Commonhold and Leasehold Reform
Mr Gerald Bowden (Dulwich)
I beg to move,
That this House calls for the early introduction of commonhold as a means of effecting necessary reforms in leasehold and freehold tenure.
I feel especially fortunate to have been lucky in the lottery. I drew first prize and thereby gained the opportunity to present to the House for debate a subject which is of great national importance. At the same time, it is of great constituency concern for many Members on both sides of the Chamber.
A motion in similar terms was proposed by my hon. Friend the Member for Kensington (Mr. Fishburn) almost a year ago, on 8 March 1991. The need for leasehold reform is a recurring theme in the House, and it has been with us throughout this Parliament. There is a need to regularise the relationship between landlord and tenant and between leaseholder and ground landlord and it is necessary to consider how these relationships can be improved by the introduction of the device of commonhold. In what might be the last occasion on which to debate private Members' business in the House, it is opportune to raise this matter. I hope that it will be viewed as a matter of great urgency and that it will have priority on the agenda in the next Parliament.
I pay tribute not only to my hon. Friend the Member for Kensington, who has tenaciously and relentlessly pursued the matter during his time in the House, but to his predecessor, Sir Brandon Rhys Williams who, throughout his time in the House, also made the issue one of his particular concerns.
The matter has particular links with particular constituencies. My constituency of Dulwich has a large amount of leasehold tenure, where the ground landlord is a large landed estate. Over the years, the matter has become one of enduring concern. My predecessor, Sam Silkin, although of a different party, pursued the matter in the House, and previously his predecessor, Robert Jenkins, a Conservative Member, did the same. The matter is therefore not party political, but one of great concern, because we want to ensure that the law relating to leasehold is reformed and regularised.
All sides of the House recognise that there is something wrong in the relationship between the leaseholder and the ground landlord. There is, perhaps, something rotten in the leasehold law. That is why I am grateful that the Minister for Housing and Planning gave a commitment on 4 March that legislation would be introduced to allow long leaseholders to extend the term of their lease, with a provision to allow acquisition of the freehold interest. That builds on the earlier commitment by the Minister on 12 July 1991 that commonhold tenure would be introduced into the legislative programme. I was somewhat disappointed that it was not included in the programme for this Session, but, realistically, we understand that such a complex matter, with so many unintended implications, must be comprehensively considered. We must get it right; we cannot take a chance on bodging it. Therefore, it is appropriate that the matter should be considered at the beginning of a new Parliament.
I am glad that those welcome commitments have been given, because they give a sharper focus to our debate this morning. In some ways we are now pushing at a opening door and we can pinpoint where particular proposals can be most effectively applied. Why is there a need for change? Anyone who has had dealings, whether professionally, as a representative of local government, as a Member of Parliament or as a tenant, recognises that there is a deficiency in the current leasehold law and, therefore, a problem in the relationship between landlord and tenant. The law does not meet the needs of those whom it exists to serve.
I can cite one or two examples of that. In an ideal world, a lease is a contract between landlord and tenant—an agreement entered into voluntarily on equal terms by the parties concerned, to their mutual benefit, each recognising his obligations and accepting his rights under that agreement. In theory, it is an equal exchange. However, in many instances that is not the case and there is great inequity and inequality in the status of the two parties to the contract. I will not go into the matter in any detail, but I know of a number of cases where, for the long leaseholder, the interest that he has is the interest in his own home—an asset involving financial, emotional and personal investments. One of the most traumatic experiences must be any damage or threat to one's home. Landlords often view the contract as a simple commercial transaction. The property is an asset—an investment on which a return is sought. Therefore, it cannot be said that the contract relationship is one of equality, because there is a disparity of interest that could lead to conflict.
This may be an appropriate time to declare an interest. The House should be aware, if it is not already, that I am the chairman of a board of governors that looks after a charitable foundation—the Wellcot Educational Foundation. It has its assets in landed property in inner London. In that sense, I am a landlord, although it is a voluntary activity for which I receive no remuneration. My responsibilities allow me to view the position from both sides.
Over the years, I have received representations about the need to retain the integrity and the completeness of many of the large landed estates, to which the proposed legislation might be a threat. It has been argued, with great conviction, that there is a need in certain areas to have comprehensive management to ensure that the architectural integrity of the buildings concerned, which are often of great distinction, is maintained.
It is recognised that many of the large estates have been innovators in town planning and that they have made a substantial contribution to conservation. The charm and the beauty of my Dulwich constituency can largely be attributed to the good stewardship, sympathetic understanding and sensitive development of the estate's governors of Alleyns College of God's Gift, who are the managing agents and ground landlord for much of that area.
Recognising the distinguished service and responsible stewardship of many of the landed estates in the past should not obscure the fact that there is now a crying need for change. By way of comfort to those responsible landlords, I say to them that they will have to accept change, but they have nothing to fear from the proposed legislation. There is a need to adapt to changing social need, and landlords have done that over the ages. With reasonable recompense, there is an opportunity to redeploy those assets in some other directions.
Although responsible landlords have little or nothing to fear, the rapacious Rachman-like landlords have every reason to be apprehensive. Many hon. Members have had experience of such landlords, but their racket has been rumbled and their game is up. The proposed legislation would do a great deal to ensure that responsible landlords can continue to exercise proper control and concern over their estates, but the irresponsible landlords will be rooted out.
What are the problems; what is the mischief; what are the elements that we are seeking to change? It concerns mainly flats but also houses. I refer to the problem, which affects hundreds, if not thousands, in my constituency, that arises in respect of the lease—having a term of perhaps 99 years—that is taken up by a person in their 20s when he or she is first beginning to earn. Throughout that person's working life of 40 years, the lease gradually diminishes, so that what was once a rising asset and an investment begins to fall in value. The property, on which the leaseholder once hoped to capitalise, in planning for his or her retirement, becomes an unmarketable asset. A lease with no more than 60 years to run is unsaleable, because it is unmortgageable by any prospective purchaser. A provision to extend leases so affected would go some way to mitigating that problem.
There is the attendant problem of the landlord's responsibility to repair, maintain and service the structure of a block of flats and its common parts, including the surrounding land, gardens and garages. That is a constant source of concern, friction, stress and anxiety. The irresponsible landlord often exploits that aspect in devious ways, perhaps by neglecting to meet his obligation under the covenants of the leases. He may not only allow the property to fall into disrepair but impose a service charge to finance a maintenance fund that makes payments that are disproportionately high in relation to the work undertaken.
Frequently, such work is not put out to open tender but is placed with the landlord's own sub-contractors, with all the opportunities for quasi corruption that that presents.
Mr Geoffrey Finsberg (Hampstead and Highgate)
The House has addressed that issue on more than one occasion, and was able to close several gaps in that particular racket. I am interested to know whether others have appeared since the days when I was a housing Minister.
Mr Gerald Bowden (Dulwich)
My hon. Friend has made a distinguished contribution to landlord and tenant issues since the first day that he entered the House. Overt corruption has been stamped out, but it is difficult to prove that necessary work commissioned by the landlord, but for which tenants will pay, has been contracted at the cheapest price or even at a competitive price. That presents an opportunity if not for corruption then for a form of internal payment that does not represent open market, value for money of the kind that is in the tenants' interest. Such practices may fall short of criminal behaviour, but they are not an open book. We seek to draw public attention to those loopholes, in the hope that provisions can be devised to close them.
Excessive management fees and service charges, and landlord neglect, are frequently obscured by complex leases. Long ago, I trained as a lawyer, but many of the leases that have been shown to me read like double Dutch. One cannot help but conclude that the drafting lawyers not only used an antiquated and unnecessary form of words, but made a deliberate attempt to kick dust in the eyes of the prospective tenant, and that there was a deliberate intention to obscure the landlord's obligations and the prospective tenant's rights.
An element in commonhold reform should be the introduction of a simple and readily understandable form of words that the layman can comprehend, which clearly sets out the occupants' obligations and rights.
In the relationship between landlord and tenant, the cards are often stacked against the latter. It is often an unequal and inequitable relationship, and one which requires fundamental reform. It is no longer sufficient to tinker on the fringes of landlord and tenant law. The relationship between the long leaseholder and the ground landlord served a purpose in the past, and may have an enduring role to serve in future—but in its present form, it is not one which best represents the association between the occupant of a flat and the person or persons responsible for its maintenance and that of the common parts, including the building's roof and foundations.
Earlier this week, my hon. Friend the Minister for Housing and Planning outlined in a written answer a move towards enfranchisement, by abolishing the artificial, rateable value hurdle in the way of leaseholders wanting to acquire their homes. A large number of leaseholders throughout the country will have an opportunity to acquire the freehold interest that they were artificially denied under the Leasehold Reform Act 1967. That is a step in the right direction.
Mr Gerald Bowden (Dulwich)
Yes. The rateable value of £1,500 is applicable to London properties. I believe that the figure outside London is £750. Subject to consultation, the removal of that hurdle will allow occupants of properties under a long lease to acquire the freehold.
The next stage is to allow tenants who are anxious about the diminishing term of their leases and the threat that presents to their futures an opportunity to extend their leases or to acquire the freeholds, with the ultimate objective of the introduction of commonhold. That system of tenure flows automatically from the tributaries of lease extension and enfranchisement. To use the political idiom of the day, commonhold would serve as the leaseholders charter, offering rights and guarantees that are extended by charters to other aspects of our lives.
The nature of commonhold is often debated among those ideologues who think of angels dancing on the head of a pin. I may have erred in referring to it a moment ago as a form of tenure. Commonhold is a legal device which allows individuals who enjoy the freehold occupancy of a residential unit jointly to own a commonhold interest, with responsibility for all the duties and obligations, but also enjoying all the rights, of a ground landlord. It is not so much the creation of a new form of tenure as a way of supporting existing leasehold and freehold tenure in a regularised, sensible scheme.
There is a need for a standard form to be defined and recognised from the beginning. It should not be left to the individual draftmen of professional firms to draw up what they think is appropriate to meet these needs. Far be it from me to ascribe deviousness to draftsmen, but it is possible to benefit one party rather than the other.
With the introduction of commonhold there should be established a commonhold commission. It would be a regulatory body with the duties of administering commonhold arrangements, of advising in any circumstances where they were being considered and of adjudicating when any dispute arose. Without such a safeguard, it would be impossible to ensure that the commonhold scheme would have universal application, which is desirable, and universal understanding, which is essential.
I fear that what I have said so far may have sounded like rather dry, academic theorising. The case is best illustrated by three examples from my constituency. Earlier I mentioned the management of the estate of Alleyn's College of God's Gift and particular developments that were introduced in the 1960s. Some fine blocks of flats of seven or eight storeys, containing 20 or 30 highly desirable, small dwellings, are involved. There is responsible tenant occupancy. The tenants occupy on long leases and there is a great deal of corporate concern through residents' associations and leaseholder associations. Whatever the good faith and good will on the part of the estate's governors, there is, if not conflict, certainly friction arising from the nature of the landlord-tenant relationship, to which I referred earlier.
Commonhold would provide tenants with the opportunity not only to extend their leases, which in most cases run for 60-plus years, to make them a more marketable asset, but to take responsibility for the management and maintenance of the blocks. They would be individual freeholders of their flats with a joint responsibility for carrying out the duties of the management of the block as a whole. That is clearly desired by the vast majority of the occupants of Lowood court, Raleigh court and Drake court. They, and others, are recognisable names of residents' groups that wish a greater say in the control of the management, maintenance, decoration and general care of their home which they regard as their freehold right.
The friction is reflected on a wider front. I am fortunate in having a constituency with a large number of professional people who are able to share their expertise for the benefit of the community as a whole. Three active, well-informed amenity societies are the Dulwich Society, the Dulwich residents' association and the Dulwich Village preservation society. They have all participated in the debate and have taken a view about any change in tenure that is needed and any change in management that commonhold would offer to occupants in the area. Those bodies represent broader interests than do individual tenants of a block and they commend the commonhold principle for the legislative programme.
There are developments in the private sector and there is significant involvement by the London borough of Southwark. The commonhold provisions would be of great benefit if applied to one of its responsibilities. There are two blocks known as Dawsons Heights. They dominate the landscape rather like the totalitarian buildings of eastern bloc countries. They have a commanding view of London. They were developed in the 1960s and are occupied by a remarkably lively group of tenants, some of whom, but by no means the majority, have exercised their right to buy under the Government scheme. They are, therefore, long leaseholders, whereas the remainder are direct tenants of Southwark council. They have sought to take advantage of the provision in the Housing Act 1988 for tenants to choose their landlord and opt out of the landlordship of Southwark council. They have taken up the tenants choice scheme early on and run with it. Over the past two and a half years the negotiations have been slow, largely because of the efforts of Southwark council to put obstacles in the way of the tenants exercising that choice.
I am delighted to say that on Wednesday I had the opportunity of showing the estate to my hon. Friend the Minister for Housing and Planning. He met several tenants who made it clear to him that they wished to proceed. I hope that the negotiations will now take wing. The Samuel Lewis Trust is the preferred choice as landlord. It has been given what is called approved landlord status and is to be considered as the alternative landlord in a ballot. The management of the negotiations is in the reputable hands of the Paddington Churches housing association and I hope that a ballot will be held at the end of the year. This provides an opportunity for tenants who are not long leaseholders to show that they want to change their landlord. At the same time, if commonhold was thought to be an appropriate way of holding the freehold or harmonising leasehold, freehold and tenants interests on such an estate, it would work well for such mixed occupancy.
On a much smaller scale, in Dunton court, a block of 20 flats, 18 or 19 tenants have exercised their right to buy. They are outraged that they are called on to pay heavy sums to Southwark council for reserve and maintenance funds for work that is not being done on their leaking roofs and rising damp. In those circumstances there is an excellent, easy opportunity for the long leaseholders to take on a commonhold interest together, making provision for any remaining tenants but ensuring that they, rather than a remote, indifferent, inefficient bureaucracy, look after their interests.
I allude to another example which represents a different aspect of the problem. Ruskin Park house was built by the London county council to a higher standard and, in the terms of the times, was intended to be a block for professional people. In the early stages of the right-to-buy scheme—in the 1960s and early 1970s—the tenants of Ruskin Park house exercised that right in good measure. About 75 per cent. of the flats in that block are now owner occupied. I was about to say that the management of the block was organised on rather novel terms—it was certainly novel when it started.
The Greater London council—the successor to the LCC—retained the freehold interest. The owner-occupiers formed a housing association—I believe that their status is that of a non-charitable housing association—and took a long lease on the whole freehold interest which, in turn, was subject to sub-leases for owner-occupiers. The GLC took sub-leases for the people who remained tenants and offered weekly or periodic tenancies to their tenants. Therefore, the GLC was originally the ground landlord —the freeholder—which had granted a long lease to the Ruskin Park housing association which, in turn, granted subsidiary long leases to individual occupiers. In the case of those who remained tenants, a subsidiary long lease was granted in similar terms back to the council, and the tenants' position remained unaltered.
A management committee held shares in the proportion of one share per flat. When I was the Dulwich member of the GLC, I sat on that management committee and exercised my vote for the number of shares—not a block vote in the pejorative sense, but limited to representing the flats still occupied by GLC' tenants. When the unlamented GLC was dissolved, one of the effects of that dissolution was the decision by the London residuary body not to transfer the freehold interest to the head lessee—the Ruskin Park housing association, as would have been right and proper. Instead, it transferred it to the London borough of Southwark. That, alas, has been one of the enduring concerns that have plagued this development.
The development was innovative and displayed all the best elements of management self-help, but under the present arrangements it has fallen between two stools. The opportunity provided by commonhold would be a way to solve that problem. When the Housing Act 1988 was in Committee I raised that issue several times and the then Minister for Housing, my right hon. Friend the Member for Bristol, West (Mr. Waldegrave) acknowledged that something had to be done. I believe that something can be done with commonhold tenure.
By using examples from only one constituency I have tried to illustrate three problems that affect many people and which need to be resolved. The reforms of leasehold enfranchisement, extension of leases and commonhold would be steps in the right direction. However, there are a number of questions still outstanding which would need to be resolved in Committee. One of the most crucial is whether, if commonhold is thought to be desirable, it should be by voluntary agreement or involve an element of compulsion. I know that that will be a matter of controversy and that is why I raise it this morning. I have my view, but I accept that other people may have different views. I would start with the principle that, as the original arrangement between landlord and tenant is in theory reached through contract, any change should be by agreement. I am enough of a realist to know that if it is left to voluntary arrangements by agreement between the parties, there might be expressions of goodwill and support but little action. That was very much the case with the right-to-buy scheme. It was left to local councils to implement voluntarily if they wished, but it was not until it was made a right for tenants that it became effective. Therefore, there must be an element of compulsion. Compulsion might encourage ground landlords and their long leaseholders to get together in the spirit of co-operation. Without that, I do not think that the scheme will take off.
That leads to the question of proper compensation in such circumstances. Valuers will disagree, depending on whom they are representing, whether it should he the open market value, modified open market value, market value reflecting marriage values, or any other ramifications or whether it should be decided according to a statutory formula. I raise this issue without offering an opinion, but it must be considered at an early stage. Unless there is reassurance and clarification about the basis on which compensation would be given, there might be objections which might be misinformed.
Mr William Benyon (Milton Keynes)
My hon. Friend will know from experience that in tranferring an asset from one owner to another, if the marriage value is not taken into account his constituents and others will make very large tax-free capital gains almost immediately if they wish to sell their property thereafter.
Mr Gerald Bowden (Dulwich)
I accept my hon. Friend's point. I in no way promote the idea of commonhold or the element of compulsion which it might bring to deliberately do down the landlord or to give an unexpected bonus to a tenant. It should realistically represent the value of the property so that some tenants do not make a killing and beneficiaries of a charitable trust do not suffer. There should be a professional and realistic valuation which would solve the mischief and problems inherent in the present system. Responsible landlords have little to fear from the financial consequences of the scheme, although they will have to adapt. It might be less attractive to and, indeed, might scupper some of the activities of irresponsible landlords.
We must also consider what happens when a number of residents wish to have a commonhold arrangement but others object. One can easily imagine that if it were necessary to have 100 per cent. unanimity in order for all residents to have commonhold, very few schemes would take off. There is bound to be one objector to any arrangement who might thwart the wishes of the vast majority. Indeed, I envisage an unscrupulous or devious landlord ensuring that there was one or more such persons in occupation to object. I am interested in the concept, which I believe came from Mr. Edward Nugee, QC, of qualified unanimity, which is a smart way of saying majority. It is necessary to have a decision on whether there should be commonhold tenure or a commonhold arrangement which is based not on complete unanimity, but on a majority vote by those affected. From my reading of the answer given earlier this week by my hon. Friend the Minister for Housing and Planning, a two thirds majority would be considered acceptable support to trigger off the commonhold arrangements.
Mr Donald Thompson (Calder Valley)
There is another group of housing about which my hon. Friend may not know. In the north of England, there are houses that were built by benevolent employers with 999-year leases at £1 a piece. They can now be used by unscrupulous landlords to squeeze tenants who pay only £1 a year each. That must be dealt with in forthcoming commonhold or leasehold reform.
Mr Gerald Bowden (Dulwich)
I fully agree with the principle of my hon. Friend's suggestion. I hesitate to make any observations about the detail, because I do not have the facts of the case. The landlord's role is thoroughly honourable and socially useful. As I said when I declared my interest, I have been involved in that role. In defending that position and in speaking with pride as a landlord, one must recognise that there are unscrupulous landlords who must be rooted out and identified as such. They must not be allowed to prosper and flourish as many have.
The legislation will be complex. It will not be easy to understand and it will take time to ensure that it goes through the House properly. The legislation must be comprehensive and it cannot be hurried, although it is a matter of urgency. I commend the proposals to the House and I ask my hon. Friend the Minister to ensure that they are high on the agenda of any new Parliament.
Mr Tom Cox (Tooting)
I warmly congratulate the hon. Member for Dulwich (Mr. Bowden) on introducing the debate, which interests me and many other hon. Members. The issues of commonhold, leasehold reform and a greater say by tenants in service charges are long overdue for consideration. It is regrettable that after 12 years of Conservative Government, we have the debate in the closing days of this Parliament when for many years —the hon. Member for Dulwich referred to four hon. Members who, like him, have been involved in the issue —there have been calls for changes in legislation.
Leasehold is a London issue and, as the hon. Member for Calder Valley (Sir D. Thompson) explained, it is a problem in other areas. I refer to two blocks of flats in my constituency. Ducane court is a large block of flats containing 600 properties with 800 to 1,000 residents. There is a smaller block of flats called Moira court. Both give examples of the issues to which the hon. Member for Dulwich referred.
If ever a group of tenants has suffered the abuses of despicable behaviour by landlords and their agents, it has been those who live in Ducane court. I quote briefly from a letter from a lady who lives in Ducane court. She says:
I have lived in Ducane court for 50 years and under the present regime of ineffective management agents, of which our landlords are directors which I believe is outside the law, I have watched this block deteriorating year by year.
Many other residents have made similar comments to me over the years in which I have tried to work with them. I have had countless meetings. I have had meetings here with junior Ministers in the Department of the Environment on the specific issues of the behaviour of the landlords and their agents, and of the service charges that were repeatedly charged to those men and women.
The great problem was that one could never get a detailed breakdown of how the charges were arrived at. The agents once decided that there would be a three-stage improvement programme for the property. The residents did not object to that, but they objected to the fact that before the first stage had been completed, the agents demanded money for the second stage. The residents came to see me and said that they did not know what the total cost would be for the first stage because they had not been given accounts and the work had not been completed. They told me that they were now being pressurised by the landlords and their agents who said, "Do not worry about the cost. Do not even worry about when the first stage will be completed. We are interested in payment for the work for the next stage." The landlords could not even tell my constituents when the work would be carried out.
Mr Hugo Summerson (Walthamstow)
Is the hon. Gentleman prepared to name the landlords? I do not ask that in a mischievous spirit, but because the behaviour he describes sounds so similar to the behaviour of some freeholders in my part of London that I wondered whether they could be the same landlords.
Mr Tom Cox (Tooting)
That is a fair question. I am not reluctant to give the name. However, the people who then owned and were responsible for the property have long passed from the scene. Other people now run the property. I cannot tell the hon. Gentleman who the people involved were, because they have moved on. I am sure that many hon. Members can give similar examples. Such behaviour undoubtedly causes great bitterness. The hon. Member for Dulwich talked about commonhold and we must also consider services charges.
I have received letters from constituents who live in the blocks of flats and from other constituents who are aware of the commonhold proposals. They want to know what would be involved in the legislation and how they would be affected. We need to hear a little bit about several issues. Whichever party wins the next election, there will be support for legislation to be introduced quickly. People will decide that they are interested in such a scheme, but they will feel that they need to know certain basic points before they commit themselves to voting in support of commonhold.
As I understand it, two thirds of those eligible to vote on the introduction of a commonhold scheme will have to support it. There can be many different types of tenancies within a large block of flats. I shall be interested to hear the Minister's thinking on that. I accept that he may not be able to go into great detail at this stage, but those who come to us—their Members of Parliament—will want some basic guidelines. In the same block, there will be people with leases and people who are renting their property. In Ducane court, for example, some people have been renting for many years and may wish to know where they would stand under a commonhold policy. Some people live in sub-let properties and some own their properties. How would that breakdown of tenancies affect the two thirds majority proposal?
I received a letter from a gentleman which illustrates the kind of difficulties to which the hon. Member for Dulwich alluded:
When one gets to 80 and with about 30 years to go on the lease of this desirable studio—husband and wife sharing, living on pensions and savings, no relatives to leave the property to anyway—one is not very enthusiastic for spending more money.
He is obviously talking there about spending more money on buying the leasehold. As a resident in a block of flats, that gentleman would clearly be eligible to vote for or against the introduction of commonhold and no doubt we can all understand and accept that he would have good reason for not wanting to vote for commonhold at this stage in his life. There are many elderly people living in such properties who may be interested, but would wish to know exactly what sort of sums would be involved. That information will be crucial to those interested in such schemes.
Mr Geoffrey Finsberg (Hampstead and Highgate)
That matter has been examined in the context of a block of flats in my constituency which the tenants wished to purchase from the Church Commissioners. The whole block was bought by the tenants who then became landlords and those who did not want to buy their own flat became tenants of the new tenant organisation. Similar arrangements could apply in respect of commonhold.
Mr Tom Cox (Tooting)
The hon. Gentleman makes an interesting comment and I hope that such provision can be incorporated in any legislation.
I come back to the question of cost because that is what we are talking about. Another letter that I received says:
I am very much in favour of commonhold being obtained for the above building, provided it is not too expensive.
We will be told that repeatedly.
Suppose that a majority of residents has voted in favour of commonhold. How will the market value be determined? Many of the properties have been neglected by agents over the years and some of them are in a very poor condition. Will that be taken into account in determining their market value? I could quote many further letters, but I will not, because I am sure that many other hon. Members present will have received similar correspondence. Suffice it to say that these matters are of great concern to people in my part of London.
The residents in a large block may be very diverse. They may include professionals and elderly people who would not want to be involved in the management of the new commonhold. What criteria would the Department apply in relation to the management of such properties? In many cases large groups of properties may be involved and the legal aspect may be complicated. There is also the question of financial accountability—how money will be spent in the day-to-day maintenance of the property. The property will sometimes also need to be surveyed.
The management committee would presumably be made up principally of residents. Will there be certain legal requirements necessary to qualify for commonhold of which a potential management committee will he made aware before it decides whether it is in favour of commonhold? We are talking not only about cost but about complex issues of which many people have had no experience. Recently, I received a letter which said:
One would need to be absolutely sure of the competence and representative stature of the management committee to supervise the introduction of the scheme and see to its day-to-day running.
Those are what I would describe as the gut issues affecting people who are interested in the introduction of commonhold. They will want some guidelines concerning the day-to-day management and how that would operate in legal terms.
I hope that whichever party wins the next election will regard the introduction of commonhold legislation as a priority. Can the Minister assure us that civil servants at the Department are already starting to put together draft legislation? I hope that we shall not be told after the next election that the Government have to go out to consultation. Hon. Members on both sides of the House know what people want: they want action to be taken to protect their interests and an opportunity to express their concerns. They want to be listened to, and they seek redress for the injustices from which they have suffered for so long.
Mr Chris Smith (Islington South and Finsbury)
I endorse everything that my hon. Friend says about the urgency of ensuring that commonhold legislation is introduced. Does he agree, however, that it is important that any Bill should include measures to deal not just with flats held on leasehold but with whole houses held on leasehold? As I understand it, there are at present two exceptions to the ability to enfranchise and to take the freehold. That cannot be done if the rental value some time ago was too high or if the rateable value is too high. Does my hon. Friend agree that it is important that both those criteria should be wiped from the exceptions to freehold enfranchisement and that we ensure that people in my constituency and in Hackney, for example, can purchase the freeholds of their properties?
Mr Tom Cox (Tooting)
My hon. Friend makes a valid point. The great benefit of debates such as this is that we have an opportunity to introduce other aspects of the legislation that is needed and my hon. Friend has done just that. I hope that, after 9 April when a change of Government comes about, the Minister then responsible for that legislation will take note of the points that have been made.
What will happen if a two thirds majority of the tenants in a block of flats is not arrived at? I hope that arty legislation will be tough on the abuse of service charges and that the dubious landlords who, sad to say, still exist, will be deterred. I am referring to those landlords who say, "My tenants have had an opportunity to vote for commonhold but did not take up that opportunity, so I need not bother about the law." Otherwise, we shall continue to see an abuse of service charges. I hope that, where the two thirds majority is not reached, there will be strict guidelines on service charges. People should have a right to oppose service charges, as my constituents have tried to do over the years, without success.
The issue of squatters may be out of the terms of the general debate, but it will be interesting to hear the Minister's views on it, because squatters have moved in to a block of flats in my constituency. Ministers may say that legislation on that already exists and that the agents or landlords should implement it. In the past two or three weeks, however, my consituents in that block of flats have been writing to me daily, asking me to get something done. The police say that they have enough to do, without worrying about squatters. Unfortunately, the legislation does not work quickly enough in support of decent, honourable people who have long lived in a block of flats and have a pride in it because it is their home. If a few properties fall empty for a period of time, it soon becomes known and the squatters move in. We need a means by which action can be taken quickly. Once squatters have been living in a property for a month or so, it becomes difficult to get rid of them.
I congratulate the hon. Member for Dulwich, who has done a great service to London constituents who have experienced the difficulties to which he referred. Whichever party wins the election, I hope that this will be a priority for the next Parliament because it is long overdue.
Mr Geoffrey Finsberg (Hampstead and Highgate)
First, I congratulate my hon. Friend the Member for Dulwich (Mr. Bowden) on raising this issue and compliment the hon. Member for Tooting (Mr. Cox) on what he has just said. From his experience of dealing with squatters, he will know that some of the attempts in the past 12 years or so to toughen the laws on squatting were vehemently opposed by hon. Members on the extreme left of the Labour party, under the guise of libertarianism. I exclude the hon. Gentleman, because he is a much more sensible person. He is the authentic voice of the Labour party. If such Labour Members controlled the Labour party, we might have some worries about winning the election, but we have no worries, because people like him are not in control.
May I place on record the absence of the co-called Liberal Democrats, who clearly have no interest in the problems of tenants of any kind? Yet when the election comes, they will be at the forefront, squeaking in their hypocritical terms about how they are the friends of tenants.
After being in the House for some 22 years, this is probably the last time that I shall address it. I have always been greatly interested in the problems of tenants, both private and public. When I came into the House in 1970, there was the scandal of Freshwaters—landlords who were destroying private tenants. They had taken over from highly reputable landlords, such as the London County Freehold and Leasehold Property Company and the Prudential, all of whom managed their properties in the interests not only of themselves but of their tenants, and there was immense satisfaction.
My own dear parents lived all their lives as tenants in Key Flats, and I lived most of my early life in those same conditions. So I know the problems, and I saw the change when the Key Flats were sold.
My hon. Friend the Member for Dulwich and the hon. Member for Tooting spoke about service charges. On occasions, I have rebelled and my first rebellion was on the first Housing Finance Bill to go through the House. As a new Member, I moved a new clause dealing with service charges, but I did not know the rules of the game then and had not warned the Whips what I intended to do. I won and beat the Government on the issue. However, I did not know that the second vote to be taken was that the new clause stand part of the Bill and, by then, the Whips had organised matters and my new clause was not added to the Bill. When the Bill was dealt with in another place, however, my points were covered. So I soon learnt that it is better to have the Whips on one's side and to work with them, and I have tried to do that ever since.
I thought that we had covered service charges then. Later, when I had the good fortune to be a junior Minister in the Department of the Environment, I again thought that we had cleared up all the loopholes. I was assured by the draftsmen and lawyers in the Department that that was so and, with the help of my senior colleague, my right hon. Friend the Member for Tonbridge and Mailing (Sir J. Stanley), we went into the matter in great detail. I thought that we had managed to settle the issues of the inspection of service charge accounts and independent auditors—we had got rid of the phoney auditors put up by the landlords —and that we had provided that, where work was to be carried out, alternative and genuine estimates had to be submitted so that the tenants could challenge them if they were not satisfied. All those issues were to be challengeable in the county rather than the High Court so that expenses could be kept to a minimum.
I am disturbed to hear from my hon. Friend the Member for Dulwich and the hon. Member for Tooting that that system is not working. I hope that my hon. Friend the Minister will explain why it is not working. What can be done to ensure that Parliament's intention is carried out? If there are loopholes, will he take urgent steps to ensure that they are closed in the first housing Bill that comes before the House in the new Parliament?
The hon. Member for Tooting and my hon. Friend the Member for Walthamstow (Mr. Summerson) spoke about landlords' identities. Again, I thought that we had ensured in the last Housing Act, which my hon. Friend the Minister for Housing and Planning took through the House, that the names and addresses of landlords had to be disclosed. If that Act is not working, I am very disturbed. I hope that the Minister will be briefed by his officials on those points, because they are of immense importance. It is not a party issue but an issue affecting human life.
Such actions give landlords a bad name. The overwhelming majority of landlords do not deserve that bad name, as they are good. But they are tarred with the same brush as the irresponsible people who use so-called managing agents, who could not manage a fish and chip shop if everything was supplied free. The agents take large fees for doing poor work. I hope that the profession will tidy itself up. It involves only a minority, but we have all seen, over the years, newspaper headlines stating, "MP's fifth cousin up on driving charge". We never read, "Journalist's third cousin up on driving charge"—which is interesting. The irresponsible minority causes us all problems.
Having tried to do something for private tenants, when the opportunity arose, I tried to do the same for public tenants. I wanted to ensure that council tenants had the right to buy, and that the legislation covered various issues. My hon. Friend the Member for Dulwich spoke of the delays in Southwark. We introduced amendments to the legislation so that, if there were delays, tenants could serve notice on the council, rent could be withheld and go towards the purchase cost. Such delay was covered in the legislation.
I ask my hon. Friend the Minister to note a new factor. Camden council has now decided that there should be a differential parking charge on mixed estates. Council tenants pay one parking charge and those who have bought their flats and who park on the same estate are asked to pay four and six times the weekly amount. I am told that nothing can be done until the law is changed. I hope that that can be done, as that system is grossly unfair.
There will always be gaps. My hon. Friend the Member for Dulwich mentioned the problem of long leases coming to an end. Those long lease contracts were freely entered into many years ago—perhaps not even by the current residents, but by their predecessors. There are two sides to the question: the right of the freeholder who owns the property and who has sold on the lease for a fixed term at a ground rent, and the right of the person living there to some form of security. We must get the right balance.
One of the best ways of achieving the correct balance is to extend the lease. My hon. Friend the Member for Kensington (Mr. Fishburn) has done much work in that sphere and he put forward various proposals in a debate about a year ago. The extension of the lease would give tenants the security that they understandably want. It would also cover the issue raised by the hon. Member for Tooting about whether people could afford to buy.
There used to be an option to remain in a block of flats. Those who chose that option remained as tenants of the new owner. That might not always have been satisfactory. We must see what can be done to ensure that the market value of the lease extension is fair to both sides. Perhaps that task should be given to what used to be the old rent assessment committees, which now have some new duties under the Housing Acts. Perhaps we should re-establish the old valuation courts that used to work with the benefit of the advice of the district valuer. We must have a system that is seen to be fair and workable, in the interests of both the freeholder and the tenant. It would be possible to achieve that, and I should certainly welcome an advance on that front.
We must also examine the option of compulsory sale. We must decide what percentage is adequate to demonstrate the desire of the majority to purchase. How does one decide what to do if there is a resident freeholder or commercial occupation? The statement that my right hon. Friend the Secretary of State issued spoke of a 10 per cent. commercial occupation—that is one suggestion to consider. There is a problem with mixed occupation. If a council tenant of a garage lives over that garage, he has no right to purchase that property, which does not seem fair. We must consider how we could overcome that problem in future legislation. There must be fairness on both sides.
The issue of leases presents problems. When I had responsibility for the new towns, I was confronted with the problem of what length of lease one should give in the case of commercial properties. I had been brought up all my life to think of 99-year leases. Those no longer held good as if there were substantial redevelopments to take place, this would involve a time scale of about 60 years. We considered the issue and decided that 125 or 150 years would be about the right length for a lease. When considering the continuation of existing leases, we may decide that they should extend for longer periods than previously, but we must bear it in mind that all properties have a useful life and it is no good to the freeholder, leaseholder or tenant if the useful life expires and one cannot redevelop in a sensible way.
One of the simple theories in the world is that there are more tenants than landlords, so one must carefully consider the tenants' interests. Of course, that is right. A landlord is in business to provide an income for himself, which is quite understandable. A tenant is there because it is his home. We must find the correct balance. Over the past 30 years or so, the balance has swung somewhat unfairly against the tenant due to the activities of the bad landlords.
I do not believe that many people in the world would quarrel with the concept of private landlords if they conformed to previously accepted landlords' practice. Big companies such as the London County Freehold and Leasehold Property company had an unmatched reputation for looking after property and tenants.
People who are to become the new owners of blocks of flats—I leave aside houses, as they are a different issue —must realise that they will not necessarily have the time or ability to look after the immensely detailed business that will come their way. They may need to appoint managing agents to look after the property, but they will have to ensure that they pick the right ones. They must realise that major repairs will have to be done from time to time, which cost substantial amounts of money. They will have to listen to the advice given to them by their managing agents, which means that they will have to establish sinking funds that are well maintained and looked after in the interests of the tenants. They must realise that a cycle of preventive maintenance is by far the best way of proceeding. They cannot suddenly think that, as they have purchased the commonhold or freehold, they will not have to carry out any more repairs or have any more outgoings. If they understand that, a new Parliament will provide us with the opportunity to introduce legislation to allow private tenants to feel more comfortable and satisfied as they enter the last stage of this decade. I think that the whole House would welcome that. That is what I hope will happen.
I commend my hon. Friend the Member for Dulwich on giving the House the opportunity of debating this important issue.
Mr George Howarth (Knowsley North)
I congratulate the hon. Member for Dulwich (Mr. Bowden) on introducing this subject. It is significant that the Government, who dithered on the issue for 13 years, have chosen their last few days to make a statement that seems to support the attitude of the hon. Member for Dulwich and of other hon. Members on both sides. It is also interesting that the warm noises emanating from the Department of the Environment have not yet been matched by any legislation. There is no draft Bill—