Matthew Pennycook

“I start by declaring an interest: my wife is the joint chief executive of the Law Commission, whose work I will cite in the course of my remarks. It is a pleasure to respond to this vital debate on behalf of the Government, and I warmly congratulate my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi) on securing it. Commonhold and leasehold reform and the regulation of property agents are issues of the utmost importance to millions of homeowners across the country, and I commend her and the Backbench Business Committee for giving the House an opportunity to debate them in detail. Let me briefly put on record once again my sincere thanks to her, the other members of the Housing, Communities and Local Government Committee, and its Clerks for the huge amount of work undertaken in support of pre-legislative scrutiny of the draft Commonhold and Leasehold Reform Bill. This has been an excellent debate, with many informed and passionate contributions, and I thank all hon. Members who have participated. Collectively, those contributions have served to reinforce both the complexities and challenges of leasehold reform and the strength of feeling that exists across the country in respect of the need to act boldly and urgently to provide relief to the millions of leaseholders and residential freeholders currently suffering as a result of unfair and unreasonable practices—and make no mistake: they are suffering. We have heard of some particularly egregious cases in this debate. What may seem like prosaic matters to many—service charges, ground rents, consent fees—are the source of acute financial hardship and misery for huge numbers of those living in one of the approximately 5 million leasehold dwellings in England and Wales. Let me be as clear as I can from the Dispatch Box: leaseholders are being routinely gouged by freeholders and managing agents acting on their behalf. They are being gouged as a result of a system that denies leaseholders control over the homes they live in and have paid for and subjects them to extraction in the form of punitive, escalating ground rents, unreasonable or extortionate charges, unjustified permissions and administration fees, and onerous conditions, often imposed with little or no consultation. I have said it many times before, and I will say it again: this is not what home ownership should entail. Leasehold is blighting lives. Leasehold is a barrier to a fair and efficient modern residential property market. Leasehold is an anachronism in the 21st century. The aim of this Government by the end of this Parliament is nothing short of dismantling it and bringing the corresponding emancipation of leaseholders. I will heed your strictures, Madam Deputy Speaker, so I do not have time to respond to all the specific points raised, such as points about freehold estates, service charges, development value and the retirement sector. Those were all well-made points, and, as ever, I am more than happy to speak to hon. Members outside of the Chamber. I assure the House that none of those issues are an afterthought. Where there are provisions in the 2024 Act, we are working at pace to take them forward; where there are issues outside of the draft Bill, such as freehold estates, we have consultations and are analysing feedback, as my hon. Friend the Member for Hartlepool (Mr Brash) knows. In our manifesto, we made a clear and unambiguous commitment to act where previous Governments had failed and finally bring the leasehold system to an end. The forthcoming commonhold and leasehold reform Bill is not the end of that story, but it is integral to honouring that manifesto commitment. As the Committee’s report rightly recognises, the draft legislation represents a significant step towards ending the leasehold system for good, delivering greater fairness for leaseholders while laying the foundations for a reinvigorated commonhold model. I am immensely grateful to the Committee for its detailed and thoughtful scrutiny of the draft Bill. Its report provides a valuable set of recommendations as we continue the process of augmenting, strengthening and refining the Bill for introduction. As my hon. Friend the Chair of the Committee knows, we are considering each of those recommendations carefully, and I hope we can report back in the not too distant future. I want to make some very brief remarks about commonhold and ground rent, but before I do, let me address the main issue that has been the subject of today’s debate, which is that of property managing agents and the Committee’s recommendation that we establish a new, independent public body as a regulator of them, with enforcement powers. I agree with my hon. Friends the Members for Brent West (Barry Gardiner) and for Luton South and South Bedfordshire (Rachel Hopkins) and others who have mentioned the importance of control. I continue to believe that giving leaseholders control over the buildings they live in is our overriding priority, and that that will help to tackle the majority of abuses. However, I want to reassure hon. Members that I have listened and heard the serious concerns raised on both sides of the House about the performance of managing agents, both on freehold estates and in leasehold blocks—I know from my own caseload how serious these problems are. Managing agents play a key role in the maintenance of multi-occupancy buildings and freehold estates, and as the shadow Minister said, their importance will only grow as we transition towards a commonhold future. That is precisely why we have committed to strengthen the regulation of managing agents. As hon. Members know—it has been mentioned several times—the previous Government committed in 2018 to regulate the property agents sector. It asked a working group chaired by Lord Best, who I am very pleased to see in the Gallery, to advise them on how to do it, yet over multiple years they failed to act on that report’s findings. We have already progressed work on a number of those recommendations, including mandatory professional qualifications. However, I will state candidly that in taking forward those and other measures designed to strengthen the regulation of managing agents, we have a choice about how we do so. We face those choices in the context of a substantive Bill that is already around 260 clauses and 20 schedules and could grow further, and the fact that we have made very clear—I stress this point again to hon. Members—that this is not the only piece of legislation required to meet our manifesto commitments. Other pieces of primary legislation are required, not least to enact the remaining Law Commission recommendations on enfranchisement and the right to manage. I want to make it clear, though, that I take very seriously the Committee’s recommendation of a new independent regulator. I am certainly not going to stand at the Dispatch Box and rule one out—indeed, I am personally extremely sympathetic to it—but we will set our overarching position on the regulation of estate, letting and managing agents in due course. I can assure hon. Members that in finalising that position, we will continue to consider all aspects of Lord Best’s report. I can feel your eyes upon me, Madam Deputy Speaker, so I am going to skirt over commonhold—I am more than happy to speak to any hon. Members who have particular concerns about that—and speak briefly about ground rents. In particular, I want to touch on the decision the Government made in the draft Bill. We committed in our manifesto to “tackle unregulated and unaffordable ground rent charges”, and we are delivering on that commitment through the Bill. As hon. Members know, the draft Bill will cap ground rents at £250 a year initially, changing to a peppercorn after 40 years. This will deliver immediate relief for hundreds of thousands of leaseholders during this Parliament, and over the lifetime of that policy position, it will save leaseholders between £10 billion and £12.7 billion. It is a significant intervention. After 40 years, all ground rents will change to a peppercorn, ensuring that they are brought to an end in their entirety. However, it is our view that a 40-year transitional period is necessary to avoid unintended consequences and ensure stability for leaseholders and the wider property market. This is a balanced and fair solution to the problems caused by unaffordable, unregulated ground rents. I agree with my hon. Friend the Chair of the Select Committee that the cap must be introduced as soon as possible, so that leaseholders can benefit from reduced costs and more easily access mortgage financing when looking to move home. Subject to parliamentary timings, we are seeking to introduce the ground rent cap by 2028 at the latest. That is not the end of 2028—it is a point in time in 2028 at the latest—but I want to stress the words “at the latest”. It is up to this House to ensure that pieces of legislation progress more quickly. Before concluding, I can helpfully clarify the answer to the very specific question that the shadow Minister put to me. There is no ambiguity about the fixes that need to be made to the 2024 Act. It is really unfortunate that we have to make fixes to that Act. We should not be repairing primary legislation through new primary legislation, but we confirmed in the King’s Speech on 13 May that fixes to those flaws will be included in the forthcoming substantive Commonhold and Leasehold Reform Bill. To conclude, I once again thank my hon. Friend the Member for Vauxhall and Camberwell Green for applying for this debate, the Backbench Business Committee for granting it, and all those who have participated in it for sharing their concerns, insights and case studies. I look forward to providing the Committee with a formal response to its report as quickly as we possibly can—notwithstanding the current constraints—and I look forward to continued engagement with the Committee as our substantive Commonhold and Leasehold Reform Bill progresses and as we continue to implement those reforms to the leasehold system that are already in statute.”