Commons debate, July 11
Asking developers like Redrow to put things right is not enough, Justin Madders, the Labour MP for Ellesmere Port and Neston, told the Commons: it needs enforcement.
And if government co-operated the leasehold scandal could be fixed.
Mr Madders cited the example of a Redrow site in the constituency where houses had been sold leasehold – the site where we staged a demonstration two years ago:
Like other plc house builders, Redrow hit reverse and started selling out the site as freehold houses, which they should have been in the first place.
It has offered to sell freeholds of the leasehold houses for x 26 annual ground rents: “that was still too high, but at least Redrow was prepared to sell it back rather than send it to an offshore investor”, said Mr Madders.
Mr Madders praised the Leasehold Knowledge Partnership and the National Leasehold Campaign which “have shone a light on these issues for the past three years”.
“It has been a long journey. We have had some successes, but the further we have travelled the more deceptions, scams and greed we have uncovered, and the more it has become crystal clear that this has been nothing short of a national scandal.”
Mr Madders said that Parliament does not need to wait for the conclusion of the Competition and Markets Authority investigation into mis-selling to come up with “tangible legislation to help leaseholders now”.
“If the Government are serious about ending the abuses in the leasehold sector, they should adopt my party’s proposals to allow leaseholders individually or collectively to buy their freeholds under a fixed formula paid to the landlord.
“This is similar but not identical to my 2017 private Member’s Bill. The Government could also cap existing ground rents at £250 a year or 0.1% of capital value, whichever is lower, and cap the cost of buying the freehold at 1% of the capital value.
“Alternatively, they could just do a multiple of the ground rent. I am not precious about my private Member’s Bill; I just want to see something done.”
Mr Madders emphasised that this was a non-party issue.
“Parliament has been stuck in a rut for months because the Government have lost control of the Chamber, but if they came forward with a proposal along the lines we have been talking about today, there is no doubt that they would find more than enough support on both sides of the House for getting real tangible laws on the statute book as soon as possible to offer help and hope to the many thousands of people still stuck with toxic leases.”
However, Mr Madders was positive about the CMA investigation.
“It is important that that investigation is carried out, however, because I think it will shine a light on wholesale practices.
“I have seen evidence such as the [commercial estate agents] CBRE market review of 2013 saying that “leases had been optimised” in terms of rent review clauses, notice fees and other provisions to maximise freehold sale receipts for developers.
“It talked about soft income being generated from insurance premiums, commission, service charges and enfranchisement premiums.
“There is clearly an industrial-scale racket going on, and it is important for the future of the industry that we get to the bottom of it and find out who is responsible and make sure that they never get the chance to do it again.”