Commonhold and Leasehold Reform: Managing Agents

For many of the 5 million leaseholders across England and Wales, these reforms have been a long time coming. After a decade of campaigning across party lines, we now have an opportunity to finally tackle the fundamental injustices of the leasehold system, once and for all. Leasehold reform has long commanded cross-party support. Ten years ago, the campaign in Parliament was championed by the former Member for Worthing West, Sir Peter Bottomley. His work chairing the all-party parliamentary group on leasehold and commonhold reform amplified leaseholders’ voices across Westminster. I thank the current chair, my hon. Friend the Member for Ellesmere Port and Bromborough (Justin Madders), for his tireless cross-party campaigning. It is in that cross-party spirit that my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) and Lord Gove generously gave evidence alongside each other in the opening session of our inquiry. The two former Housing Secretaries were united in their view that this draft Bill is welcome, and that the Government must go further and faster to deliver for leaseholders.

The draft Bill is technical and long—it runs to 164 clauses and 13 schedules—but if we take a step back, the problem that it seeks to address is about control. Control is supposed to be one of the main advantages for people of buying their own home.

For many leaseholders, a flat is their first foot on the housing ladder. They may have been drawn in by the banners on new build developments advertising the Government’s Help to Buy scheme. Many leaseholders were told that that was the affordable route to buying, via shared ownership. They expected control and a feeling of security, knowing that they could make the changes that they wanted in their own home and have control over the running costs, and would not be threatened with eviction by a landlord.

The benefits of home ownership simply do not apply to leaseholders. They are homeowners, yet they are tenants. Far from home ownership and the dream that they were sold, many of them are stuck in a living nightmare. In the words of one leaseholder, who shared their story with our inquiry:

“I thought I’d bought a flat, then discovered leasehold is a financial trap. I have no control over my finances, my relationships, where I live, or where I work”.

We all agree that this is an injustice that needs to be addressed. This afternoon’s debate is an opportunity for Members to reflect on the draft Bill and what additional measures might need to be included in the final version to ensure that we get these reforms right.

Perhaps the most headline-grabbing measure in the draft Bill is that it will cap existing ground rents at £250 a year. We must be absolutely clear across this House and in the other place that ground rent is money for nothing. An investigation by the Competition and Markets Authority found “no persuasive evidence” that leaseholders “receive anything in return” for ground rent. Many leaseholders have ground rents that double every 10 years or increase with the retail prices index.

We support the Government’s intention to change to peppercorn ground rent over time. We understand that that will need a transition period, as Ministers must be confident that they are striking a fair balance between the interests of competing parties, but it is not clear to us how the Government decided on their policy of a 40-year transition. Based on the evidence to our Committee so far, we think a shorter transition period may be justified and fair. That is why our report calls on the Government to publish more data in the coming months so we can be confident that we are getting the transition period right.

Another key focus of the draft Bill is the measure to replace leasehold with a new commonhold tenure. Commonhold will allow all homeowners to have a vote in how their block is run. Homeowners are not required to participate in commonhold if they do not want to, and many blocks will vote to appoint their chosen managing agent, but this modern tenure will offer homeowners the control that they do not have under the current leasehold system.

The biggest issue and source of frustration for so many homeowners and leaseholders in the leasehold system is the quality—or lack of it—and service provided by their managing agents. Many colleagues from across the House will share cases involving their constituents in this afternoon’s debate, but it will come as no surprise to anyone that one company came up time and again in the stories we heard from leaseholders. That company was FirstPort, the largest independent managing agent in England. Last year, the Minister said he had “significant concerns” about FirstPort’s unreasonable service charges, its slow response to complaints and its approach to debt collection.

Ultimately, the problem with many of these managing agents is that they are taking advantage of a captive market. They effectively have a monopoly on individual estates, meaning that they are able to treat homeowners with sheer contempt. In the words of one leaseholder we heard from, homeowners are left feeling “like cash cows”.

Ultimately, commonhold is a vast improvement, but it will not always be as simple as hiring and firing agents. Commonholds are likely to appoint managing agents on contracts that last for several years, and they need to have confidence that they are appointing high-quality service providers. An independent code of practice would provide that assurance, so overall we think it would be a valuable addition to the final Bill—one that would benefit homeowners. Homeowners want a crackdown on poorly performing agents like FirstPort, with a regulator that has teeth and can deliver.