Leasehold and Freehold Reform Bill, Report Stage, House of Commons

• We welcome the bill and support its general intention to make the current system fairer for leaseholders and freeholders. 
• We support clauses enabling the Secretary of State to make provision for a redress scheme for the leasehold system that will help resolve disputes between leaseholders and landlords (estate managers). We also welcome the broader intention to make leasehold ownership fairer and more affordable for leaseholders.
• However, the bill gives the Secretary of State discretion in appointing a ‘lead enforcement authority’, setting out local housing authorities as one of the options – it further clarifies that this includes district councils, London borough councils and the Common Council of the City of London.
• It is concerning that bill does not make non-discretionary provision for new burdens funding for lead enforcement authorities. It is vital that the Department for Levelling Up, Housing and Communities (DLUHC) conducts a full assessment of the resources councils need to effectively administer the redress scheme and the costs of setting up a scheme. New burdens funding should then be allocated accordingly.
• Councils already face severe budgetary constraints; in October we estimated a funding gap of £4bn over the next two years. We welcome the additional funding announced in January, but a significant funding gap remains. 
• We support an extension of the Building Safety Act 2022, to make buildings under 18 metres or under four storeys also accountable to the new Building Safety Regulator and the new building safety regime. The LGA maintains that building height is a poor indicator of risk. As such, we call on the Government to bring in such provision at a later stage.

Part 5, Clauses 72 - 75: Leasehold and estate management: redress schemes

• Part 5, Clause 72, establishes a redress scheme andenables the Secretary of State to require a person or body that carries out estate management to be a member of a redress scheme. 
• Secondary legislation will be used to require relevant landlords or estate managers to register with the ‘lead enforcement authority’.
• Clause 72 provides the Secretary of State discretion in assigning enforcement responsibility to the ‘lead enforcement authority’, which can be defined as (a) the lead enforcement authority, (b) the Secretary of State, (c) a local housing authority, or (d) another person designated by the Secretary of State as an enforcement authority. In this case ‘local housing authority’ is defined as (a) a district council, (b) a London borough council, (c) the Common Council of the City of London (in its capacity as a local authority), or (d) the Council of the Isles of Scilly.
• Clause 74 gives the Secretary of State powers to give financial assistance (in any form) to the ‘lead enforcement authority’ for the establishment or maintenance of the redress scheme.
• Schedule 9 allows the ‘lead enforcement authority’ to impose financial penalties on those who have breached regulations under the redress scheme. The schedule notes that the enforcement authority may apply the proceeds of this towards meeting the costs and expenses associated with, carrying out any of its functions as an enforcement activity, outlined in this Act.
• Clause 75 provides for the Secretary of State to require members of a scheme to pay a membership fee.

LGA view

• We welcome the creation of a redress scheme that will help leaseholders and landlord, or the estate managers acting on their behalf, resolve disputes. This will mean that leaseholders have access to redress when the estate manager fails to comply with their responsibilities, helping to promote a fairer leasehold system.
• We are deeply concerned by the lack of clarity and lack of a firm commitment to fully funding the activities required of the ‘lead enforcement authority’. If councils are given the responsibility to setup and maintain the redress scheme, it is vital that they are properly resourced, through a new funding stream. The Bill has the potential to place significant new regulatory and enforcement responsibilities on councils.
• We welcome the provisions in the Bill that set out a discretionary ability for the Secretary of State to require members of the scheme to pay fees to the enforcement authority, and provisions in the Bill that enable enforcement authorities to keep the proceeds of financial penalties to reinvest in enforcement activity. However, this funding is unlikely to be sufficient to cover the costs of the new duties in the Bill or the scale of the proactive work that is needed to setup the scheme, especially while councils are facing severe budgetary constraints and councils’ compliance and enforcement capacity is stretched thinly across a number of existing duties.

Bringing buildings which are under 11m in height or have fewer than four stories within the scope of the protections of the Building Safety Act 2022. 

Not currently included in the Leasehold and Freehold Reform Bill

• The LGA is calling on Government to extend the Building Safety Act 2022 to all buildings. We were disappointed that when drafting the Act, the Government ignored our calls and only made buildings over 18 metres accountable to the new Building Safety Regulator and the new building safety regime.
• The LGA has always maintained that building height is a poor indicator of risk. The development of the Cladding Safety Scheme to fund the remediation of fire safety risks associated with external wall systems in medium rise residential buildings (those 11 to 18 metres in height) is a positive step forward. However, there are the same restrictions in place on councils applying for funding under this scheme as there are in relation to the Building Safety Fund, which means that remediation of council buildings with unsafe cladding is predominantly funded through the HRA.

Elliot Gregory, Public Affairs and Campaigns Advisor

Email: [email protected]