Commonhold and Leasehold Reform: Managing Agents

Before we come to the debate on commonhold and leasehold reform, I inform that House that permission to appeal has been granted following the judgment on the judicial review brought forward by ARC Time Freehold Income Authorised Fund and others over the Leasehold and Freehold Reform Act 2024. The case is therefore sub judice. Mr Speaker has granted a waiver to allow Members to discuss fully the Housing, Communities and Local Government Committee report on the implications of the Government’s draft Commonhold and Leasehold Reform Bill. I call Florence Eshalomi, who will speak for up to 15 minutes.

I beg to move, That this House welcomes the Housing, Communities and Local Government Committee’s First Report of Session 2026-27, Pre-legislative scrutiny of the draft Commonhold and Leasehold Reform Bill (HC40); notes the Government’s commitments to cap ground rents and to bring forward legislation in this Session to support the uptake of commonhold in place of leasehold; further notes the concerning practices of some property managing agents who fail to act in the best interests of homeowners; and calls on the Government to accept the Committee’s recommendation to legislate to create a body with enforcement powers to regulate property managing agents. I am grateful to the Backbench Business Committee for granting time for this important and timely debate, which gives the House the chance to consider our Committee’s report on the draft Commonhold and Leasehold Reform Bill. I thank my fellow Committee members for their collaboration and cross-party work on the report, the excellent Committee staff for their help in preparing the report and the Committee’s two specialist advisers, Professor Nick Hopkins and Wendy Wilson, for their assistance throughout our inquiry. Today’s motion invites the House to call on the Government to use the final Bill to legislate for the regulation of managing agents. Colleagues from across the House will be all too familiar from their inboxes with the “wild west” of managing agents, but first I would like to begin by discussing some of our findings on the draft Bill more generally. For many of the 5 million leaseholders across England and Wales, these reforms have been a long time coming. After a decade of campaigning across party lines, we now have an opportunity to finally tackle the fundamental injustices of the leasehold system, once and for all. Leasehold reform has long commanded cross-party support. Ten years ago, the campaign in Parliament was championed by the former Member for Worthing West, Sir Peter Bottomley. His work chairing the all-party parliamentary group on leasehold and commonhold reform amplified leaseholders’ voices across Westminster. I thank the current chair, my hon. Friend the Member for Ellesmere Port and Bromborough (Justin Madders), for his tireless cross-party campaigning. It is in that cross-party spirit that my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) and Lord Gove generously gave evidence alongside each other in the opening session of our inquiry. The two former Housing Secretaries were united in their view that this draft Bill is welcome, and that the Government must go further and faster to deliver for leaseholders. The draft Bill is technical and long—it runs to 164 clauses and 13 schedules—but if we take a step back, the problem that it seeks to address is about control. Control is supposed to be one of the main advantages for people of buying their own home. For many leaseholders, a flat is their first foot on the housing ladder. They may have been drawn in by the banners on new build developments advertising the Government’s Help to Buy scheme. Many leaseholders were told that that was the affordable route to buying, via shared ownership. They expected control and a feeling of security, knowing that they could make the changes that they wanted in their own home and have control over the running costs, and would not be threatened with eviction by a landlord. The benefits of home ownership simply do not apply to leaseholders. They are homeowners, yet they are tenants. Far from home ownership and the dream that they were sold, many of them are stuck in a living nightmare. In the words of one leaseholder, who shared their story with our inquiry: “I thought I’d bought a flat, then discovered leasehold is a financial trap. I have no control over my finances, my relationships, where I live, or where I work”. We all agree that this is an injustice that needs to be addressed. This afternoon’s debate is an opportunity for Members to reflect on the draft Bill and what additional measures might need to be included in the final version to ensure that we get these reforms right. Perhaps the most headline-grabbing measure in the draft Bill is that it will cap existing ground rents at £250 a year. We must be absolutely clear across this House and in the other place that ground rent is money for nothing. An investigation by the Competition and Markets Authority found “no persuasive evidence” that leaseholders “receive anything in return” for ground rent. Many leaseholders have ground rents that double every 10 years or increase with the retail prices index.

I thank my hon. Friend, the Chair of the Housing, Communities and Local Government Committee, for recognising the work done not only by me, but by Peter Bottomley and Jim Fitzpatrick on the APPG. I was struck by a comment in the Committee’s report about the argument put forward by some freeholders that ground rents are used to cover service charges and that people will be put in danger if they are lost. The Committee used the word “shameful” for that argument. Does that not show that this system is a money-making racket? People are using any excuse to carry on that income stream.

I refer my hon. Friend to the evidence session at which we had representatives of freeholders—one of the most enlightening sessions for my Committee and my colleagues. We probed and pushed and tried to seek justification for ground rents, but none was forthcoming. That shows that they are a money-making scheme. We must be absolutely clear, as the Competition and Markets Authority has said, that there is no place for ground rents. Last month, there were media reports that the Government are preparing to accept our Committee’s recommendation to bring the £250 ground rent cap into force in late 2027—one year earlier than previously planned. If those reports are correct, that will be welcome news for many leaseholders, who are calling on us to act with greater urgency. However, even before the final Bill has been introduced, we hear threats of judicial review from a small number of organisations with very deep pockets. Rather than engaging with the process here in Parliament, they are preparing to challenge the democratic mandate of successive Governments, and the will of this House, to make these changes. Shame on them. They know that they have lost the political debate. The Government should be emboldened by the fact that they have successfully defended judicial reviews in the past. We think they should push ahead with these reforms, but there is a real risk that these measures could be delayed if freeholders do launch such a challenge. The Committee has called on the Government to include a clause for the ground rent cap in the final Bill to ensure that it comes into force two months after the legislation receives Royal Assent. We support the Government’s intention to change to peppercorn ground rent over time. We understand that that will need a transition period, as Ministers must be confident that they are striking a fair balance between the interests of competing parties, but it is not clear to us how the Government decided on their policy of a 40-year transition. Based on the evidence to our Committee so far, we think a shorter transition period may be justified and fair. That is why our report calls on the Government to publish more data in the coming months so we can be confident that we are getting the transition period right. Another key focus of the draft Bill is the measure to replace leasehold with a new commonhold tenure. Commonhold will allow all homeowners to have a vote in how their block is run. Homeowners are not required to participate in commonhold if they do not want to, and many blocks will vote to appoint their chosen managing agent, but this modern tenure will offer homeowners the control that they do not have under the current leasehold system.

I thank my hon. Friend and her Committee for the excellent work that they have done in preparation for this Bill. Pensioners who bought retirement flats in Aire Valley Court and Sutton Court in my constituency were hoping for peace of mind; instead, they have had rocketing service charges, poor maintenance and a lack of communication and transparency from FirstPort, the property managing agent. Does my hon. Friend agree that while commonhold is a fantastic opportunity for leaseholders to take charge, we need further independent regulation of property agents to ensure that they provide a good service to leaseholders and commonholders in the future?

I thank my hon. Friend for that intervention, and I thank many other Members, including my hon. Friend the Member for Uxbridge and South Ruislip (Danny Beales). I will come on to the very important area of managing agents and a firm that is notorious with many of us in this Chamber—FirstPort.

My hon. Friend is about to come on to property managing agents. May I add to the experiences heard by her Committee the experiences of constituents in my communities? Probably one third of the casework that I deal with relates to the poor performance of property managing agents. Does she agree that many leaseholders face real difficulty in getting proper recourse? A much tougher regime than the one currently in place, involving the property ombudsman and the property redress scheme, is urgently needed if leaseholders are to have genuine hope that their concerns about managing agents will be taken seriously.

I thank my hon. Friend, a fellow London MP, for that intervention. This issue is not just isolated to London; it happens in many areas right across the country, and it was raised continuously throughout our inquiry. As I mentioned, I will come on to the issue of managing agents more broadly. Our Committee is broadly supportive of the move to commonhold. That said, we have two key questions about its implementation. First, the Government must clarify what voting rights shared owners will have in commonholds. The Government have indicated that housing associations may have control over the votes of shared owners during the 10-year initial repair period of their properties. That could leave shared owners without any say in decisions that directly affect their homes. We call on the Government to clarify the position on this matter. We must ensure that the vote can be split between shared owners and their housing providers if necessary, so that shared ownership leaseholders get a meaningful say. Secondly, we need to ensure that as many existing leaseholders as possible are able to convert to commonhold. The Government want all new build homes to be commonhold and to support existing leaseholders to convert. However, the draft Bill does not enact important recommendations from the Law Commission that would make it easier for leaseholders to buy out their freeholder and make the important switch. Our report includes proposals on how some of those recommendations could be included. If it is not possible to include them in this Bill, the Government must bring forward further legislation later in this Parliament. We do not want to run the risk of leaving some leaseholders behind. The biggest issue and source of frustration for so many homeowners and leaseholders in the leasehold system is the quality—or lack of it—and service provided by their managing agents. Many colleagues from across the House will share cases involving their constituents in this afternoon’s debate, but it will come as no surprise to anyone that one company came up time and again in the stories we heard from leaseholders. That company was FirstPort, the largest independent managing agent in England. Last year, the Minister said he had “significant concerns” about FirstPort’s unreasonable service charges, its slow response to complaints and its approach to debt collection. Ultimately, the problem with many of these managing agents is that they are taking advantage of a captive market. They effectively have a monopoly on individual estates, meaning that they are able to treat homeowners with sheer contempt. In the words of one leaseholder we heard from, homeowners are left feeling “like cash cows”.

My hon. Friend talks about leaseholders being treated with contempt. I have an estate in my constituency, Bishops Gate, where it took three years for FirstPort to respond to residents’ requests, and even when the council got involved, FirstPort refused its request. Given all the service charges they had paid in, the homeowners believed that there would be £230,000 in the account; in fact, there is zero, and they are told that there is £60,000 of debt. That is the sort of scam that is going on.

I thank my hon. Friend for sharing that example; colleagues across the Chamber will probably cite similar, if not worse, ones. That is a shocking indictment of the company we are discussing. The law already requires service charge increases to be “reasonable”, but when charges are skyrocketing for basic maintenance services such as cutting grass, many residents do not feel that they are being treated reasonably.

Residents in Stratford and Bow tell me that some of their monthly service charges have now reached almost £600. It is driving them to the financial brink, and many of their neighbours are now facing legal threats for falling behind. I have had to intervene on several occasions, calling public meetings with management agents that are behaving terribly and treating residents as cash cows. Does my hon. Friend agree that it is an absolute disgrace that leaseholders continue to be pushed about by unregulated property management agents who are profiteering from our constituents, and that the Government must bring forward robust measures to protect leaseholders as quickly as possible?

I thank my hon. Friend for raising that point—as I mentioned, many colleagues will have dealt with similar cases. This is an issue that we want the Government to look seriously at, and one that has frequently been brought up in the Chamber. It is right that Members are advocating for their constituents, but local MPs or Housing Ministers should not have to name and shame these companies; we are talking about some of the largest managing agents in England. We are seeing patterns, with the same companies coming up time and again across the country. As MPs, our support for individual blocks and housing estates might result in small wins locally, but it is not addressing the root cause of the problem. Our Committee surveyed over 7,000 homeowners, and found that the regulation of managing agents was the No. 1 action that homeowners wanted the Government to prioritise as part of their leasehold and commonhold agenda. In 2018, the Lord Best report proposed a new regulator to cover letting and managing agents, with a mandatory and enforceable code of practice. Lord Best recommended that this new body should be established as a statutory regulator for property agents, as there was no existing body that could take on that role. Even the managing agents themselves have told us that they would welcome Lord Best’s proposals for regulation and the professionalisation this would bring to the sector. We already have industry-funded professional bodies with their own codes, but self-regulation does not work.

I am dealing with huge numbers of groups of leaseholders, and one of the things we have discovered—with the managing agent very much as my hon. Friend is describing—is this habit of subcontracting, only for the leaseholders to find that the subcontractors are owned by the same company; the name has just been changed. When we raised this point, the answer we got from FirstPort last week was, “We can do what we want.” Does that not reinforce my hon. Friend’s argument about regulation?

Before the hon. Lady rises, I remind Members that this is a very oversubscribed debate, and I am sure that many people want to speak.

I thank my hon. Friend for that intervention, and wish him a happy birthday—I am sure a good birthday present for him would be the regulation of managing agents for the sake of his constituents. Self-regulation does not work when there is no real enforcement, and leaseholders were clear with us that they do not just want mandatory qualifications. As Lord Best put it in his evidence to the Committee, “being qualified doesn’t necessarily make people behave properly; you still need a code of practice and enforcement”. What we need is a regulator with teeth—one that will issue meaningful sanctions against agents that treat homeowners like a revenue stream. For the worst offenders, that should include the removal of their licence to operate. I should acknowledge that our inquiry heard from some campaigners who were concerned that regulation could add to the costs passed on to leaseholders via service charges. On balance, though, we think that regulation is now necessary to protect all leaseholders from rogue managing agents. The reality is that some leaseholders will not be able to convert to commonhold—some blocks will not be able to meet the 50% threshold to convert, and some blocks will have special features that mean they are not eligible. We cannot leave those homeowners behind. Ultimately, commonhold is a vast improvement, but it will not always be as simple as hiring and firing agents. Commonholds are likely to appoint managing agents on contracts that last for several years, and they need to have confidence that they are appointing high-quality service providers. An independent code of practice would provide that assurance, so overall we think it would be a valuable addition to the final Bill—one that would benefit homeowners. Homeowners want a crackdown on poorly performing agents like FirstPort, with a regulator that has teeth and can deliver.

Will my hon. Friend give way?

Very quickly.

My hon. Friend has mentioned a number of times that nobody should be left behind by this legislation. My constituents suffer from the actions of the St Mary Magdalene and Holy Jesus Trust, a supposed charity that refuses to allow them to extend their leases and is using a loophole in the current legislation, leaving them—as one constituent put it—as prisoners in their current homes. Does my hon. Friend agree that the legislation should address those concerns and liberate my constituents?

I thank my hon. Friend for raising the important issue of marriage value and the extension of leases, with many people having to take out additional loans just to remortgage and extend their lease. All these areas are covered in the draft Bill, and I know the Minister is keen to address them. The Bill will be an opportunity to impact the lives of millions of constituents across England and Wales who bought their homes in good faith. We must all take responsibility for keeping this topic on the agenda and ensuring that the final Bill comes back to this Chamber in the autumn to make progress through Parliament—we cannot allow this issue to be swept away by events that are happening outside this place or that are beyond our control. Our Committee’s report sets out the blueprint for the changes needed to make the Bill a bolder, more ambitious piece of legislation. With an independent regulator, we can ensure that all homeowners see a real change in the short term. I therefore urge Members across the House to support today’s motion; leaseholders’ expectations have been set very high, so it is vital that we get the reforms right. If we do so, this will be the Parliament that finally allows leaseholders to realise their dream of home ownership, making them true homeowners with the control they have been promised.

We will start with an immediate four-minute time limit.

I congratulate the hon. Member for Vauxhall and Camberwell Green (Florence Eshalomi) on her opening remarks, and on the work her Committee has done to produce its report. It was an exceptional read—I thank her and her Committee. I am seeing increasing numbers of cases where leaseholders experience a range of problems, including high service and administration charges, a lack of transparency, overcharging, disproportionate costs to extend leases or buy freeholds, poor actions by managing agents, a slow and costly sales process, and imbalanced dispute mechanisms with leaseholders potentially liable for the freeholder’s legal costs. Nowhere is that more apparent than in the retirement village up in Ben Rhydding in my constituency. For the past year, I have been working with the Clevedon owners group, who have experienced real-life examples of how the current leasehold framework governing the integrated retirement sector falls well short of the standard that should be expected. The Clevedon owners group is made up of a group of leaseholders at the Audley Clevedon retirement village in Ben Rhydding. They have experienced repeated failures by their landlord to fulfil some of the most fundamental obligations contained within their leases, while the landlord continues to collect substantial service charges. The owners group estimates that the Audley Group collects approximately £30 million of annual service charges a year across its whole estate, with £3.5 million of deferred service charges, yet its residences are falling into disrepair and the freeholder is not updating its commitments or undertaking its responsibilities. The owners group has highlighted to me that its biggest concern is around the legal definition of the service charge and, crucially, whether certain mandatory payments in retirement leases fall within the statutory definition of a service charge under the Landlord and Tenant Act 1985. The experiences of those residents in the Audley retirement village demonstrate exactly why this seemingly technical issue has profound and real consequences. Leaseholders have paid substantial monthly management charges and deferred management charges on the understanding that the funds would maintain their homes, safeguard communal facilities and ensure the long-term sustainability of their residential community. It is clear from the meetings that I have had with my constituents that that simply is not the case. Instead, their properties have gone unserviced, which presents serious questions about how the annual service charge and those funds are being used. Following years of expansion, heavy borrowing and financial difficulties, maintenance across the Audley Clevedon retirement village has reportedly declined significantly, despite leaseholders continuing to pay increased service charges. That needs to change, and I respect some of the recommendations in the report on that point. Does the Minister have any intention of commissioning an independent forensic audit of major retirement community operators to examine corporate governance, financial arrangements, service charge accounting, deferred management charges and compliance with lease obligations? Can he confirm that leaseholders in retirement housing, including integrated retirement communities, will not be excluded from the protections of the Leasehold and Freehold Reform Act 2024? The current legal framework has failed to keep pace with increasingly complex corporate structures. If confidence in retirement housing is to be restored, residents must be given the protection, transparency and accountability that they rightly expect.

Trust in politics is at an all-time low, and part of the reason is that our society is littered with examples of structural unfairness, injustice, and ordinary people being ever so slightly fleeced. The housing market of recent years is a strong case in point, with multiplying ground rents, abuse of the forfeiture system, opaque service charges, management companies that cannot be changed, overpriced maintenance performed by firms connected to the management company, no adoption of common assets, short leases and exorbitant lease extension fees—the list goes on. It has been a privilege to have played my part in scrutinising the draft Bill, because it represents an opportunity to put a significant dent in some of these practices, and to demonstrate that politics and politicians can deliver for people and change lives for the better. As my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi) has set out, the Committee took evidence from an extensive array of witnesses on the measures in the Bill, and I thank them for their contributions. I will draw out a few specific points from our report. First, the reinvigoration of commonhold that this Bill will deliver has rightly been described not just as an alternative to leasehold, but as a radical improvement on it. For it to be implemented successfully, considerable work needs to be undertaken at the Land Registry to make sure that it is ready to respond, not just to the registration of new commonhold, but to the conversion of existing leases. Our Committee found that a failure to modernise the Land Registry’s legacy systems would pose a significant risk to commonhold working. Good-quality public access systems will be crucial. My second point is on the ground rent cap. It is fair to say that the Committee spent a lot of our time attempting to get to the bottom of the Government’s rationale for their proposals. I support the proposal to adopt a flat cap of £250, rather than the cap being a percentage of property value. However, I have struggled to understand the rationale behind waiting 40 years before converting to peppercorn rent. I can understand the desire to give certainty and predictability to investors, and I can understand an argument that investors need time to adapt to such changes, but the last three successive Governments were elected on a mandate to address onerous ground rents. The ground rent system, as my hon. Friend said, was condemned by the Competition and Markets Authority, which said that it could find “no persuasive evidence that ground rent was either legally or commercially necessary, or that consumers received anything in return”.