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.”
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“The conclusion I reached was that proposed new section 21D very plainly envisages the involvement of a chartered accountant—a qualified accountant; proposed new section 21E is different because it would appear to be more narrative, a more general description of the information that has to be provided. If you look at the Bill, subsection 21E(3), which entitles the appropriate authority to make provision about information to be contained in the report, is extremely broad. It refers only to “matters which…are likely to be of interest to a tenant”. That is a very wide scope. The information in effect has to be provided within a month of the service charge year-end, whereas the service charge accounts must be provided within six months.”
“Finally, proposed new section 21E of the 1985 Act talks about annual reports, while proposed new section 21D sets out the basis of the accounts and when they must be presented. What is your understanding of the difference between the report—as set out, “before the report date for an accounting period, provide the tenant with a report”— and the accounts, which have to be presented at the end of the sixth month after the period? Is there any requirement in the Bill as drafted to ensure that the information available in the accounts is greater or more detailed—indeed, in any way different—from the report? Amanda Gourlay: That is a question with which I have battled for a number of hours.”
“Q You referenced the damages under proposed new section 25A of the Landlord and Tenant Act 1985, which “may not exceed £5,000”. The tribunal does not have to award £5,000; it is a ceiling, rather than a floor. Often a single leaseholder will go to the tribunal and get an award, but they are representative of problems that all the other leaseholders have. Rather than saying that damages under the proposed new section may not exceed £5,000, would it make sense to say that damages to each leaseholder may not exceed £5,000? Amanda Gourlay: That would make sense, but damages are not an appropriate remedy in this particular situation. It is very rare that a leaseholder will suffer financial loss. It is more about encouraging good behaviour.”
“Q Thank you. Will you send me a full report on the details that you did not get a chance to share? Amanda Gourlay: I will, yes. I had no intention of making a speech, and I am sorry if I trespassed on people’s patience.”
“They would have to be seen in the light of what they would do to the scheme that is in the Bill and how the provisions interrelate. That basic uplift from 25% to 50% is significant and will enable many more leaseholders to exercise their rights. There are perhaps things around the edges, but what is there is beneficial.”
“Q First of all, let me thank you for the Law Commission’s work, which was extensive and hugely helpful. I am conscious that the recommendations on structural dependency rules have not been adopted by the Government in the drafting of the Bill. Even those leaseholders who are going to benefit from the uplift of 25% to 50% of the non-residential limit in the Bill may still be disqualified, because of the shared plant room in underground car parks and so on. Do you believe it would be preferable and helpful to introduce into the Bill at Committee stage some of the recommendations that you made on that? Professor Hopkins: I do not think I would like to comment on whether specific amendments or recommendations could be introduced.”
“Q I totally agree. It is certainly beneficial that there is the uplift from 25% to 50%. However, if one were to adopt the view that the commission take on structural dependency and those shared services, some groups would be prevented from benefiting unless we adopt the terms that you have recommended. Professor Hopkins: Yes, although you have to look at what impact that would have in terms of what is in the Bill as it stands.”
“Our report includes recommendations on the conversion of existing blocks, which is undeniably more complex than building a commonhold block from the start. We concluded in our report that commonhold was the preferred tenure because it gives the advantages of freehold; leasehold is really performing a job it was never designed to do. When I gave evidence to the Select Committee on the Ministry of Housing, Communities and Local Government, as it then was, I said that if commonhold works, you do not need leasehold. But whether you then mandate commonhold is not just a legal question; there is a political question there.”
“Q Of course, commonhold is not within the scope of the Bill. Indeed, the way in which the Government framed your remit meant that your report was closely constrained in what it could say about recommending that as a tenure. Following on from what the hon. Member for Redditch said, do you think it would be helpful to move to a system where all new build flats had a share of freehold and that that was the only tenure going forward? In effect, that would give us a foretaste, and all the caveats that you outlined to the hon. Member for Redditch could gradually be put in place around that. Professor Hopkins: It is certainly the case that it is easier to do things with new builds than it is for existing leasehold blocks.”
“Q Indeed. Currently, a leaseholder who has three or more flats in a development is instantly disqualified from participating in an enfranchisement claim. The Law Commission concluded that that regulation should be scrapped because it is hard to enforce and can be easily gamed by what I think you called sophisticated investors. You said that the practical effect of that 1993-era policy is to deprive leaseholders of the ability to buy out the freehold and to enfranchise. Are the proposals we are talking about ones you would be pleased to see introduced in Committee to get rid of that barrier? Professor Hopkins: Again, all these things are Law Commission recommendations, and I am always going to say that the Law Commission would like to see our recommendations implemented—”
“I am delighted; that is what I wanted you to say. Professor Hopkins: But I cannot say whether they are the right things or the most impactful things to add to the Bill. What is there is great and is going to be hugely beneficial. There are lots of other things in our recommendations that would benefit leaseholders—”
“Secondly, it is to pave the way for commonhold to be available so that everyone can enjoy the benefit of freehold ownership in future. But we always saw those as two entirely legitimate aims that legislation would need to pursue.”
“Q Improve the lot of leaseholders, yes. At one point slightly earlier, you seemed to give the impression that we were—I think this is the polite way of saying it—polishing an excrescence in this Bill. Is that broadly your view, and should we just get on with commonhold eventually? Professor Hopkins: No, that is absolutely not my view. Whatever happens with commonhold, leasehold is going to be with us for a long time. There are people who own 999-year leases. The system has to work. When we published our reports, we published a summary of what they were seeking to do. We identified them as having two distinct aims. One is to make leasehold work, and work better, for those who now own the leasehold and who will own it in future.”
“Q One way of tackling this would surely be to enable all leaseholders ultimately to gain the benefits that freeholders, or people who have a share of the freehold, currently have, by enabling them to convert to commonhold. Professor Hopkins: Yes. Conversion is always going to be more difficult than building from the start. We have recommendations that would enable conversion and enable more people to convert than can at the moment, where unanimity is required, but leasehold is going to be with us for a very long time.”
“Well, it has been with us for a very long time, hasn’t it? Professor Hopkins: Yes. So the system has to work, and that is what the Bill achieves in relation to leasehold.”
“Q Mr Brewis, I think we all welcome the FCA’s work to try and make things more equitable for leaseholders, so thank you for your endeavours there. I am sure you will be familiar with the Riverside case from before Christmas, in which it was discovered that an FCA-regulated broker could not provide a written contract of the insurance to the first-tier tribunal. Do you find that strange? Matt Brewis: I cannot talk about individual cases. However—”
“Q Okay. Should there be a case in which an FCA broker is unable to provide a written contract to a first-tier tribunal, would you find that strange? Matt Brewis: Yes.”
“Q Thank you. After a three-year campaign, that poor leaseholder managed to find out, through the leasehold tribunal, that £1.6 million had been paid to her landlord for the insurance services. You will be aware that this Bill outlaws commission as a permitted charge for landlords to charge. However, you will also be aware that, in that first-tier tribunal case, it was not regarded as a commission. In fact, it was accounted for as a fee, which is chargeable under this proposed legislation. How will that leaseholder know that this legislation does not allow her to be ripped off in exactly the same way as she was ripped off before? Matt Brewis: The value assessments I talked about require firms to approve what value they are providing, for there to be transparency to a leaseholder around—”
“Q How do you do that if you cannot get a written contract? Matt Brewis: Under our new rules, which came into force at the start of this year, that needs to be provided.”
“Q But that is not actually here in the Bill, is it? Would it be helpful if, under clause 31 or at another appropriate place, we were to say that a written copy of any insurance contract must be provided to all leaseholders? Then they can at least see what it is they are supposed to be benefitting from. Matt Brewis: The new Financial Conduct Authority rules around this do provide that, in a way that was not the case previously.”
“Q But the Bill does not. Matt Brewis: I believe that would be duplication of a clause that is already in the new rules from the regulator, which require a broker to provide that information.”
“Q No, sorry; there is a distinction here. You are talking about the broker providing it to the landlord; I am talking about the landlord providing it to the leaseholder. If you want transparency here, surely that also has to be part of that transparency? Ultimately, we know that it is not the landlord paying for the insurance services—it is the leaseholder. Indeed, in the case that you cannot particularly talk about, it was the landlord getting £1.6 million of a kickback for the privilege. Matt Brewis: In the event that the freeholder is not forthcoming with the contract, it is incumbent on the insurer to provide a copy of the contract to the leaseholder directly. It is in our rules that the leaseholder has the option of going directly to the insurer now, in order to get a copy of that contract, in a way that was not previously possible.”
“Q To be absolutely clear: a leaseholder can write to the insurer—the insurance company—to obtain a copy of the contract that their landlord has, which insures their property? Matt Brewis: Yes, and they will be in breach of the FCA rules if they do not provide it.”
“Q Because at the moment, there is no compulsion on the landlord to do that, is there? It is certainly not in this Bill. Matt Brewis: If you follow that chain of events, when they do not know who the broker is and they do not know who the insurer is, and the landlord refuses to provide the documentation—”
“Q Then the leaseholder has no access to the contract. Matt Brewis: One would hope—expect—that it is a very low-likelihood situation, but that would be the case.”
“Q We have made legislation on the basis of optimism before, and it has not proved successful. Matt Brewis: For some buildings that have material issues around fire safety or other issues, it can be very difficult to place insurance. It is about time and cost. There is value in the services that brokers provide, and sometimes some of that work is outsourced to property-managing agents. Assuming that is done appropriately—itemised and billed—I have no issue with the payment of commission or brokerage, where it is for services that have been rendered effectively. Where it is a blanket case, in the way that you described—”
“Q Of course, those fees for insurance services are chargeable under clause 31, in proposed new section 20G of the Landlord and Tenant Act 1985, but there is nothing in the Bill that says they have to be reasonable. The Bill says that excluded insurance costs have to be “not attributable to a permitted insurance payment”, but not that they have to be costs that are reasonable. There is a difference between a permitted insurance payment and a reasonable permitted insurance payment, is there not? Matt Brewis: My understanding is that the secondary legislation that will follow will set out what those are.”
“Q God bless the Secretary of State! So we are waiting to see whether the Secretary of State introduces the word “reasonable”—or would it not be better to have the word on the face of the primary legislation? Matt Brewis: One would still need to define reasonable.”
“I have one estate in my constituency where they were charging residents for the management of land that they did not even own. It took us months to get the documentation to prove that they did not own that land. The fence that they had mended had actually been mended by the council. Other things like that are going on, but if that restriction were put in place in the first place, they would not be able to do it, would they? Cathy Priestley: Our understanding is that the land belongs to the developer. It is not public until it is made public through section 106 agreements with the council.”
“Q Halima and then Cathy, let me pick up this business of the fleecehold estates, as you refer to them. They are a relatively new thing in leasehold; they were not there in the same way 20-odd years ago when we were passing the Commonhold and Leasehold Reform Act 2002. They have been seen as a revenue stream for developers. Do you think that it would make sense for local councils, when they sell public land for housing development, to insist that that public land should not be used for a private estate model in this way? Developers can of course build the homes and you can buy them, and they can make their profit from the payments that you make to buy those homes, but they should not then have an ongoing source of revenue from the substandard management, as you described it, of the estate.”
“Q I understand what you are saying, but I am referring specifically to when a council makes available land that has been publicly owned by it to developers for development and puts that restriction in place. Cathy Priestley: Well, yes, you would not want more and more privatisation, would you? I do not think any policy is in place that is pushing for privatisation of the management of public open spaces, is there?”
“Now, what the freeholder lobby will say when they come on later is, “There are only about 80 to 90 cases a year.” That is potentially 80 to 90 homeless families a year. More important, in a way, is that it is the threat of forfeiture that gets leaseholders to go, “Oh my God, I’m going to pay that bill.” My mum is on £33,000 a year, for a three-bed with no swimming pool, no gym and no garden. The freeholder is one of Britain’s richest men, sheltering in a tax haven in Monaco—a billionaire. Everyone who is not a leaseholder says, “Why would you pay that? That’s more than someone’s salary.” She says, “If I don’t pay it, I’ll lose the property.” So get rid of forfeiture.”
“Q Mr Scoffin, you talked about this issue having wasted six years of your life; I think it has only wasted about 25 years of mine, since before the 2002 Act. You spoke about future development. What would actually make it better for existing leaseholders? There are things in the Bill that I think do improve the lot of existing leaseholders, but how can we make it even better? Harry Scoffin: There are a number of quick wins. One is to get rid of forfeiture, because that allows these freeholder overlords to extort money from ordinary people. It is not like mortgage foreclosure, where if you cannot keep up with the mortgage payments you get the difference back less the debt; with forfeiture, in theory, a freeholder could take back a £500,000 flat on a £5,000 bill.”
“Do you know how much work that has involved? It is cornering people in lifts, paying the £3 to the Land Registry, doing some weird investigations. It is Herculean. You have to go back to 1931 in this country to find a political party that has won a general election with 50% of the vote, so why is it fair for residents who are being ripped off to be told, “You need to get 50%”? That should come down, because most big blocks, particularly the newer ones, will never hit 50%, and given that the Government are talking about a long-term housing plan and about building up in the cities, we have to make flat living work. We have the second lowest proportion of flats of any country in Europe, after Ireland—”
“That is something that the Law Commission already recommended. We can get that into the Bill. Another point to note is that if you cannot participate, for whatever reason, in buying the freehold—you do not have the money to join your neighbours—in perpetuity, you will never be able to buy that share of the freehold ever again. If you cannot get the money together, you are out. That needs to be sorted. The right to participate was very popular with the Law Commission consultees. That absolutely needs to happen. There is one last thing. Nickie Aiken MP and other MPs, such as Stephen Timms, have been pushing on this point. At the moment, to buy the freehold or get right to manage, you have to get 50%. In our building, which is 20 years old, we are very lucky that we have managed to get 82% of the leaseholders.”
“It needs to be allowed that a manager appointed under the Landlord and Tenant Act 1987 can be the principal accountable person where a tribunal deems it appropriate. There is one other major point. At the moment, many people may stand to benefit from getting the right to manage or buying the freehold, with the 25% rule going up to 50%. I know that because I have campaigned for it for the last six years. Nick Hopkins at the Law Commission used to have a joke that he would probably have to take out a restraining order against me, because I really pushed on this issue. The problem is that there are so many people who would benefit from that, but if they have that plant room or that underground car park, they still will never be free. They will never be able to get the freehold or right to manage.”
“What is happening at Canary Riverside is that the freeholder—the same one that we have—is looking at getting back a building that he was removed from controlling in 2016. There was even a letter from the Secretary of State to the leaseholders, which they cleverly submitted to the tribunal, saying that he was the man who passed this Act and he genuinely, honourably, had no idea that that was the implication. That is another thing, because many blocks are not going to be able to buy the freehold or be able to get right to manage. They are in a monopolistic position with these freeholders. If there is no ability to buy the freehold, you are trapped. In our building, we cannot sell the flats. We cannot even give them away at auction.”
“The freeholder, who has been stripped of his management rights—because, basically, he has defrauded leaseholders or been absentee, is not doing remediation works in a timely manner, or is not giving information—will now be the accountable person. But the manager cannot manage the building, because you will have two managers for one property. The tribunal for Canary Riverside—I add a disclaimer that this is my sister estate; we have the same freeholder, so I was there at the tribunal—said that, as much as we would like to help the leaseholders at Canary Riverside, Parliament has made it very clear that, while a non-freehold owning right to manage company or a non-freehold owning resident management company can be the accountable person, a court-appointed manager specially vetted by the tribunal is no longer allowed to be one.”
“Since the Building Safety Act came in, there has been a very interesting regime about the accountable person, trying to make developers and freeholders take responsibility for their buildings. This was heard in tribunal in December—I was there—and I understand that Michael Gove has taken a personal interest in this, but there is again no guarantee that we can get the fix. The problem is that, at the moment, any building over 18 metres cannot have a court-appointed manager, because the court-appointed manager cannot be the accountable person. It is like an aeroplane being flown with two pilots flying in completely different directions.”
“Q Was forfeiture not part of the 2002 Act? Harry Scoffin: Yes. They draw it out. There is a process now in the courts, where you can go, “Oh, I forgot to pay it” or “Here’s the money.” The point is that it does not give leaseholders the confidence to challenge unreasonable bills. They have the sword of Damocles hanging over their heads—they are being treated almost like criminals. The Law Commission recommended in 1985, in 1994 and more recently in 2006 getting rid of this iniquitous element, arguably the most feudal element of leasehold. It has not been done. The Government recently asked the Law Commission to update its 2006 report, so we know work has been done, but it is not in this Bill. I think you spoke earlier today about this section 24 business. That is a really important issue that many Members may not be aware of.”
“So the fact is that at least on right to manage, where you are not compulsorily acquiring the freehold interest, it should at least come down to 35%, in line with the suggestion from Philip Rainey KC, whom you will be hearing from on Thursday. The London housing and planning committee also said that 50% is very, very difficult in large developments, particularly in London. So that does need to be thought about at least—it coming down on right to manage.”
“Harry Scoffin: Some leaseholder advocates say, “We do not touch the 50%,” and I do not understand them for it, but the fact is that they just say, “Give leaseholders more information.” I have to be honest: even once you have got in touch with guys from Singapore, Hong Kong, the middle east and all the rest of it, when you try to explain what leasehold is, it goes over their head; when you say “right to manage”, it goes over their head. They say, “Well, I’ve bought the flat. I don’t need to get involved.” And then you say, “It’s £2,000 or £3,000. We all need to do it—each—to club together.” These guys are mean—some of them—and they are not going to get involved.”
“Q Sorry, can I just ask you to amplify what you were saying about the 50%? I understand the difficulty, if you have 900 people in a high-rise block, to co-ordinate to get 450 plus one to do it, but surely many of those apartments will be buy to let, so you may not ever be able to meet or get in touch with the actual leaseholder. You are going to be able to do that only through a subtenant, and that makes it almost impossible, doesn’t it?”
“Ms Ali wants to come in. Halima Ali: I just want to make this specific point. It is clear that rules and regulations regarding leasehold and RTM are not working. It is very—what is the word, Cathy?”
“Q Unfair? Unjust? Inequitable? Halima Ali: It is very unfair and inadequate, and it makes no logical sense for freeholders on a private estate to be given the same rules and regulations when it is not working for leaseholders.”
“Q Mr Bulmer, would it not be easier for your members to just pursue a claim in the county court, rather than go through the whole business of forfeiture in order to recover what are sometimes actually quite trivial sums? Mr Andrew Bulmer: Would it be easier? I am not entirely sure. A substantive point was well made earlier. At the very minimum, there was a call for the equity that is left in a forfeited property to be returned to the leaseholder.”
“Q Just so that the public and everybody is absolutely clear on this, at the moment, for a debt to your freeholder in excess of £350, you could lose the entire property, valued at several hundred thousand pounds, and the difference is not given to you. Is that correct? Mr Andrew Bulmer: As I understand it, that is absolutely correct. Yes, the freeholder takes a lot. Just to be clear, it might just be worth saying that we represent only managing agents. We do not have freeholders as members and we do not represent freeholders. That is sometimes misunderstood and, while I am clarifying, probably 50% or thereabouts of the estates that my members manage are RMC controlled. We also have members in Scotland who are freehold entirely, so we are very comfortable with freehold, commonhold and resident control.”
“We ask for the sources of stress, and they include the cost of living and things external to their work, but it is roughly equally balanced between freeholders and leaseholders.”
“Q Your members do come in for a lot of flak, I know, and I just want to put it on record that I do not think that they are only the agents doing wicked freeholders’ biddings. They have a difficult job to do and many of them do it well. Do you find that your members’ mental health improves when they are dealing with tenants who are in a right-to-manage block, where they have that sense that it is they that are in ultimate control, as opposed to dealing with people on behalf of a freeholder who has that control? Mr Andrew Bulmer: We do a mental health survey of our members. We have done it now for, I think, three years. I am sad to report that the answers of property managers to the question of “Is your life worthwhile?” are in the bottom 17% of the UK population, which is certainly a cause for concern.”
“Q So people can be equally bloody minded whatever they are. Mr Andrew Bulmer: I think it rightly places property managers roughly in the middle of all this. Shall we say that?”