Leasehold Reform (Ground Rent) Bill [HL] — House of Lords, 2021-07-20
Topic: Housing
John Lytton (Crossbench, Unknown): My Lords, it is a pleasure to follow the noble and learned Lord, Lord Etherton, and I thank the Minister for introducing this group of amendments, in which I have two: 5 and 39. I declare my property interest but hasten to add that it does not involve long leasehold; I also declare my interest as a property professional. I particularly thank the Minister for meeting me this morning at short notice; I very much appreciate that and I think it is fair to say that we had a frank and generally constructive conversation. I am indebted to the British Property Federation for the comments it sent me, to the Wallace Partnership Group for its observations on the Bill, and to the Homes for Later Living group, which is a retirement homes specialist The pivotal point here is the question of who takes on the responsibilities of property management and things such as safety oversight, particularly in complex buildings. I am thinking of developments such as Salford Quays, but there are others in the pipeline, including King’s Cross and Battersea, that will come on stream and are in the process of evolving even as I speak The British Property Federation believes—and I agree with it—that most leaseholders in these large, complex, often urban developments will not want to take on the sort of responsibilities implicit in the management and future-proofing of the common areas and common parts of buildings in these multi-occupied developments. Hardly had I considered that point when it was pointed out to me that a poll by Savanta found that only 31% of people would willingly take on the management of their apartment block, even when faced with the option of saving on ground rent. I have some experience that reinforces this, so much more so when we come to the scale of some of these urban and often redevelopment situations that are truly industrial in their complexity A buy-to-let investor is hardly going to have interest in participating in the day-to-day running of an estate. Freeholders, with a nil or peppercorn rent and no other interest beyond the maintenance and management charges that may be taken away from them by right to manage, are hardly going to have an interest in taking on costs that they might not be able to recover. By that I mean costs on things such as long-term capital expenditure on visual improvements or repurposing parts of the development—matters that are not a service charge and therefore there is some question as to the degree to which they could be recovered. With no skin in the game, how is the freeholder going to finance or forward-fund these things? For practical purposes, the Bill ends up providing us with the opportunity for non-responsive freeholders If leaseholder-led arrangements fail or the leaseholders want to hand back the management process, an effective freeholder is traditionally there as a backstop to take on the responsibilities. Curiously, under the Bill that onus will persist, with the freeholder having a peppercorn rent. I question whether the liabilities will in fact be shouldered in that way or can be imposed in practice I do not intend to press either of my amendments, but it is worth my while going into Amendment 5 in a little more detail. The amendment would make leases that meet certain criteria excepted leases and therefore still able to operate on a ground rent principle. Freeholders would thereby be incentivised to invest in the property in the long term and to bring their expertise, their ability to deal with complex developments at scale and their property management skills and safety oversight As buyers of individual long leaseholds, consumers would still have the choice at the market-wide level as to whether they wanted to live in a block run by a freeholder and pay a ground rent or to purchase a flat in a communally run block. Consumers would also retain the right, as they have now, to enfranchise or exercise their right to manage and take over the block, which the Government have said they will seek to make easier as they work on a second leasehold reform Bill I propose the choice of a functioning leasehold system in larger and particularly complex apartment building arrangements because, as I say, there is good evidence that a lot of leaseholders do not want the responsibility of running these blocks. It must be pointed out that service charges relate to current expenditure. They do not customarily cover future investment, improvement or adaption and may potentially be challengeable by leaseholders A point about retirement developments was rather eloquently made by Homes for Later Living. These often have specialised development models, including extensive communal facilities, so although they are not the same as these large, mixed-use commercial redevelopments, they have some of the same problems.