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Leasehold & Freehold Reform Bill Second Reading

13 December 2023

On Monday, 11th December, the House of Commons held its Second Reading of the Leasehold and Freehold Reform Bill, presenting Parliamentarians their first opportunity to scrutinise and debate the piece of legislation, initially announced in this year’s King’s Speech. 

Despite being passed to the Public Committee stage (which was recently announced as ending on Thursday 1st February 2024), and both the Government and Opposition supporting the Bill, there was rigorous debate, more on what was not included in the Bill than what was. For example, great attention was paid to the fact that the Bill in its current form, does not ban leasehold tenure in any capacity, nor does it cover leasehold flats. Surprisingly, there was also great mention of the lack of regulation of managing agents within this Bill, with many MPs raising the need for this regulation to be introduced during this Parliament. 

Many of the issues raised by Parliamentarians during this debate aligned with the briefing sent to MPs at the end of last week, offering a positive opportunity for The Property Institute to continue to position itself as the go-to industry voice in this area, particularly on the topic of regulation and mandatory competency standards, and the work of Lord Best’s Working Group – we have summarised some of the points made below.

The debate is compelling viewing, and we encourage our members to find some time to watch the TV clip, linked below, particularly the first 30 – 40 mins, to listen to Secretary of State for Levelling Up, Housing, and Communities Michael Gove, shadow Levelling Up, Housing, and Communities Secretary Angela Rayner, and Sir Peter Bottomley MP.

Summary of key points:

Bringing the Bill before the House, Secretary of State for Levelling Up, Housing, and Communities Michael Gove: 

  • Explained that leasehold is a form of tenure where someone is invited to buy a home, but is then, instead of becoming a full homeowner, they are treated as if they were a tenant.
  • Described the leasehold system as fundamentally unfair.
  • Contested that individual leaseholders should not have to rely on the “good will and good character” of their freeholder.
  • Added that the building safety crisis has underlined the challenges and failings of the leasehold system.
  • Noted that freeholders were not queuing up to remediate buildings identified as requiring building safety remediation.
  • Explained that the Bill will ensure, through later amendments, that there is a ban on new leasehold homes.
  • Outlined that there is an on-going consultation on ground rents, following which the Government will legislate to ensure that ground rents are reduced.
  • Said that ending the system of leasehold is not about undermining property rights and is instead about supporting property rights and the rights of leaseholders.
  • Described the Bill as substantive, adding that he believed that it would make leasehold a thing of the past.

Speaking for the Opposition, shadow Levelling Up, Housing, and Communities Secretary Angela Rayner:

  • Said that the Opposition does not intend to oppose the Bill.
  • Added that leaseholders have been waiting too long for the Government act on reforming the leasehold system.
  • Noted that the “botched” drafting of the Bill ensures that there are no clauses that actually ban new leasehold properties – flats or houses.
  • Criticised the fact that even when new clauses to ban new leasehold houses are introduced, no ban will be extended to leasehold flats which make up 70% of all leasehold properties.
  • Asked whether the Bill would be amended to include a ban on pet-prohibiting clauses in leases, as the Renters (Reform) Bill does for tenants.
  • Said that a Labour Government would make commonhold the default tenure for all new properties. 

Regulation of our sector

The regulation of managing agents was a major topic of debate. Some key points raised in the debate, included:

  • Secretary Gove acknowledged that the recommendations of Lord Best’s working group would fix many of the issues surrounding less scrupulous firms, stating: “Strong arguments have been made about how property agents can be better regulated and Lord Best in another place has made arguments that I find incredibly persuasive—so why not legislate for them now? Well, as I mentioned earlier, this Bill has many clauses, deals with technical aspects of property law, requires close scrutiny and is likely to face a lobbying exercise from deep-pocketed interests outside attempting to derail it. Legislating to give effect to Lord Best’s proposals and to set up a new regulator—I am always a wee bit wary about setting up new quangos but on this occasion he makes a good case—would require significant additional legislative time of a kind we simply do not have in the lifetime of this Parliament.”
  • Responding, Ms Rayner, stated: “He makes a really important point, and he is right to point out the huge problem of estate agent charges and fees. The steps the Government are taking to address the issue are welcome, of course, but we absolutely believe there is room to improve the measures in the Bill. The shadow Housing Minister, my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook), will look to do so in Committee.”
  • Wendy Morton (Conservative, Aldridge-Brownhills) made a statement, calling for a regulatory model for managing agents, greatly in keeping with The Property Institute’s ask. Furthermore, Ms Morton continued to praise the code of practice for estate management companies: “There is also a strong need for a new regulatory model for managing agents. Under the current system, anyone can become a managing agent, regardless of experience. Unfortunately, many leaseholders report countless problems with their agent, from high service charges to lack of transparency or exclusion from decision making. Of course, there are some managing agents who perform well and choose to sign up to standards of practice, but there are many who do not. This, for me, is a clear case of a moral hazard. It must be addressed, and we have the opportunity to do so through this Bill.”
  • “I am pleased that the Government have committed to regulating managing agents through a single, mandatory and legally enforceable code of practice. Managing agents will be required to have a nationally recognised qualification to practice, which will be overseen by an independent regulator. By requiring them to adhere to minimum standards through a professional body, we can expect to see higher levels of professional conduct among all managing agents.”
  • Later during the debate, Samantha Dixon (Labour, City of Chester) raised Lord Best’s working group recommendations, and the Labour party’s intention to legislate these if they win the next election, stating: “Missing from the Bill is the regulation of property agents. The single biggest rip-off in the leasehold system is service charges, and without robust regulation of this, it will continue and leaseholders will remain at the mercy of bad managing agents. On the Opposition Benches, we are committed to implementing the recommendations of Lord Best’s working group, which were published by the Government four long years ago and on which they have sat.”
  • Whilst discussing the National Leasehold Campaign’s view of what was missing from the Bill, Ian Byrne (Labour, Liverpool, West Derby) stated that a key piece of legislation that needed to be amended to the legislation was: “The regulation of managing agents, as we have heard about today; and making it easier for leaseholders to have the right to manage. If the Government are truly serious about ending the nightmare for leaseholders, they need to urgently revisit this legislation.” 

Watch the debate here (starts at 17.12.09).

Read the transcription of the debate here.

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