Leasehold Reform (Ground Rent) Bill [Lords] — House of Commons, 2021-11-29
Topic: Housing
Kevin Paul Hollinrake (Conservative, Centre-right): It is a pleasure to speak after my former colleague in the Cabinet Office, my hon. Friend the Member for Loughborough (Jane Hunt). She made some good points, not least on part-built developments. I support the Bill’s intent There is an expression that you should never take down a fence until you know why it was put there. As I set out in my intervention, I have one or two particular concerns. I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I have been involved in the property sector for a long time. I am not directly involved in it today and I have no vested interest—that is for the people who make comments on Twitter in particular, because I will not agree entirely with many of the points made about completely scrapping leasehold, in effect. I am actually a leaseholder, rather than a freeholder, in this context On the leasehold system, for most of my life, when it comes to selling and renting property, leasehold has been a perfectly workable form of tenure for most people—for most leaseholders and indeed freeholders. In recent years, there is no doubt that the system has been tremendously badly abused. It is right of the Government to act on that in no uncertain terms. However, the fence to which I referred is between freeholders and leaseholders, and it was put there to try to ensure a proper mechanism for resolving disputes. That is why we ended up with a professional landlord who had an overall interest in an entire block, rather than in a specific unit in that block. The Bill will in effect remove any interest that a professional landlord would have in a future block. My hon. Friend the Member for Wimbledon (Stephen Hammond) is therefore right that the default will become commonhold On freehold, in my formative years of selling property in York, most flats were leasehold, and those flats were perfectly saleable and rentable. However, if ever we came across a development of freehold flats—a block where all the owners were freeholders, or commonholders, in modern-day parlance—we found that those properties were almost impossible to sell. In fact, mortgage lenders would not lend on them because of concerns about maintenance. If there was not a method to ensure that the building was maintained or that its insurance continued, the building might fall into disrepair and the lender’s security over the property would not be sufficient to cover the mortgage. That is the concern we potentially have here, as we move to this system of commonhold. I think commonhold can work for quite a number of flats—most blocks of flats, indeed—if it is simple and easy to operate However, commonhold is far and away not, in any shape or form, a panacea. We can see that from the current experience. There are some effective leasehold or commonhold ways of managing blocks, with residential management companies or right to manage agreements, where in effect the leaseholders manage the block and take on the responsibility of a freeholder. However, there are disputes within such blocks or organisations. The trouble with the commonhold rules—as I understand it, and the Minister may tell me differently—is that each commonholder has the right to raise their own dispute regarding the particular property, and I do not think there is any clear means of resolving such a dispute Previously, in a leasehold agreement, the freeholder would have been able to say, "This is what is actually going to happen. These are the terms of the lease, and these are the terms of the lease that you must adhere to." A simple example of that is the payment of insurance. As I am sure most Members in this debate will know, in a leasehold agreement the freeholder will normally arrange the buildings insurance for the entire block, which obviously covers communal areas, as well as things such as the roof. That would be the responsibility of the freeholder, who would pass on the costs to each individual leaseholder in proportion. If one leaseholder decides not to pay the insurance, the freeholder can say, "Well, you must pay the insurance", and they can actually carry out debt collection on that leaseholder. If it is an absentee leaseholder, they can go even further: ultimately, they could disenfranchise that leaseholder completely, and take the apartment back from the leaseholder I know that that has been used in some draconian ways in leasehold, but generally there is a mechanism that makes sure everybody in the block pays a fair amount for maintenance and things such as the insurance, but I am not sure how that happens in commonhold. If somebody stops paying for their particular element of responsibility for the charges, I do not think there is any such mechanism. The others could take that person to court, but again, the problem is that the fellow residents—fellow commonholders—in that block would have to take one of their own residents to court, instead of a freeholder doing so who does not have a cheek-by-jowl relationship with the resident This is why I think we have some of the maintenance issues in Scotland, and in Scotland there are some big maintenance issues, as my right hon. Friend the Member for Chipping Barnet (Theresa Villiers) mentioned. The hon. Member for Reading West asked about other jurisdictions. Australia has a very similar system, which I think is called the strata system. There are issues there about the recruitment of people to sit on the management boards, with 37% of companies expressing difficulties in recruiting residents to sit on these management boards.