There should be an inquiry into the “mis-selling scandal” of housing developers pointing buyers to preferred conveyancers, who then did not advise on escalating ground rents, MPs said this week.
Several members spoke out on Monday about the role of lawyers as they backed the second reading of the Ground Rents (Leasehold Properties) Bill, which will reduce the ground rent on new residential long leases where a premium is paid to a peppercorn.
Landlords will then not be able to “cheat” by introducing associated management fees and other charges, said junior minister Eddie Hughes, who started the process towards the legislation with a private member’s bill before he was in government.
Speaking shortly before she was reshuffled away from the shadow housing brief, Lucy Powell described the bill as a “very small step” towards “serious leasehold reform”.
She went on: “What I do know is that, unfortunately, many people who bought houses in this situation were advised to use the solicitor of the marketing company or company selling the houses – I have many in my constituency. So they were given poor advice, and this is a mis-selling scam as well.”
Fellow Labour MP Mark Tami agreed. He said: “These people were often first-time buyers, keen to get on to the housing market and get their first home.
“They were told, ‘Don’t use this solicitor or that solicitor; use these ones, and we will give you a discount to use them’, and – shock, horror – many were not even aware… of the property being leasehold, let alone of all the other charges associated with that.”
Another Labour MP, Justin Madders, said that not only were some people told that they had to use particular solicitors, “in breach of Law Society guidelines”, but some were also told that they had to complete within a certain period of time.
“So even if they had used a different solicitor, it just would not have been practical for them to analyse or understand the documents correctly. That suggests to me that there needs to be a complete overhaul and inquiry into how the scandal was allowed to develop in the first place.”
Ms Powell agreed. “There is a very strong basis for a wider mis-selling scandal inquiry,” she said.
Former housing secretary Robert Jenrick said that conveyancers “failed in their duty to their clients: many constituents have come to my surgeries who were oblivious about the homes that they were buying”.
He added: “That applies not only in the situation we have discussed, but with respect to management fees, which may be very high or… may involve charges, for example for putting up a satellite dish, building a conservatory and so on.
“Conveyancing solicitors need to take much greater care to bring such matters to the attention of their clients.”
Conservative Stephen Hammond urged ministers to “talk to the Solicitors Regulation Authority” about the role of solicitors in facilitating ground rent clauses.
Housing minister Christopher Pincher responded to the debate by saying that the bill was narrowly drawn to address “the most egregious offences on ground rents and then move on to the more complicated matter of wider leasehold reform”.
Mr Jenrick outlined what he hoped would be in a second reform bill. “It should include 990-year leases, a simpler, cheaper enfranchisement process, ending marriage value, improving the position of leaseholders in the management of buildings, and ending… the building and selling of new houses as leasehold, because there really is no justification for that.
“Finally, I hope that that bill will look to the destination of a world beyond leasehold. That is the end point towards which we must work. I established the Commonhold Council to see how we could chart that course, and it seems to me that all the complex issues that are raised are surmountable – that is the evidence from the council so far.
“It also seems to me that commonhold will never take shape to any substantial degree in this country without a major government intervention, which means indicating that it is our tenure of preference, or setting an end date for new leasehold properties. I favour the latter.”