Parallel scandals

Posted: December 1, 2021 | Author: julesbirch | Filed under: Fire safety, Leasehold | Tags: Michael Gove |Leave a comment

Originally written as a column for Inside Housing.

The building safety and leasehold scandals have run in tandem for some time but the parallels really hit home in parliament this week.

The parallels between the two issues go well beyond the fact that both concern leaseholders and the power imbalance between them and freeholders.

While the government is acting to change things for the future, progress on protecting existing leaseholders and residents of buildings with safety issues has been slow. Ministers have repeatedly promised action only to lament the complexities of the issues involved.

Building safety dominated the initial exchanges in Commons questions on Monday as MP after MP asked Michael Gove about the plight of leaseholders in their constituencies.

The levelling up secretary dropped yet more hints of a series of new measures to tackle the ‘invidious vice’ in which leaseholders are caught that will be announced ‘shortly’, ‘in due course’ and eventually ‘before Christmas’.

Adopting the more aggressive tone towards developers and the construction industry that has marked his approach to the issue since the reshuffle, he said that ‘my Department are looking at every available means to ensure that the burden is lifted from leaseholders’ shoulders and placed where it truly belongs’.

Pressure came from both main parties, with Labour MPs raising hikes in insurance costs, the EWS1 mess and what happens when developers have gone bust and Conservative MPs highlighting the plight of renters in buildings under remediation and of leaseholders facing large bills in developments under 18m.

Gove even seemed to agree when Dr Julian Lewis (Con, New Forest) asked him ‘whether this scandal measures up to some of the worst that we have seen, whether it be contaminated blood or the wrongful jailing of innocent postmasters’.

He said he had been struck by two things when he arrived in the job: ‘the first was the combination of circumstances that come so unfairly on to the shoulders of people who bought their properties in good faith and now find themselves landed with wholly disproportionate and unfair bills’; and the second was that his predecessors had ‘worked hard to deal with a situation that is intrinsically complex’.

But shadow housing minister Mike Amesbury said housing ministers had promised 19 times to protect leaseholders from historical remediation costs ‘yet as we speak we know of thousands of people receiving invoices for astronomical remediation costs’.

He raised a case reported in Inside Housing last week where leaseholders at Oyster Court in London could face remediation bills of £80,000 each after Optivo got an assessment based on a draft version of the new PAS 9980. This is the very standard that is meant to resolve the problems with EWS1 so it could set a worrying precedent.

Gove denied that the government had merely added ‘yet another toxic layer to the mess’ and added that ‘we need to ensure that we are in a position to reassure lenders, leaseholders and everyone in the market that buildings are safe’.

If this was so far, so encouraging from the new secretary of state, we’ve heard such fine words before from ministers from Boris Johnson down and not that much has changed apart from more leaseholders being caught up in the scandal.

And another Commons debate 90 minutes later was a reminder of one of the reasons why progress has been so slow and so many problems have been left unresolved.

This came during the second reading debate on the Leasehold Reform (Ground Rent) Bill that will reduce ground rent to a peppercorn for new leaseholders (effectively meaning there is no ground rent).

This latest attempt at leasehold reform changes the status quo for the future while doing nothing for the existing leaseholders whose plight forced the government to act in the first place.

As happens when MPs press for more radical action on fire safety, minister cite the complexities of the issues involved as reasons why they cannot act more quickly on leasehold.

And just as progress has been painfully slow on remediating cladding since Grenfell, so it is also more than four years since ministers first promised to ban the sale of leasehold houses. That issue is not addressed in the new Bill but is promised in further legislation to follow ‘later in this parliament’.

Ministers clearly sympathised with repeated interventions from critical MPs and pointed to the results of the continuing investigation by the Competition and Markets Authority in changing the behaviour of developers.

Housing minister Christopher Pincher said that the Bill had been ‘narrowly defined, as the Law Society advised—so that we can get on and deal with the most egregious offences on ground rents and then move on to the more complicated matter of wider leasehold reform’.

Former housing secretary Robert Jenrick strongly supported the Bill, arguing that: ‘It is a comprehensive piece of legislation to remove more of the iniquities of the present leasehold system, and to pave the way for the wholesale introduction of commonhold.’

However, there were reminders of the lobbying from vested interests that has dogged previous attempts at leasehold reform and a glimpse of what happened behind the scenes on this one.

As originally drafted, the Bill would have exempted developers of retirement homes from the requirement to reduce ground rents to a peppercorn, but the legislation will now apply to them from 2023.

Robert Jenrick told the Commons:

‘As Secretary of State, I came under fierce resistance and lobbying from the retirement property sector. Its lobbyists approached Members of Parliament and my Department and threatened judicial review of our proceedings. I considered it to be an unfair practice, targeted at the most elderly and vulnerable in our society, that in addition to paying their service charge they should pay a ground rent that might escalate at a significant pace.’

Interventions from several Tory MPs suggest that such lobbying is still going on, along with efforts to exempt more complex developments such as flats above shopping centres from the Bill. They warned of ‘unintended consequences’ from the legislation.

For Labour MPs, the issue is that the legislation does not go remotely far enough. As Mike Amesbury summed up the Bill:

‘For people already trapped in leasehold properties with high and escalating ground rents, it does nothing. For those trapped in flammable flats, facing soaring costs and crippling remediation bills, it does nothing. For leaseholders facing extortionate service charges without any transparency on where the money is going, or suffering from other unfair terms and conditions or limitations on enfranchisement, it does nothing.’

If it was not obvious enough already, the building safety and leasehold scandals are two sides of the same coin.

No matter how ‘complex’ the issues, the action that is promised ‘shortly’ and ‘in due course’ cannot come soon enough. 

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