Barry Gardiner
MP for Brent West · Labour · United Kingdom
“Sir Desmond, imagine that the top brains in the country’s security and intelligence community produced a report that told you how to save the world. You would want to see it, right? Well, the report we are discussing is not about how to save the world; it is about what happens if we do not.”
“The nuclear threat will rise as clashes between nuclear powers become more frequent. Those are the cold assessments of the Joint Intelligence Committee. The Government were right to think that those assessments might scare people—they scare me—but they were wrong to think that they could hide them from the public.”
“The Minister will know that the grant structure on which UKRI is based gives out grants for a maximum of three to five years. Very few are for five years—most are for three years or under—yet the sort of long-term scientific development that my hon.”
“My hon. Friend is making a superb case for the importance of funding for her deep earth facility. I had the privilege of going to the National Oceanography Centre’s deep oceans facility, and the innovative science there on carbon sequestration is superb.”
“The Prime Minister has spoken powerfully about the devolution of power and giving back control. Will he therefore ensure that the proposals for commonhold and leasehold reform, for which 5 million leaseholders in this country are waiting with bated breath, do give that power and control back to those people, through the right to enfranchi…”
“We know how much land there is in the UK, and we know the extent of our inland waters and seas, so we can know how much we have to do to protect them, as we are required to do by target 3 of the global biodiversity framework.”
The complete record
Every one of 5,406 lines we hold for Barry Gardiner, in date order, each linked to its source. Free to read, in full, without an account. Page 13 of 109.
“Q If I can prevail on you for just a little longer, could you explain the just and convenient test, and how the BSA has affected that? Philip Rainey: The just and convenient test is effectively an equitable test. It is a very flexible test intended to allow the first-tier tribunal to take into account all of the circumstances and, in layman’s terms, to decide whether something is just, fair, convenient and going to work—the rights and wrongs and the practicalities of it. Because of the ongoing case, I do not think I can answer the second part of the question, as to how the Building Safety Act 2022 might have affected that.”
“Q I want to pick up on what Mr Carter said and your insistence that capping rents was sending the wrong signal to pension funds. I trust you are aware of the statement from the Pensions and Lifetime Savings Association that said that pension funds aggregate allocation to all types of property—commercial as well as residential—and that accounts for 4% of all pension holdings, and that none of their members have expressed any concerns with them about proposed changes to rules affecting leasehold and ground rents. Were you aware of that? Jack Spearman: Yes, I know where that came from.”
“Well, it came from the Pensions and Lifetime Savings Association. Jack Spearman: I would advise you to go and ask them again, because the pension funds we are talking about have made representations directly to the Government.”
“Over the past 15 years, they have created a rentier structure wherein they can extract revenues from the ground rent that are exorbitant—in some cases, £8,000 a year for no service. Is that not true? Jack Spearman: You make a couple of points there. First, you seem to be suggesting that it is okay to steal the chocolate bar from the shop because it is only 1% or 2% of the stock—it is still not okay. The second thing I would say is that—”
“Q If we are talking about, “Directly to the Government”, the Government’s own statement noted that the pension funds held less than 1% of assets in residential property, and added that any hit to pension funds would be within normal investment and depreciation tolerances. They said: “We do not think it is fair that many leaseholders face unregulated ground rents for no guaranteed service in return.” So the idea that you seemed to put out—“My goodness, the housing market was going to collapse because pension funds were not going to invest in property any more because they weren’t going to be able to extract the ground rents”—is a nonsense, is it not? You talked about £100 ground rent, but you know what is being done here. Your members are not limiting to £25 or £100 ground rents or peppercorn rents.”
“Q Nonsense. Justify the word “steal”. I would say the word “steal” is justified when there is no service being provided, and yet you are charging for it, even if it is only a chocolate bar. Jack Spearman: I can come on to the service provided. Ground rent is a consideration as part of the lease and the premium. You are right to say that, technically—legally—the ground rent does not afford service. But we would say that, through our members, a huge amount of work gets done as a result of that ground rent and as a result of pension funds having invested in it. Take the Building Safety Act 2022, for example—remediation, fire safety audits and building safety audits are all undertaken at no cost.”
“Q Remediation—because the freeholder did not ensure the proper safety of the building in the first place. Jack Spearman: I disagree with that.”
“So you went out to people who had no connection as leaseholders and surveyed them, and then claimed that was an argument.”
“Q Mr Spearman, since we have limited time, let me turn to what you are saying to the members of the public. You have engaged in a number of polling operations. You have told people that only 1 in 4 people in a block would be able to agree with each other about how to manage that block. The implication is that many leaseholders do not want to take on the burden of management and, actually, some of them are incapable of taking on that burden of management—almost as if you are providing them with this wonderful service that they would not want to get rid of. But the figure of 1 in 4 people that you quoted in your survey was 1 in 4 people in the United Kingdom, and not leaseholders at all, was it not? It included people in Scotland who are not involved in the provisions of leasehold in England and Wales.”
“Indeed. Mr Spearman, you have misled people in the polling surveys and the conclusions you have drawn from them, have you not? Your own members—Consensus Business, Long Harbour and Wallace Estates—did surveying in which they found that 67% of residential leaseholders said that they would wish to take control of their building and get out from under you, but you suppressed that, did you not? Jack Spearman: We have never said that people are incapable of managing their building—absolutely not. The desire to do so diminishes with the complexity of the building. I am sure you have seen the Government’s own survey on living in shared buildings. You heard from Professor Steven this morning in Scotland about the issues with the system in Scotland—”
“A manager who works for a freeholder can be no different from a manager who works for an enfranchised set of leaseholders, can it? So the idea that the complexity is beyond the leaseholders is simply not a fair comparison.”
“I have looked into this. I have had various conversations with various lawyers. It still just seems bizarre that the manager who has been appointed by the court cannot be the accountable person. I am just a simple man: I do not understand why that cannot happen—why the Government, or the judge, based upon the legislation that is out there, think it is a reasonable or positive outcome for that money to go back to that rogue landlord, shall we say. I do not get it, to be honest.”
“Related to that, I know you are aware of the Building Safety Act 2022 ban on section 24 managers being the accountable person. This is a matter we have discussed with a number of witnesses such as yourself. Are you aware that at one development, the management control regarding safety and remediation was given back to a freeholder who was the one who took, the tribunal found, £1.6 million in insurance commissions unreasonably? They will now be handed £20 million because of that BSA anomaly, by the Government. So the very people who could not be trusted with money are now being given £20 million to remedy the defects that they were responsible for in that building. Giles Grover: I am very aware of it. I have watched some of the sessions, and I was made aware of it last year by one of the leaseholders at that building.”
“Q First, may I declare an interest? I am not sure whether it is necessary, but our witness Mr Grover participated in a documentary that I am making about leaseholds, so we have a knowledge of each other. First, Mr Grover, thank you for all the campaigning that you and your colleagues in End Our Cladding Scandal have done; it has been magnificent over the past few years. You raised the issue, in response to Matthew Pennycook’s questions, of section 24 of the Landlord and Tenant Act 1987 and applying for an officer of the court to be installed to do the works and turn around a building. Clearly, it would be something much to be wished, for many people who found themselves involved a building safety issue, if they were able to do that.”
“Our developer sold the freehold out from under us to an offshore freeholder who, one year before the building safety crisis took effect, said they did not want to sell the freehold because they were long-term investors. A year or so later they said, “Okay. We are transferring it to another company. Do you want to buy the freehold off us?” Because they saw—”
“Q Have you come across cases like one that I have in my constituency? It was a co-development between St Modwen and Soucrest, but when the provisions that the Government put in place came into force, they changed to Wembley Central Apartments Ltd. That name was then changed to Wembley Residential Ltd, and they now have their offices at, I think, Cricket Square, Grand Cayman in the Cayman islands. Do you have other examples of the ways in which freeholders are using company law to avoid their obligations under this Act and in fact relocating to jurisdictions outwith the UK? Giles Grover: Yes. I only have 20 minutes, so I will try to be brief. I could spend all day talking about that. I have had personal experience of that in my building.”
“One is applied by the Association of Residential Managing Agents—the Property Institute, as it is now called—and sets out that managing agents should hold separate bank accounts for each of the sites that they manage. The Royal Institution of Chartered Surveyors’ code does not require that. I am aware from experience of my and other sites that, in the recent period of higher inflation, some managing agents used consolidation accounts, accrued the interest in the service charge funds to themselves and passed very little on to the leaseholders. So yes, I think it would be very helpful if we had greater transparency and protection.”
“Q Mr Boyd, you just spoke about the accounting of funds. At the moment, there is no requirement to show any separation between sinking or reserve funds and the normal service charges for managing the property. Many leaseholders have suggested that that is a problem, and that they are not clear what is happening with their sinking fund. Sometimes they believe that the moneys that were there for future capital works on the property are being raided. Would it be a good idea for the Bill to contain something that enabled leaseholders to see precisely what was happening to those reserve or sinking funds? Mr Martin Boyd: There were proposals in sections 152 to 156 of the 2002 Act to help to improve protection for leaseholders’ funds. Currently, we are left with a set of voluntary codes.”
“That was one of the things that annoyed me when I found out about it over a decade ago. It is not something that we would argue for now.”
“Q Indeed. You nicely lead me to my other question, which concerns something else that was in the 2002 Act but was never brought into effect: the provision that, if the landlord had not complied with the rules around service charges and the charges were unfair, leaseholders should be able to withhold their service charge. I have no idea why that was never brought into effect, but would it be a good idea? The Bill sets out extensive obligations that have to be followed in relation to service charges. If those are not followed, should leaseholders have the right to withhold the service charge? Mr Martin Boyd: I can tell you why it did not move forward. One of the reasons it did not move forward is that, when there was a consultation, the organisation that I now chair argued very strongly against the implementation of that section.”
“Liam Spender: I agree; you have summarised it very well. To borrow a loose analogy from company law, there is something called a tag-along right. If someone comes along and buys a certain proportion of shares in a company, the other shareholders can exercise the right to tag along to join the purchase. That could be adapted to those who do not participate in an initial enfranchisement to address exactly the issue that you raise.”
“Q Mr Spender, I want to ask you about what I find to be one of the more complicated aspects of the Bill: the leaseback arrangements. Nominee purchasers can require a landlord to take a leaseback on certain units. Those are the units that, in an enfranchisement process, are not participating in the enfranchisement. You might have a block of 100 units, and 30 of them do not go in with the leaseholders who want to enfranchise. At the moment, they are then, in perpetuity, leaseholders, are they not? They cannot ever enfranchise because the others have already enfranchised. Should there not be a provision in the Bill to enable those locked-in leaseholders—if they have the money in future, because many times it will be because they did not have the money available at the time to participate—to buy their share of the enfranchisement?”
“Q Grand. If I can pursue that area, at the moment, the lease is granted to the demoted freeholder—so they become the head leaseholder, perhaps, and the other leaseholders are now subject to the head leaseholder. Their contract was always with the previous freeholder, who is now the head leaseholder. Should there not be some provision in the Bill that requires those minority leaseholders, who are still in a relationship with the former freeholder, to actually pay their service charge to the new freeholder? But there is not, is there? Liam Spender: I think the provisions introduce a degree of complexity into buildings because, exactly as you say, you are creating a new class of landlord. That could be solved by—”
“Q But the specific question I want to probe with you is whether there is any provision in the Bill to require the minority leaseholders who did not enfranchise to pay their service charge to the new freeholder, namely the majority who enfranchised. I cannot see where that contractual obligation lies in the Bill. All I can see is that they will continue to have a relationship with the previous freeholder. Liam Spender: That is right: there is no statutory mechanism to transfer to the newly enfranchised freeholders.”
“Q So you think the Committee should look at that very carefully. Liam Spender: The Bill creates a lot of new areas of complexity, and that is certainly one that would merit detailed attention.”
“We welcome the increase to 50%, but they are very creative when they design these buildings, with the underground car parks and stuff, as to what they can do to exclude the leaseholders from taking back control of their blocks. It is all about trying to have control over people’s homes. We should be able to control our homes—what is spent. No one is saying that you should not have to pay service charges, but it is about being in control of who provides those services. At the moment, leaseholders have no control. They just pay the bills.”
“However, the Law Commission actually said something specific about whether you should be allowed, if there are shared services such as the car park or the plant room, to be able to take over control, because the flats—the leaseholders—would only have control over the plant room as it related to their block. Is that a provision that you think should be introduced? Otherwise, it makes a mockery, to a certain extent, of increasing from 25% to 50% if you are still going to be precluded from gaining control of your block because of the plant room or shared services. Katie Kendrick: Yes, there are clever ways in which they exclude people from being able to do that.”
“Q I apologise because I came in slightly late today, Chair, so I do not know if people have declared their interest. I should say that I am a freeholder; I am not a leaseholder. I have been a leaseholder in the past, but always with a share of the freehold. Ms Kendrick, you said that there were things that the Law Commission report had talked about that have not been included in the Bill. One of those is in relation to shared services. Often, in a mixed development, if there is a commercial element to the block of flats, with flats above, you will find that there is a common plant room or a common car park. I welcome the provisions in the Bill that say that you can go from 25% commercial to 50%; that is a good move.”
“Q If commonhold will not be in the Bill, would you support a principle that all future leasehold flats should have to be sold with a share of the freehold? Katie Kendrick: Absolutely.”
“Q And that any residents’ association should be able to have the management of the block? Katie Kendrick: Absolutely. If they are saying that commonhold is not ready to rock and roll, to have a share of freehold to mandate, a share of freehold for new flats moving forward would be a good step closer.”
“You might have just enfranchised and got the right to manage your own block, yet there is now an appointed person who will be told by the court that they have the right to manage the block. Very often, it will be the person you have just liberated yourself from. You will have just enfranchised yourself from that freeholder, only to find that they are now back in control. Do you feel there is a way in which the Committee should try to remediate and address that problem when it is looking at the Bill, and do you have any ideas as to how we should go about it? Cath Williams: First of all, the situation that flat leaseholders are in at the moment, where they have building safety issues and leasehold issues, is so complex. It is horrendous. We hear daily in the National Leasehold Campaign about these poor leaseholders.”
“Q I want to ask you about this whole business of people being unable to sell, and, in effect, the interaction between what the Government have tried to tackle in the Building Safety Act 2022 and what we have in this Bill. Under the Building Safety Act, the provision is to appoint a designated person—an agent—to deal with the safety of the building. Often it will be the developer who is responsible for the remediation of a building that has fire safety defects and so on, which the Government are quite rightly trying to address, but they will argue that it is not possible to do that unless they have control over the management of the block as a whole. Therefore, there is a conflict between the Building Safety Act and the provisions in this Bill to help leaseholders gain the right to manage.”
“People have committed suicide, have they not? Cath Williams: People have committed suicide, yes. That is worth noting. They ask for advice. We have never been flat leaseholders; that is the first thing, but there is a lot of support in the group to try to help people navigate their way through the Building Safety Act first of all, and now we have this Bill as well. In principle, I think they would really welcome some sort of cohesion between the two. I don’t know what that would be; it is really hard. Katie Kendrick: It is really difficult because we are encouraging people to take control, but by doing that they are liable for more of the building’s safety. The two Bills have to work together.”
“We also fear that, in terms of the timetable for legislation and getting this through, the sector will fight intensively and try to tie this up in the courts for years. It has nothing to lose; why wouldn’t it?”
“It was unjust in the first place, and it would be much better if the Government simply moved the consultation onwards and got rid of it. Cath Williams: Yes. Jo Derbyshire: The Leasehold Reform (Ground Rent) Act 2022 has essentially created a two-tier system where you have new builds without ground rent. As Cath mentioned, we are concerned that clause 21 and schedule 7 of the Bill seem to say a qualifying lease for buying out to a peppercorn rent must have a term of 150 years. We have seen lots of examples in the National Leasehold Campaign of new build properties—flats in particular—where the lease is 99, 125 or 150 years from the start, so a whole swathe of properties would be automatically excluded. However, for us, because ground rent is a charge for no service, peppercorn is the answer.”
“Q You have talked extensively about ground rent and, Ms Derbyshire, your situation with it doubling. We all know the story about the inventor of chess, who asked for a grain of rice on the first square as his reward as long as it doubled until the last square, and then there was not enough rice in the world to provide it. This is clearly inequitable. You said that you welcome the provision in the Bill to be able to get rid of ground rent—to take it down to a peppercorn. Given that we have the consultation at the moment, would it not better if the Government just did that rather than you having to pay for it, which is what is recommended in the Bill? You should not have to pay to get out of a situation that is unjust.”
“Q I understand that you were involved in the Canary Riverside judgment just before Christmas. Amanda Gourlay: That is correct—yes. Forgive me; I was involved in Canary Riverside between 2016 and 2017. My involvement finished in June 2017.”
“Q Thank you. But you are aware of the judgment that came through just before Christmas in the case. Amanda Gourlay: I am not sure that I am—no.”
“Q Were you involved in relation to the uncovering of the £1.6 million commission for insurance? Amanda Gourlay: No, I was not involved in that element of it.”
“How should we address that problem in the structure of the Bill? Amanda Gourlay: I do not think you need to do that in the structure of the Bill. Casting my mind back to the Building Safety Act, which is now in second place to the Leasehold and Freehold Reform Bill in my mind, my understanding is that there is provision for a special measures manager in that Act. If that were brought into force, one would have a recourse. I am very happy to open my computer and look at the Act, but I do seem to recall that there is provision for a special measures manager to take over the building safety or the accountable person role in a manner of speaking. I say that in the loosest terms, without having checked the law.”
“Q In that case, I am probably better putting those questions to a later witness. In relation to that case, and on the accountable person provisions and section 24 amendments in the Building Safety Act—this relates to a question I asked earlier—the tribunal decided in the Canary Riverside case that the section 24 manager cannot be the accountable person, and that risks the section 24 management order failing, and the failed freeholder coming back to take control of the leaseholders and their service charge moneys. The implications of that decision really are quite dramatic. It means that the lifeline of the section 24 court-appointed manager provision from the Landlord and Tenant Act 1987 has been removed from leaseholders, particularly those who cannot afford to buy their freehold or do not qualify for the right to manage.”
“Clause 28(2) inserts proposed new section 21D, “Service charge accounts”. Subsection (2)(a)(i) talks about the variable service charges “arising in the period”.”
“Q I am sure Ms Maclean will have details from her past life. Thank you for that—it is extremely helpful. You referred to clauses 27 and 28 and said that the word “arising” was one that troubled you. Could you point us to which clause that is in, so that we can be clear about it? You will have heard the question I put to another witness about making provision in the Bill, as there had been, although it was never brought into play, in the Commonhold and Leasehold Reform Act 2002, for leaseholders to be able to withhold their service charges if all that is set out in proposed new sections 21D and 21E has not been complied with? Amanda Gourlay: There is always a concern looking forward as to how things might play out. I will deal your question on “arising” first, then come to your other point.”
“Ah, “arising in the period”. Gotcha. Amanda Gourlay: Turning to the second part of your question, one of the very big difficulties with the reform of leasehold is that good and bad—to put it in very binary terms—do not sit on one side or the other. While it seems to me that in an appropriate situation it would be entirely reasonable for a leaseholder to be able to withhold their service charges, there may equally be leaseholders who consider that this is an opportunity not to pay, for different reasons. There is always that risk. If one does not pay one’s service charge and is obliged to do so—for example, by going to tribunal and the tribunal says that actually £2,000 is payable—one is at risk of legal costs, which I am sure we will come on to in relation to the risk of forfeiture.”
“It is the most draconian form of enforcement. One should always bear in mind, however, that if a third-party management company—a residents management company—is obliged to insure a building and has absolutely no wherewithal to insure it, there is that risk. Things may need to be done that simply cannot wait but, in principle, I see no reason why that should not be a remedy for failure to follow the process.”
“Q I was thinking not so much about where there is a dispute over reasonableness but more about whether the process that is set out in proposed new section 21D had been followed—for example, someone had not laid the accounts within six months and had not gone through all the set requirements in the Bill. Rather than it being a dispute about substance, the charge would be withheld on the basis of a failure of process by the freeholder. Amanda Gourlay: Yes, and I understood your question that way. I think my concern is that if there is a minor breach, is that simply a situation where we withhold service charges entirely? The question is the nature of the breach and whether it is or is not a breach. In principle, I would agree that it would be a sensible form of enforcement, because it is the absolute.”
“Q Although I said at the outset that I would not pursue the insurance costs with you, I think we can probably agree that the £1.6 million commission that was ruled illegal will take out the idea of commission—but that will move to fees instead. Given what you said about “arising”, do you have similar fears that fees for work charged might also open that up to a multitude of sins in the Bill? Amanda Gourlay: Do you mean generally, or in relation to insurance?”
“One would hope that there would be degrees of transparency, but of course there is no obligation to account necessarily for the fees, save for the limitation of administration charges and the obligation to publish a schedule of fees of administration charges. Again, however—I am sorry that I am providing such long answers—where it comes to publishing a schedule of administration charges, that is quite straightforward for most cases, but clearly if someone wants to carry out a significant change to a flat on the 15th floor of a building, the costs will be difficult to quantify in advance. There is still wriggle room, I think, in the administration charge limitations for costs to be higher.”
“In relation to insurance—because it will no longer be possible to charge commission, but it will be possible to charge a fee. Amanda Gourlay: That is always a risk. In fact, that is a risk across the whole Bill where more obligations are imposed on a landlord. If the costs of those obligations are recoverable under the terms of the lease as part of the management, it is almost inevitable that charges will go up. They will have to: I am going to have to do more work, so I would like to be paid more.” The only control of those that we have at the moment is under section 19 of the Leasehold Reform Act 1967, which is whether the costs are reasonable in amount for the standard of work that is provided.”
“While I am on that point, proposed new section 21E is enforceable under the enforcement provision, which I think is clause 30; rather peculiarly, however, proposed new section 21D is not. I invite the Committee to consider whether that new section 21D should be brought within the scope of clause 30.”