that, for too many leaseholders, the costs they pay come with no transparency about how their money is spent, how spending decisions are reached, and who signs off on them. Lack of clarity around these costs is a problem that policy makers cannot ignore. Knowledge of these problems is not new. In 2018, the then Government established a regulation of property agents working group under the chairmanship of the noble Lord Best. The group examined the key issues impacting leaseholders and the need for reform in the sector. The group issued its report in 2019 and proposed a new regulator and regulatory regime, and a new enforcement system. Neither the previous Government nor the current one did a great deal to bring that about. Seven years later, we still await any meaningful Government action building on the recommendations of the report, and the draft Bill is silent on that issue. It is not the only thing that leaseholders have to wait for. In two years, the Government have not yet implemented the full measures promised in the Conservative Government’s Leasehold and Freehold Reform Act 2024. The Government have said that they have their own plans for leasehold reform, but leaseholders have been told time and again to wait for a new Bill because of significant flaws in LAFRA. For two years, we have been told that primary legislation is required to fix the Act, but nothing has been done, and the draft Bill produced by the Government in January this year does not address the supposed flaws of the previous Act. That prompts the question: where is that legislation and what is taking so long? Why are the Government proposing to bring forward a Commonhold and Leasehold Reform Bill that does not offer these fixes? If the eventual Bill remains in line with the previously published draft Bill, when can we expect the next Bill to address those changes? Assuming this Parliament lasts for a full term, we are now 40% of the way through its life, and we have had more Secretaries of State in that time than actual leasehold reforms. The Housing Minister himself spent the end of his time in Opposition highlighting the need for speedy implementation of new rights for leaseholders, pressing the previous Conservative Government to “give us a sense of the timetabling of some of the more important provisions in the Bill, because leaseholders watching our proceedings will want to know when the rights provided for by the Bill can be enjoyed.” Well, he was clearly correct, so I wonder what the shadow Minister of that day would say to the Housing Minister of today. I believe he would ask the same question as me: if not now, then when? When can leaseholders expect to see their rights come into force? At the end of January this year, the Government published the draft Commonhold and Leasehold Reform Bill. According to the draft Bill, leaseholders can expect a ban on leasehold for most new flats; a new commonhold system, including rules for mixed use, mandatory reserve funds and quicker debt recovery; a ground rent cap of £250 per year for many existing leases, which reduces to a peppercorn after 40 years; abolition of forfeiture and the introduction of a more proportionate court-based enforcement regime; and the repeal of rentcharge powers on freehold estates. Perhaps most eye-catching of those is the much-touted ground rent cap, as the Chair of the Housing, Communities and Local Government Committee set out in her opening speech. The Opposition recognise the need to support leaseholders facing high costs, but while capping ground rent may sound like a silver bullet, for many leaseholders it might be closer to a damp squib. That is because ground rent is usually nowhere near the level of service charges, which can have a genuine and very real impact on a buyer’s ability to find a mortgage. For the many leaseholders burdened by excessive and unclear service charges and rising council tax, the ground rent cap is a mirage in a desert of higher council taxes, escalating service charges and poor building management. While this move may have some marginal benefit to leaseholders, there could be ramifications elsewhere. Investors have expressed deep-seated concerns about the potential impact on investor confidence and faith in the UK system. That is because the UK has long been seen as a safe, secure and predictable place for sound investment, and ground rent investments, favoured by UK pension funds among others, have become an important part of that environment. The Government’s plans to unilaterally and retrospectively revoke key aspects of pre-existing ground rent contracts have rippled through our financial districts and risk significantly negative impacts on investor confidence, with a wider undermining of our economy. The risk of freeholder insolvencies does exist and could be dangerous, as the Government know because their own impact statement lists freeholder insolvencies as a realistic cost that could have spillover impacts on leaseholders. If the Government get this wrong, there could end up being a significant, albeit unintended, risk to leaseholders—people with families and mortgages, or those living in their first home. All of this prompts the question: why is the Government’s focus on ground rent and not service charges? I hope the Minister will take the necessary time to address these very real fears and explain his choice. As outlined by the hon. Member for Vauxhall and Camberwell Green in her opening speech, one of the main focuses of today’s debate concerns the question of the regulation of managing agents and the Select Committee’s recommendation that clauses providing for this are inserted into any forthcoming Bill. We have heard compelling arguments from hon. Members from across the House, and powerful testimonies. With the Government’s plans for a wholesale market conversion to commonhold, this issue becomes all the more pressing. That is because in moving to commonhold, there is the prospect of responsibility for building safety and management for thousands of flats moving from professionals to residents. That might work perfectly with a dedicated, well-trained and attentive residents’ committee at the helm, but what about the multitude of buildings where that may not be the case? What happens when the roof begins to crack, the water starts to seep in and the lifts begin to break down? What happens when the sinking fund has been drained and the residents’ committee chair, who might be under mounting social pressure, is forced to cut service charges to unhealthily and impractically low levels? If commonhold is to become the norm, we must ensure that the Government are not laissez-faire in how they implement the system. They must not blindfold residents who may sleepwalk into a situation in which their homes are under management without proper training, a strong mandate and adequate knowledge of building safety and flood risks. To guard against that, it may very well be that commonhold residents choose to hire a managing agent to care for their homes. Managing agents exist today—some are good, and some are not—but, as I outlined at the start of my speech, many leaseholders have spoken about the bad experiences they have had at the hands of some agents. The difference between managing agents being appointed under a commonhold system rather than a leasehold one is that the managing agent’s client would be the homeowners themselves, not a distant freeholder. The residents themselves would have the power to hire and fire the managing agent. That is why the Committee’s recommendations are so important. If there is to be a regulator, it must have teeth, as the noble Lord Best said in his 2019 report and implied again in his evidence to the Committee on 10 March, and as the hon. Member for Vauxhall and Camberwell Green said in her speech. If there is a regulator, it is absolutely crucial that it works as intended. It would need to have the requisite expertise, personnel and budget to discharge its duties efficiently. Lessons must be learned from the failings of other regulators, such as the Building Safety Regulator. The Government are considering bringing their Bill forward and examining the Committee’s work. If the Government decide to heed the recommendations of the Committee, I hope the Minister will commit to working across parties and with the whole industry to ensure that the Government get it right the first time.”