Reform of leasehold tenure is needed
I am sure many will recall seeing the devastating fire in my Dagenham and Rainham constituency, on 26 August 2024, which destroyed the privately owned Spectrum Building, upending the lives of almost 100 residents. Since that day I have been working closely with the leaseholders to get justice and redress for their loss. What I have found has shocked me and has strengthened my resolve to see the rights of leaseholders improved.
Currently there is no legal right for the disclosure, by the building owner or insurer to leaseholders, of details relating to the construction in the event of the destruction of their homes. This must be set right, which is why I have tabled Early Day Motion 1768 in Parliament, expressing this sentiment and calling on the Government to revise leaseholder’s statutory rights as part of the upcoming Leasehold and Commonhold Reform Bill.
The building insurance policy is a contract between the building owner and the insurer, although of course the freeholder passes on premium costs in full in the service charges to the residents. So, should a devastating event take place, it’s the building owner who collects the payment from the insurance company.
The extent of the cover for leaseholders is to meet the cost of their alternative rental accommodation, generally for a period of one year. For a large block of flats such as Spectrum Building, this leaves leaseholders having mortgage payments for apartments that will not be rebuilt and available to occupy for many years. This is in addition to shouldering the costs of renting homes after the building insurance cover runs out.
The resourceful leaseholders at Spectrum managed to negotiate with the building insurer to get an extension to three years on the payment of their rents for the temporary accommodation, but many in similar situations are not as fortunate.
On 11th July, alongside 16 other Members of Parliament representing Spectrum Building leaseholders who have been placed in alternate accommodation, I contacted the building owner and insurer urging that technical details be disclosed to the residents to strengthen their position as they seek redress.
The lack of cooperation from the building owner and the managing agent in the case of Spectrum is perhaps an extreme example, but accounts of the problems faced by leaseholders began to trickle out over a decade ago, that has now turned into a torrent of personal stories of hardship.
Since being elected I have received so many approaches from desperate leaseholders at their wits end, faced with escalating service charge bills and inefficient and unresponsive managing agents. I also repeatedly hear complaints about a lack of transparency from managing agents on service charge levels and in particular, justification for way above inflation increases. With every passing day it becomes clearer that stronger regulation of this sector is needed in relation to responsibilities and duties to leaseholders.
The flaws in that legislation are now being tested and rectified which should provide some relief for leaseholders, particularly around making it cheaper to extend leases; removing the so called ‘marriage value’, increasing standard lease extensions to 990 years and so on.
However, the Labour Government has recognised the gaps in the approach of the last government and is soon to bring forward the Leasehold and Commonhold Reform Bill. This is planned to enact the remaining Law Commission recommendations to strengthen leaseholders’ rights to buy their freehold, taking over building management and reinvigorating the commonhold tenure. The direction of travel is positive.
Given the experiences of the past year, representing leaseholders of the Spectrum Building, I have concerns that there has been no meaningful mention of greater transparency between freeholders, insurers, managing agents, and
leaseholders. That is why I have tabled “EDM 1768: Statutory Right for
Leaseholders to Access Information”. To ensure leaseholders have full access to
information, in order to seek redress, when disaster robs them of their home.
I also want to see regulation put in place on managing agents of residential
buildings so that there is proper transparency in service charging. The
forthcoming Bill would be the opportunity to put in place these reforms.
Achieve that and we will earn the thanks from almost five million leaseholders.
Margaret Mullane is the Labour Member of Parliament for Dagenham and Rainham, first elected in 2024.
