Right to Manage and Leasehold

I beg to move,

That leave be given to bring in a Bill to make provision about the definition of qualifying tenants for the purposes of claiming a right to manage; to reduce the proportion of qualifying tenants required to give notice of a claim to acquire a right to manage; to establish a duty on freeholders to assist a Right to Manage company in establishing contact with leaseholders within the freeholder’s property; to make provision about establishing a presumption in favour of a right to manage in certain circumstances before the First Tier Tribunal; to require the Secretary of State to review procedures for converting leasehold property into commonhold property; and for connected purposes.

I rise to speak on a topic that matters dearly to all of us in this House: accountability and representation. As legislators, our job is to hold legislation to account and ensure that it represents our constituents’ interests. It is the role of our constituents, in turn, to hold us to account whenever elections arise. I would like to thank my constituents for joining us in the Gallery today.

Accountability is at the heart of our consumer relationships, with standards and competition embedded into commercial law. It is also a key part of our social contract. When someone in a position of power does wrong, there needs to be a system of recourse. When it comes to housing, however, this too often goes out the window. Frequently, there is a stark gap between those who provide our housing and those who live in it, alongside an accountability deficit, whether in private renting, social housing or the sector that the Bill seeks to remedy: leasehold. My constituency has the highest proportion of leaseholders in the country. For too long they have had to endure a system that leaves them without full control over their homes and at the mercy of a wide range of bad actors.

I was proud to be elected on a manifesto that promised to ban the sale of new leasehold properties and make commonhold the default tenure across the land. Since the election, the Government have acted with speed in this area: inheriting a rushed piece of legislation from their predecessor and untangling it with speed; setting out our plans for reform; publishing a White Paper on commonhold; and expediting moves that include the recent reforms to the right to manage.

Those actions have already had a positive impact in the Cities of London and Westminster. Constituents have written to me saying that they submitted right to manage applications on 3 March, as the Government’s changes allowed them to do so. I join them in thanking this Government for acting so quickly in this area, and I look forward with interest to the publication of the leasehold and commonhold reform Bill later this year.

One of the most visible consequences of the leasehold system is the scourge of unscrupulous managing agents. For the past six months, my hon. Friend the Member for Hendon (David Pinto-Duschinsky) and I have been co-ordinating action as co-chairs of Labour for leasehold, which is an alliance of 150 Labour party colleagues against some of the worst-performing actors in this sector. Many of the Members supporting this Bill have been tirelessly advocating in this campaign for leaseholders in their constituencies and nationwide, and I pay tribute to that work.

In the course of our work, we have heard stories of residents suffering at the hands of managing agents as they fail to conduct essential repairs, engage in threatening and abusive behaviour towards residents and even run off with hundreds of thousands of pounds of leaseholders’ money—all while providing little justification for their service or the high fees that they charge. In this process I have also met the most dedicated leaseholders, organisers who have collected testimony from thousands of neighbours to highlight poor practice, accountants who have volunteered their time to scrutinise invoices and auditing processes, and lawyers who have provided free advice to other buildings going through the first-tier tribunal.

However, without a legal system that supports them, the leaseholders remain unable to seek the accountability that they deserve from distant and disinterested managing agents. These leaseholders include my constituents in Neville House—shared owners who pay £5,000 a year in service charges for services that have not been delivered for 20 years, with reports of mould being ignored for months, and who are stuck between their social landlord, managing agent and a freeholder in a complex cladding case. They include the residents of Sheldon Square who have had managing agents ignore sewage leaking into their flats, have been billed for damage caused by contractors to their building, and have received threatening letters posted to individual leaseholders in flagrant breaches of data protection.

These leaseholders also include the residents of Oxford and Cambridge Mansions, whose managing agent and freeholder have ignored reports of gross misconduct against building staff, failed to take action on leaks persisting for years, and ignored reports of damp and mould emerging from flats that they themselves owned and were using as storage rooms, all while complex major works loom with an opaque tendering process that may cost residents millions.

Ultimately, the situation amounts to one of accountability and representation. In most cases, managing agents do not feel a need to represent leaseholders’ interests, and the only accountability they have is to the building’s freeholder, who far too often takes little interest in residents’ welfare. There are some ways out of this situation, and one is by acquiring the right to manage. That involves forming a right to manage association, recruiting half of the flats in a block to join, and submitting an application to the landlord, who can then accept it or drag leaseholders through the first-tier tribunal.

There are multiple loopholes and hurdles obstructing leaseholders from achieving even this basic step. Properties cannot have over a certain percentage of square footage of commercial space, and sometimes even flowerbeds or communal car parks get included in that. Even when large numbers of residents are in favour of getting the right to manage, and no one in the building is opposed, hitting the 50% threshold can be difficult. This is due to a number of reasons, from owners who do not reside in their properties to freeholders who retain a large number of flats in the building to let out privately or, as mentioned previously, to use as storage rooms.

This Bill would go some way to rectifying this hurdle. First, it would lower the threshold required for a successful right to manage application from 50% of qualifying leaseholders to 35%. As many campaigners have pointed out, this alone is not enough. That is why the Bill redefines qualifying tenants during a right to manage application as tenants who respond either positively or negatively when asked to vote. Put simply, it changes the threshold for a right to manage claim from, “Can you find a majority of the flat owners in your building?”, to, “Do enough of the actual leaseholders in your block want this to go ahead?”.

The Bill addresses a number of other issues too. Most notably, it establishes a duty for freeholders to assist the right to manage company when it contacts their fellow leaseholders, and it establishes a presumption in favour of leaseholders on occasions when freeholders counter-claim at the first-tier tribunal. This Bill does not go all the way to fixing the right to manage, and a number of obstacles would remain, particularly in mixed-use developments.

There are no quick fixes to the right to manage, commonhold or any other reforms. Managing blocks of flats will always remain challenging and will lead to difficult debates within buildings as to how to manage complex and expensive works. What matters is that the companies who manage the buildings are accountable and represent fairly the people who live in the buildings. Through reinvigorating the right to manage, we can achieve this. Leaseholders across the country are ready to take this step to hold their managing agents to account. All they need is for the law to be on their side.

That Rachel Blake, Lizzi Collinge, Dr Beccy Cooper, Deirdre Costigan, Emily Darlington, Marsha De Cordova, Anna Dixon, Amanda Hack, Jayne Kirkham, Uma Kumaran, Sarah Russell and Yuan Yang present the Bill.

Rachel Blake accordingly presented the Bill.