Commonhold and Leasehold Reform
Mr George Howarth (Knowsley North)
Before the statement, I was saying that the Government have had 13 years to do something about leasehold reform, but they have shown a lamentable lack of inclination to do so—with the exception of the Lord Chancellor's consultative paper on commonhold.
Mr George Howarth (Knowsley North)
I have only just begun. I shall give way in a moment because I know that the hon. Gentleman has spoken in these debates previously. I want to get a little way into my argument before giving way.
I again congratulate the hon. Member for Dulwich on introducing the motion. He made a cogent and well-argued case for reform. However, if the past 13 years are anything to go by, the prospects of the Government doing anything if they are returned to power are pretty dismal. I do not want to go back over the whole of those 13 years, so I shall just itemise a few opportunities during the past two years that the Government have had to do something about the problem, but which they have failed to take.
The hon. Member for Kensington (Mr. Fishburn) has raised the matter frequently in the House. He is not in his place, although he was previously. He introduced the Leasehold Reform Bill on 3 April 1990. It is interesting that one of the sponsors of the Bill was the hon. Member for Ealing, Acton (Sir G. Young), now the Minister for Housing and Planning—who has been somewhat reticent in following up the promise that he made at the time. There was another opportunity to make some sort of announcement on 8 March 1991, when a suitable motion was before the House. The Minister and I took part in that debate and the hon. Members for Kensington and for Dulwich also spoke. The opportunities have been there, but they have not been taken.
Mr George Howarth (Knowsley North)
I do so, but I will mention later the inadequacies of that legislation.
A letter dated February 1992 from Joan South of the Leasehold Enfranchisement Association, which was widely circulated, states:
We have now received a positive commitment from the Labour party … a less than satisfactory one from the Liberal Democrats … but as yet have received nothing from the Government or the Conservative Party.
Earlier this week, perhaps because of fears in many Conservative-held marginal constituencies, particularly in London, the Department of the Environment issued a press release on which the Minister will no doubt comment in more detail. That suggests some panic in the Government. There are fears in a number of London constituencies about the inadequacy of the Government's past and proposed action.
When Labour comes to power in the next few weeks, it will put into effect a document, "Commonhold and other new rights for leaseholders" which I launched at Kensington town hall earlier this month in the company of that constituency's excellent Labour candidate, Ann Holmes. It suggests extending a new right to buy, including one relating to commonhold, along the lines previously considered for all leaseholders of houses. It deals also with lease expiry. A Labour Government will consider introducing and co-operating in the introduction of holding legislation.
Other key points in that document include the right for existing leaseholders to choose their managing agents, to help to ensure that agents are efficient and that reasonable service charges are levied. Existing leaseholders will be given the right to extend their leases and to have the freeholder's accounts examined by an auditor of the leaseholder's own choosing.
There will be a right to covenants that will clearly stipulate the freeholder's responsibility to repair and to improve the block. We shall also introduce the concept of an arbitration panel with the remit of settling disputes between leaseholder and freeholder over, for example, the price of a freehold or the level of service charges. We will also repeal the legislation that makes the original lessee liable for payment when the lease is sold on—an anomaly which exists in respect of commercial and residential leases.
The Government's proposals made even at this late hour are inadequate. I quote from a letter sent to my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) earlier this week from Miss Jude Goffe of 68 Cloudesley road, north London. She makes the reasonable point that
The Leasehold Reform Act 1967 entitled the leaseholder to acquire freehold or to extend the lease by 50 years if certain conditions were met. These have been subsequently amended and the two most important are: 1. for leases issued pre-1 April 1990—the tenancy was at a "low" rent, i.e. at rent of less than two-thirds of the 1965 rateable value or the rateable value on the first day of the term, if later than March 1965. For leases post-April 1990—rents may not be more than £1,000 in central London or £250 elsewhere. 2. The rateable value on 23rd March 1965 was not more than £400 (increased in 1974 to £1,500) in London, and £200 (increased in 1974 to £750) elsewhere.
Miss Goffe makes the point that most houses in Islington and Hackney are excluded because of condition 1, whereas houses in Kensington, Mayfair, and Belgravia are mainly excluded because of condition 2—and that due to insufficient details in the Government's announcement,
we are not sure whether it is proposed to remove both conditions.
Miss Goffe adds:
We suspect that the Government is seeking to keep votes in key marginals, including Kensington. It would therefore not surprise us if only condition 2 were removed.
I understsand that that is precisely the Government's intention. That is all being done because in a few weeks' time, the country will go to the polls, and the Government are anxious to save the hides of a few Conservative Members in London constituencies.
The situation that I described does not exclusively affect London. In the previous debate, my hon. Friend the Member for Worsley (Mr. Lewis) spoke at length about the problems of long leaseholders in the north-west of England. It exists also in south Wales, parts of Yorkshire, and the north of England.
My hon. Friend proposed a four-point plan. He suggested establishing the right to sell the ground lease 1 o the owner-occupier; limiting by statute the level of on-costs in any transaction, because some organisations have been ripping off long leaseholders, who have been charged for all manner of items, including extensions, modifications and improvements; the removal from a given date of the imposition of retrospective permission; and, until the owner-occupier purchases, and for the benefit of those who do not choose—even at an affordable cost—to enfranchise, reasonable charges for current permissions to alter. I should be happy to incorporate those four provisions in legislation.
The Consumers Association also makes a number of important points. In a letter to me dated 4 March, it outlines five reservations that it has about the Government's proposals, and states:
enfranchisement and commonhold alone will not be sufficient to address the problems of the long leasehold system. They should be conjoined with a right to extend leases, available to all residents, and an overhaul of landlord and tenant law to improve the lot of those unable to convert to commonhold;
too many leaseholders in 'mixed' blocks containing rented flats or commercial units will be excluded from the enfranchisement provisions, and too many 'resident landlords' in converted properties will be able to escape them; a statutory formula for valuation may be preferable to open market valuation: either way, the process must be clearly explained, and an inexpensive appeals procedure established; an early announcement is needed to persuade freeholders that they will not benefit from carrying out extensive works at the expense of flatowners in the run up to enfranchisement; a commonhold and enfranchisement commission should be set up to provide advice and informal resolution of disputes.
Broadly speaking, the association is proposing a similar strategy to that set out in the Labour party's policy document published earlier this month. We can happily go along with that approach, which I welcome.
In conclusion, I repeat an offer that I made earlier to the Under-Secretary. I said:
My offer is that, if the Government take up one, two, three or all of those demands, made in our policy statement … the Opposition will co-operate in every way to ensure that the legislation—which we hope will be proposed by the Government—gets on to the statute book. We would do nothing to detain or delay such legislation and would co-operate as fully as possible."—[Official Report, 8 March 1991; Vol. 187, c. 610.]
Even in the dying days of this Parliament if the Government, even over the weekend, come forward with some draft legislation, unlikely though it is, we would co-operate with them to get it on to the statute book.
The Government have dithered and delayed for 13 years. I have no confidence and I suspect that those affected have no confidence in this last-minute conversion. The Government's attitude has everything to do with the imminence of an election and nothing whatever to do with the fact that something needs to be done about this thorny problem. In the unlikely event of the Government holding their majority at the election, I suspect that nothing will be done thereafter. My pledge is that within the first year of a Labour Government we will introduce legislation to resolve these problems and the longstanding problem of leasehold reform, which this Government have evaded and avoided for the past 13 years.
Mr Tim Yeo (South Suffolk)
As the hon. Member for Knowsley, North (Mr. Howarth) is likely to remain in opposition for some time, I thank him for his offer to co-operate with the Government in getting legislation on to the statute book as quickly as possible. I look forward to taking up that offer later this year.
I declare an interest as the owner of a long leasehold flat in a rather well-managed block which, I am glad to say, as the Whip is present, is within the Division bell area. This has been an extremely high-quality debate. No speech exceeded in quality that of my hon. Friend the Member for Dulwich (Mr. Bowden) when he opened the debate. I congratulate him on winning first place in the ballot, on choosing this particular topic so timeously and on the excellence of his speech.
I agree with my hon. Friend the Member for Hampstead and Highgate (Sir G. Finsberg) that the fact that no Liberal Democratic Member has been present at any stage in our proceedings is a sign of the low priority that that party attaches to this subject. I know that it is customary to congratulate hon. Members when they make their maiden speech. This morning my hon. Friend made what he mentioned could be his valedictory speech to the House. I should like to take the opportunity of saying what an excellent speech it was. I hope to be able to deal with some of the points that he raised.
I am sorry that the hon. Member for Tooting (Mr. Cox), who asked for answers on a range of subjects when he spoke before the Home Secretary's statement, has not bothered to remain to hear the answers that I shall now try to give.
As the hon. Member for Knowsley, North said, it is just a year since we last debated this subject. A great deal has happened since then. The Government have made progress at a vigorous pace. Last July my hon. Friend the Minister for Housing and Planning announced the Government's firm intention to proceed with the introduction of commonhold as an entirely new scheme of freehold ownership and communal management of flats and other interdependent buildings. He made a further commitment of our intention to give long leaseholders of flats the right to enfranchise and collectively to purchase at market value the freehold interest of their block. The Department of the Environment then issued a leaflet and sought comments on those proposals.
Only this week my hon. Friend confirmed our commitments to the policy of enfranchisement. On Wednesday in answer to a question from my hon. Friend the Member for Westminster, North (Sir J. Wheeler) he announced two important additional measures: the right to a lease extension and the extension of the right to enfranchise to householders who were previously excluded because of the high rateable value of their property.
Mr Harry Greenway (Ealing North)
Can my hon. Friend say whether this warmly welcomed announcement will extend to individuals in a block of former council tenants where others have not bought or where some have bought not at all? He will be aware of the various problems that that causes.
Mr Tim Yeo (South Suffolk)
Yes, I shall try to explain in more detail exactly to whom this will apply. The fact that the landlord is a local authority rather than a private landlord will not make any difference. There will still be a threshold in that two thirds of the properties in a block will have to qualify. In other words, they will have to be sold on long leases. That means that a number of flat dwellers who have exercised the right to buy will find at this stage that they are in too small a minority within their block to qualify. In smaller blocks it is perfectly possible that more than two thirds of the flats will have been sold under the right to buy, so will qualify.
Mr Harry Greenway (Ealing North)
As my hon. Friend will know, this is extremely important to the people whom I have described. Can he give them some hope that the Government will consider the case of those who find themselves in a block where there are fewer than two thirds qualifying? They are almost always former council tenants. Can my hon. Friend give them some hope that they will be able to buy before too long?
Mr Tim Yeo (South Suffolk)
We shall have to consider that point in Committee when we reach that stage. The Government will continue to promote the right to buy. I hope, and I am sure that my hon. Friend hopes, that in blocks where a relatively small number of people have bought their leases the fact that this opportunity to enfranchise will exist when they get beyond the two thirds may attract more buyers. Therefore my hon. Friend's concerns will be met in that way.
Our proposed extension of the rights of leaseholders will go a long way towards resolving many of the bad management problems, about which many hon. Members on both sides are concerned. It has been apparent from the responses during consultation last year that there is still some confusion about the important differences between commonhold and leasehold enfranchisement. Indeed, that confusion has spilt over into this morning's debate, so I shall briefly clarify the Government's intentions.
Commonhold, as a new form of land tenure, is intended as a means of overcoming the present inadequacy of the law which does not provide for the satisfactory ownership of individual flats on a freehold basis. It is not intended to replace leasehold as a form of tenure, because in many instances, particularly in the commercial sector, leasehold works perfectly well. Commonhold will provide an alternative form of tenure.
There are some freehold flats in England and Wales, but the owners of those interests are in a far from satisfactory position. Their interest is generally not mortgageable, so is difficult to sell.
The commonhold Bill will introduce a new system of positive and restrictive land obligations which, in effect, will enable positive covenants to be enforced upon successors to a freehold title. Commonhold will also establish standardised arrangements and fair rules for the democratic management of individual flats and other relevant properties. All commonhold unit owners will automatically belong to a commonhold association which will have responsibility for the fabric of the building and its common parts. A commonhold unit owner will have the additional responsibilities and liabilities that freehold ownership brings, but he will also have a mortgageable asset instead of a diminishing leasehold. The Government do not feel that it would be right to enforce those additional liabilities of commonhold ownership on anyone who does not wish to take on such responsibilities. In answer, then, to a point raised by my hon. Friend the Member for Dulwich, commonhold will not include any element of compulsion.
By contrast, our proposals on leasehold enfranchisement have an element of compulsion. The qualifying leaseholders of flats in wholly or mainly residential blocks will be given a right to purchase collectively the freehold of those blocks. That right forms a separate part in the package of measures that will be exerciseable by qualifying leaseholders, regardless of whether they subsequently wish to convert to commonhold.
We have placed in the Vote Office a leaflet that explains the proposals on the enfranchisement of leaseholds. It will go a long way towards answering the points raised by the hon. Member for Tooting, who I see is now back in his place. In outline, two thirds of the flats in the block concerned must be let on long leases—that is, leases originally granted for a term of more than 21 years. If two thirds of the flats are in that form, a further test is applied: two thirds of the people who have the long leasehold flats must vote in favour, if enfranchisement is to take place. There are a number of other more detailed conditions explained in the document, but I shall not weary the House with them now.
The process of leasehold enfranchisement will go a long way to ending management problems with freeholders, because enfranchisement transfers management to the people who own the flats.
Mr Steven Norris (Epping Forest)
I must declare an interest as chairman of Haven Services Limited which manages more than 4,000 units of sheltered accommodation for the parent company Anglia Secure Homes and for many other outside developers. May I draw the Minister's attention to what I consider to be the most crucial element in what he has said so far. The only justification for leasehold enfranchisement is as a response to poor management by freeholders. Why does he believe that such a profoundly undemocratic and un-Conservative measure as the enforced sale of assets by an individual can be justified where there is no evidence of poor management? Does not he realise that there is justification for restricting the availability of leasehold enfranchisement only in those cases where there is proven poor management, perhaps by serving a notice on a recalcitrant landlord?
Mr Tim Yeo (South Suffolk)
It would be difficult to put into legislation a definition of what was or was not poor management. I have no doubt that the company of which my hon. Friend is chairman would never fall into the category of poor managers. That being the case, I strongly suspect that the leaseholders of properties that his company and other well-known companies own will not be in the forefront, demanding the purchase of the freehold. They will not be seeking to enfranchise because, as I am about to explain, the process of enfranchisement carries a considerable cost. It is not a free option, so I believe that landlords with well-managed properties have nothing to fear from the principle of compulsion. Indeed, negotiations may take place between landlords and leaseholders about lease extensions and other matters, which will largely satisfy the concerns of leaseholders in well-managed properties.
The other advantage of enfranchisement is that it eliminates the problem of an unsaleable asset in the form of a lease which is too short to be mortgageable, as has been said. We are also concerned about the freeholder. I am glad that my hon. Friend the Member for Epping Forest (Mr. Norris) intervened, and my hon. Friend the Member for Hampstead and Highgate made the same point. There is no question of expropriating the freeholder's asset. The price that the leaseholder must pay to enfranchise must be a fair market value. We do not intend that through this legislation leaseholders should be able to acquire assets at a discount.
The valuation process will be complex. The price must include not only the open market value for the freehold but a share of the marriage value. The marriage value is a concept familiar to those in the property world. It represents the latent value released by the merger of two or more interests in land or property. The combination of those interests may be worth more if it is in the same ownership than the sum of the individual values in separate ownerships. Our aim in acquiring the marriage value to be shared is to be fair to the leaseholder and the freeholder. The document in the Vote Office explains that the freeholder will always receive at least half of the total marriage values of the individual flats.
Where there are disputes over facts, they will be referred to the county court. Where there are disputes over valuation, they will be referred to the local leasehold valuation tribunals.
Mr Tom Cox (Tooting)
I take the Minister's point that it is a complex issue, but, as I and other hon. Members have said, one of the on-going criticisms is the condition in which properties are left. Can the Minister say that the condition of a property will also be included in the market value that the owner is seeking to obtain?
Mr Tim Yeo (South Suffolk)
Inevitably, the condition and the location of a property will be reflected in the valuation.
I said that qualifying leaseholders in wholly or mainly residential blocks could enfranchise. Although we wish to spread the benefits of enfranchisement as widely as we can, our proposals will not apply to properties of which more than 10 per cent. of the internal floor area is used or intended for use for non-residential purposes.
We have no evidence of widespread demand in the property market for leaseholders of commercial units to have the same rights as people living in flats to purchase the freehold. I believe that the introduction of such a right for commercial leaseholders to enfranchise could undermine the effective working of the property market and would threaten the position of investors and developers. The 10 per cent. threshold has been chosen carefully in the light of consultation, but, as my hon. Friend the Member for Hampstead and Highgate said, it is a difficult balance to strike and there will no doubt be further debate about that in due course.
Relatively few leaseholders of flats will be excluded by that provision. We have also tried to minimise the other exclusions so that leaseholders such as local authorities and other public sector landlords will also qualify, as will leaseholders of housing association properties and of sheltered housing properties.
Mr Geoffrey Finsberg (Hampstead and Highgate)
Will my hon. Friend at least examine the point that I made about a council property that is at least partly commercial—for example, a garage with residential accommodation upstairs? Can his Department's long-standing objection in that respect be overcome?
Mr Tim Yeo (South Suffolk)
I shall certainly look into that.
The effect of the proposals would be that if enough qualifying tenants in any of the categories that I mentioned are willing to enfranchise, the opportunity to do so will be widespread.
Where four or fewer flats in a property have been converted from a house and where the landlord occupies one of those flats as his sole or main residence, that block will also be excluded. However, for the people who are excluded the next proposal is important, because it will extend leases on an individual basis. We have amended our original proposals to include this right because of our concern about how unenfranchisable leases might be treated in the property market following the opportunity to enfranchise being granted to many other leaseholders. The right to extend individual leases will ensure that leaseholders exclude from the other provisions can retain a saleable and mortgageable asset, an issue which will be of great interest to many of my hon. Friends' constituents.
I stress that the right to lease extension will be confined to leaseholders excluded from the right to enfranchise in the categories that I have already mentioned. An extended lease will be granted for the unexpired portion of an existing lease, plus an additional 90 years at a peppercorn rent for the entire period. The price will be the market price of a new lease, including the income value to the landlord of the existing lease and the price that could reasonably be expected to be paid for granting a 90-year extension at a peppercorn rent. That price will also include a share of any marriage value lost to the landlord by granting a new lease. The process of settling the price will be the same as that for a lease enfranchisement.
The issue of lease extension is much more complicated for flats than for houses. Our minds are not absolutely closed on every detail. We are still consulting on that aspect of our proposals and we are looking for comments before the end of May.
I mentioned briefly our proposals to amend the Leasehold Reform Act 1967. Most long leaseholders of houses have had the right under that Act to enfranchise, subject to their properties falling within certain rateable value limits. Those limits left many high-value houses—mostly in central London—excluded by the rateable value limits. My hon. Friend the Member for Westminster, North has made us aware of the problem that that restriction poses for his constituents. We now recognise that introducing the right for leaseholders of flats to enfranchise without any rateable value limits would create anomalies for high value houses. Therefore, we have made it clear that not only do we have no fundamental objection to removing the rateable value limits but that we now intend to do so.
Mr John Wheeler (Westminster North)
I am grateful to my hon. Friend for allowing me to intervene. I should be glad if he would comment on two issues.
First, will he assume that the provisions that he has just announced and which will be included in the forthcoming Bill will apply to the long leaseholders of the Crown Estate, as the Crown Estate Act 1961 would usually exempt the estate from the consequences of this legislation? Secondly, can he confirm that there will not be any evasion of our intentions by those who claim charitable status, except as set out in the Leasehold Reform Act 1967?
Mr Tim Yeo (South Suffolk)
In the past, the Crown Estate has undertaken to abide by the consequences of legislation and we will have discussions with the aim of achieving that again in this case. In the second case, charitable housing trusts will not be able to claim any exclusion from the legislation except when, for the purpose of fulfilling their charitable objectives, they have sold property at a discount to its market value to the long leaseholder. In other respects, they will be treated the same as everyone else.
The existence of the right to enfranchise will be a powerful spur to all landlords to maintain higher standards of management, but it will not eliminate disputes altogether. Leaseholders in blocks where the freeholder is responsible for management will still need to be protected, both against unscrupulous landlords and, sometimes, other tenants.
I regret to say that the problems of bad management are not confined to the private sector. The incompetence or worse extends all too frequently to local authority landlords which is recognised by Conservative Members even if it is often vehemently denied by Opposition Members.
Mr William Benyon (Milton Keynes)
Before my hon. Friend leaves the 1967 Act, I must point out that it is apparent from the note in the Vote Office that those who enfranchise themselves under the extension to the 1967 Act in highly priced properties, mainly in central London, will not get: the marriage value or a proportion of the marriage value. If it is equitable for the leaseholders of flats to get that, why is it not equitable for those in such properties?
Mr Tim Yeo (South Suffolk)
What is proposed for those properties is consistent with the case of the properties that qualified under the 1967 Act. As my hon. Friend has drawn attention to the point, I undertake to consider it. We have said in the document in the Vote Office that the process of calculating the price is almost identical to the market valuation principle proposed for flats. To the extent that it is different, I will consider my hon. Friend's concerns and reflect on them. My hon. Friend may not be in the House by the time that the legislation goes through. I am sure that he will be here in spirit and I have no doubt that we shall be able to communicate with him as he is a substantial landlord in Hackney. I am sure that the Hackney constituencies will soon become Conservative.
I regret that it is not surprising that Opposition Members are so reticent about the disgraceful behaviour of many local authority landlords, because such landlords are almost invariably Labour-controlled authorities. The principle that landlords can appoint managing agents cannot be easily overturned. I notice that that proposal is included in the Opposition's policyy statement. We have considered carefully whether tenants should be given the right to choose the managing agent or to remove a managing agent chosen by the landlord. To give such a right would create more problems than it would solve. It would present severe practical difficulties if the tenants wanted to take action against the landlord because of poor management. As the landlord is ultimately responsible for the management of the block, he must have the final choice of managing agent.
The Landlord and Tenant Acts already provide for tenants' agents to be consulted over the appointment of managing agents and about their duties. Leaseholders also have the right to be consulted about major works. They have the right to information about service charges, including a summary of the costs and they have the opportunity to inspect supporting documents if unreasonable service charge demands are made.
In answer to the concern expressed by my hon. Friend the Member for Hampstead and Highgate, I point out that the legislation provides a broadly adequate set of safeguards. Difficulty has arisen because of the reluctance, which may be understandable, of some tenants to enforce the legislation. The House should deliver a clear message to people that there is a framework that can be used to pursue bad landlords who are inflicting the consequences of poor management on their tenants. As Members of Parliament, we should advise and encourage people to go down the legislative route. Only if we find that the legislation proves to be ineffective when it has been tested in court would it be necessary to consider further change. I understand the caution that many tenants would feel about going to the courts and I especially understand the caution that tenants of local authorities may feel because of the danger of harassment.
I condemn the practice of many local authorities, especially in London, of making exorbitant demands for contributions from leaseholders who have exercised the right to buy to the cost of works in the blocks in which they live.
Mr Tim Yeo (South Suffolk)
I am glad to hear my hon. Friend being so vocal on the matter. In Waltham Forest and in Southwark, there is still great Labour party hostility to home ownership. That is never far from the surface anywhere in the Labour party. That hostility was reflected in Labour's opposition to the right-to-buy legislation when it was introduced. That hostility is reflected in Labour's opposition to rents-to-mortgages, the most valuable extension of right to buy. Even when the right to buy has been established as a statutory right, local authorities such as Lambeth and Hackney continue to obstruct, both by incompetence and by dogma, the process of tenants trying to exercise their right to buy.
Under prodding from my Department and following legislation, Lambeth's previously lamentable performance has improved slightly. The mantle of being the worst performing London borough in terms of processing right to buy applications has now passed to Hackney.
Mr John Wheeler (Westminster North)
Before my hon. Friend concludes his excellent speech, will he deal with this point? He may have been as astounded as I and my hon. Friends were to hear the hon. Member for Knowsley, North (Mr. Howarth) talk about the Government "dithering" over the proposals. Will he confirm that this Government set up the Nugee committee of inquiry in 1984 which led to the Landlord and Tenant Act 1987? It greatly extended the accountablity of freeholders and managing agents to renting and leaseholding residents.
Will my hon. Friend dwell on another point? Although the Opposition have said that they support the forthcoming legislation, they have proposed in their policy documents the introduction of two taxes that would make the acquisition of freeholds and commonhold an irrelevance. They propose an inheritance tax and the reintroduction of a capital transfer tax.
Mr Tim Yeo (South Suffolk)
My hon. Friend makes two important points. No Government have done more than we have, through a series of measures throughout the 1980s—we will follow that in the 1990s—designed to bring sense and balance in the relationship between landlords and tenants. In the unlikely and tragic event of the Labour party coming to power this year, there is no doubt that few leaseholders would have the resources or inclination to try to exercise the rights that we propose because they would have been taxed out of existence. The danger of the Labour party coming to power is that most householders, through a combination of higher income tax, higher national insurance contributions and, above all, higher community charges, because Labour is committed to abolishing community charge capping, would be struggling to remain where they are now. They will not be able to lay out money to acquire the freehold of their properties.
The Opposition's total silence about the way in which their Labour party allies in the local authorities are denying tenants their statutory rights is revealing. We have listened in vain this morning, as always, for any whisper of condemnation of those disgraceful practices. It is not only that such authorities deny tenants their statutory rights. They waste resources by leaving properties empty and by failing to collect the rents due to them. To know what a Labour Government would be like in practice, one has only to look at the record of the London Labour-controlled authorities.
Let me conclude with a word about service charges.
Mr George Howarth (Knowsley North)
The Minister has treated us to a long litany of abuse. As he has widened the debate to housing concerns in general, would he care to spend a few minutes defending the Government's record on homelessness?
Mr Tim Yeo (South Suffolk)
I am glad to be able to tell the hon. Gentleman that I am looking forward to the publication of the next set of homelessness statistics next week, and they will demonstrate the success of our policies.
Let me deal specifically with the point about service charges. We know of contributions requested from leaseholders of £20,000 towards work on flats whose total market value is little more than that. We have heard of demands for advance payments of up to £40,000—even where there is no evidence that the council plans to carry out any work in the near future. At the moment, I am taking up a case with Southwark—brought to my attention through the good offices of my hon. Friend the Member for Dulwich—involving a tenant who has been billed every quarter for a contribution of £100 a month towards repairs that the council shows no sign of being ready to undertake. That sum is additional to the charges for day-to-day services and maintenance costs. If that is not an abuse of landlords' power, I do not know what is. It is certainly not acceptable to us. Again, I listen in vain for any condemnation of that practice by the Labour party.
Mr Tim Yeo (South Suffolk)
No, I must make progress. I am sorry, but I have given way many times.
Tenants are being discouraged from exercising the right to buy because of their fears of excessive charges—fears that are being whipped up by councils providing unjustifiably high pre-sale estimates. They are being warned of—one might almost say that they are being threatened with—liability for repair bills higher than the value of the flats themselves.
On the issue of timing, my hon. Friends will know that I cannot make commitments about what legislation will be included in the first Session of the new Parliament. I can confirm, however, that leasehold enfranchisement and the introduction of commonhold will be a top priority. We have done the work, we have completed the consultation. The Government are committed to the policy.
The Opposition have tried to claim that they would attach a high priority to such a policy—but they have so many priorities. By the time they have introduced legislation to cripple employers and destroy jobs through the introduction of a minimum wage, and to legalise flying pickets, by the time they have renationalised the water industry, abolished fund-holding general practices and scrapped the council tax, I do not know how much parliamentary time will be left in the first five years, let alone the first year.
At least the Opposition list their priorities on housing: there are 16 priorities listed in their policy document on housing, and I should like to draw my hon. Friend's attention to one of them. Labour would lift restrictions on direct labour organisations. Of course, the Opposition must pay their dues to their masters in the public sector trade unions, but to call the promotion of direct labour organisations a priority is surely unnecessary even by Labour party standards. Let us recognise it for what it is—not a priority but a threat to the pockets of charge payers in London Labour-controlled local authority areas who have benefited so much from compulsory competitive tendering. It is a threat, too, to the tenants, whose repairs are unlikely to be more speedily or effectively undertaken if the direct labour organisation monopoly is restored as the Labour party wishes. The priority for Labour to help its union friends ranks at least equally with the introduction of leasehold enfranchisement. The message is clear: those who want legislation on the statute book quickly need a re-elected Conservative Government. That is what they will get later this year, and I commend the policy to the House.
Mr William Benyon (Milton Keynes)
I had not intended to speak in the debate but as it has been rather one-sided I have decided that I would like to intervene. I must declare my interest as the owner of leasehold property.
No one objects at all to commonhold as an additional form of housing tenure—although the claims made for it are grossly exaggerated, and the sort of instances described by the hon. Member for Tooting (Mr. Cox) show the difficulties that will arise. Commonhold sounds lovely but in practice it will mean a lot of extra money for the lawyers.
It is not that aspect with which I have difficulty, however. What sticks in the gullet is the compulsory overthrow of agreements freely entered into and their extension—quite apart from commonhold—to the Leasehold Reform Act 1967. The changes will affect the whole concept of the private rented market. As my hon. Friend the Member for Epping Forest (Mr. Norrish) implied in his intervention, that effect could have been avoided, by allowing the right of enfranchisement on change of ownership or where a landlord does not conform to a proper code of practice.
Such legislation would remove long leasehold from housing tenure. Nobody would ever again grant a long lease. The opponents of the existing system say, "So what. This is a bad system and we have heard much of its defects today. We have heard a lot about the bad apples in the barrel." But there are grave disadvantages in losing the leasehold system, particularly in areas of high-priced property. Leasehold has always been the halfway house between direct rental and owner occupation. Without it there will remain only two forms of private housing tenure—direct rental on my one hand and owner occupation on the other. I beg my hon. Friends to understand that, as a result of the change, both will become more expensive.
One of the saddest aspects of the current housing scene is the relatively small size of the private rented sector. Compared with our industrial competitors overseas, we are a long way behind, which militates against the mobility of labour. There are several reasons for that—principally, the low return that a landlord receives on rented property largely caused by the tax advantages available to owner occupiers. It is also a direct result of the political uncertainty that has surrounded rented property for so many years. As a result of the compulsion element of the proposed change whereby a Conservative Government proposes that these contracts should be overthrown, landlords will wonder how they can ensure that the same will not happen to ordinary rented properties and will decide to get out now while the going is good. That will be their overriding reaction.
Some of my hon. Friends may say that the number of private rentals is now rising, and I have the figures from the Royal Institution of Chartered Surveyors. But that is because of the depressed state of the housing market. As soon as that changes, as it rapidly will, people will leave the private rented sector in droves.
May I raise the issue of compensation, not as a private plea but because it is important for landlords' general conception of renting in the future. I was glad that my hon. Friend the Minister replied to me as he did about the extension to the 1967 Act. But even what is proposed for flats—the market price plus at least half the market value—will give enormous immediate tax-free capital gains to the leaseholder at the expense of the freeholder. There is no way to avoid that. If no change is made to the proposal for extending the 1967 Act, the windfall gain involved will be enormous and will involve hundreds of thousands of pounds per property. That is marvellous for the Government because they do not have to pay a penny, and it will no doubt have a considerable effect on how people vote. But it does make one curious about why all those impoverished people in Eaton square should have that windfall.
Excluding the 1967 Act itself, we must go back to the dissolution of the monasteries by Henry VIII to find an equivalent transfer of property from one section of the population to another.
Mr William Benyon (Milton Keynes)
Henry VIII transferred arbitrarily a large amount of property in this country. My hon. Friend may say that that was beneficial. I am not arguing that point, but it is a curious measure for the Conservative party to aspire to. When the appearance of central London changes out of all recognition, as it will, and when the price of property and rents escalate, we shall know who to blame.
Mr Hugo Summerson (Walthamstow)
I also congratulate my hon. Friend the Member for Dulwich (Mr. Bowden) on his good fortune in winning the ballot and choosing such an interesting motion for debate.
Commercial leasehold has not yet been dealt with in the debate. In a good letting market, a landlord has all the advantages. People fall over themselves to take property at a time of buoyant economy and many people want to run their own businesses from those properties. That means that landlords can include all sorts of conditions in leases, sometimes quite onerous ones that deal with the maintenance of the building and state that there must be rent reviews at regular intervals—indeed, upward-only rent reviews at regular intervals. The landlord is doubly advantaged by privity of contract—a double whammy.
We should ask what privity of contract is—
Mr Hugo Summerson (Walthamstow)
My hon. Friend asks me to define it, and I am just about to make a gallant effort to do so. In broad and general terms, at the start of a lease there is privity of contract between the lessee and the freeholder. Well on into the lease, where the lease may have been assigned several times, there is privity of estate between the freeholder and whoever holds the lease at the time. In addition, there is privity of contract between the freeholder and the original lessee, who may have assigned the lease and disappeared off into the distance.
If the lease was originally for a term of 25 years, has run for 15 to 20 years, has been assigned several times, and the holder of the lease is unable to pay the rent or comply with the conditions of the lease, the landlord can go back to the original tenant. As there is privity of contract between the two, the landlord can demand of the original tenant that he pays the rent. It could be that, with upward-only rent reviews, the rent will be much higher than it was when the lease was first granted.
I have some examples of what can happen in those circumstances, and shall quote from a publication, "Drapers Record—the Fashion Business". It states:
Some retailers are facing bills of up to £50,000 for rent arrears run up by tenants to whom the lease has been sold on. By law, previous holders of the lease can be forced to pay the arrears, if the current holder defaults on payment.
Retailers say that they face bankruptcy because they cannot pay the bills.
One fashion retailer in the Midlands, who said he did not wish to be named, said he had just received a demand for £50,000 on a property which he and his wife had left 11 years ago. 'It is causing a lot of hardship but it is the law, and the freeholder is entirely within his rights to do this.'
The retailer is now worried that the landlord will continue to force him to pay the rent until the lease is up in another nine years or until another tenant is found. He added: 'We will have to go bankrupt—there is no way that we can be liable for that sort of figure.
That is what happens with privity of contract.
A report was published by the Law Commission in November 1988, following publication of a consultation paper in 1986. A press notice on the report states:
Once a tenant no longer owns property, he should not pay for it. The Law Commission, in a report published today, recommends that the responsibilities of both landlords and tenants under a lease should normally end as soon as they
dispose of the property. At present, the general rule is that anyone who signs a lease remains liable to comply with the obligations until the end of the lease period, even though he may long since have parted with all interest in the property.
The rule applies equally to landlords and to tenants, of all types of property—residential, commercial, agricultural. But tenants feel the main impact because leases impose more obligations on them. Difficulties arise particularly when the original tenant transfers the lease, the new tenant defaults on the rent, and the original tenant has to foot the bill … The Law Commission found widespread ignorance of the present rule.
We cannot be surprised that there is widespread ignorance of privity of contract.
The press notice continues:
The first that many people heard of it was when they received a claim.
Although it is now possible to make a contract to vary the position, the Commission reports that 'landlords are often in a dominant position in this market, which either makes it impractical for tenants to negotiate on equal terms or even deters them from trying'.
The Law Commission recommends that liability should normally cease when an owner parts with property let on a lease, but there would be exceptions. The scheme works differently for tenants and for landlords:
Tenants would automatically be released, unless the landlord's consent to a transfer was needed and he could show that it was reasonable that they should guarantee their immediate successor's liability.
Landlords would have a chance to seek a release, but the tenant would have the opportunity to insist on their remaining responsible if it was reasonable that they should be.
The matter was raised more recently by my right hon. Friend the Member for Worthing (Mr. Higgins), who tabled a question answered on 3 March by the Attorney-General, who said:
In 1988 the Law Commission published its report, 'Landlord and Tenant Law: Privity of Contract and Estate', Law Com. No. 174. It recommended that all the obligations created by leases should bind the parties who for the time being are interested in the land and that those parties should cease to have any liability when they part with those interests, except in cases in which it is objectively reasonable that their liability contiue. It is envisaged that in many cases a landlord consenting to an assignment by a tenant of his interest will be able to impose a condition that the tenant guarantees the performance of the lease covenants by his successor, but only until any subsequent assignment. The Lord Chancellor is actively considering the report's recommendations and hopes to be able to make an announcement about them in the near future."—[Official Report, 3 March 1992; Vol. 205, c. 99.]
That is good news, especially since, as we hope, the Lord Chancellor has been actively considering the report's recommendations since 1988, so he will doubtless be full of ideas.
It surely cannot be right that a landlord can bankrupt someone for someone else's debt.
Turning to residential matters, I declare an interest as the owner of some freehold property in south-west London. My hon. Friend the Member for Dulwich is quite right about the difficulties facing leaseholders. He spoke of rapacious freeholders and declining leases, and no doubt there are problems; but certain difficulties also face freeholders. They will have responsibilities imposed on them for any lease. Usually, those responsibilities will include managing, insuring and maintaining a building. Freeholders, too, can run into difficulties. What if, for instance, a couple of lessees in the block do not feel like contributing to the cost of maintenance? Property maintenance is expensive and sometimes people do not feel like paying up. That puts freeholders in a quandary; they are bound by the terms of the lease and by statute to maintain a property. What, therefore, should they do when lessees say that they will not pay? They may decide that if they do not go ahead they will be breaking the law, so they go ahead and try to recover the money later. If a great deal of work has to be done to the block in question, the freeholder may find himself having to pay out large sums of money which the lessees have refused to pay.
House owners have a choice when it comes to maintenance. If the roof starts to leak and someone is feeling a bit hard up, he can decide to buy a bucket to catch the drips and leave the roof until next year. A block of flats is different, however, because the interests of everyone in it have to be considered and the freeholder may have to carry out the work. I question whether these difficulties will be solved by what we have been discussing today.
Will commonhold solve all these problems? Certainly, it will have certain different effects on blocks of flats. It will mean that other commonholders will be able to put pressure on those who do not feel inclined to pay their bills. On the other hand, some people say, "We want to live in peace with our neighbours and do not feel like knocking on the door of the recalcitrant lessee. If he will not pay up that will make things difficult for everyone else."
However, there are rapacious freeholders, people who do not do their job properly. Some of them terrorise leaseholders, and I use those words in a considered way. My constituency has a large block of flats called Fernhill court and there are many problems there. The first problem is in finding out who the landlords are. I think that the Freshwater group is involved, but the trouble is that it has created a number of intermediate forms of tenure. There are freeholders, head leaseholders, under-leaseholders and sub-under-leaseholders. As a result, responsibility for carrying out the terms and conditions of the leases has become thoroughly obscured.
Whoever the freeholders or leaseholders are in that case, they are certainly good at sending out service charge hills to the lessees, and those bills arrive without reference to any law. They consist of a bald statement to the effect that the person owes £500 in service charge. However, they are certainly bad at maintaining the property. They say, "We refuse to maintain the property until you, the lessees, pay our service charges." That is what I mean by rapacious freeholders. It is unfortunate that such things happen, because they tend to give the whole leasehold system a bad name.
Fernhill court also has the problem of short leases which are down to about 30 years, and many elderly people in the blocks are worried about that. Some of them are worried that they may outlive their leases and others are worried that if they want to move they cannot. How can anyone sell a 30-year lease in a block of flats, particularly where those who are supposed to be maintaining the fabric of the property are not doing their duty and are sending out exorbitant and, I am sure, illegal service charge demands?
We must be careful not to throw out the baby with the bath water, because there are many well-managed estates. Estates in London, and especially in central London such as the Grosvenor estate, Belgravia and Mayfair, tend to be well looked after and well maintained. If an estate wishes to sell properties on fairly short leases it should have the right to do so. Many foreigners who come to this country for two or three years would like a home of their own and are perfectly willing to pay a premium for a 25 or 30-year lease in a part of London such as Mayfair or Belgravia. They do not wish to buy a 99-year lease, because the difference in the amount that they would have to pay for a 35-year lease and a 99-year lease is considerable. They know that at the end of the time they can sell the lease and return to America or wherever.
We should consider a simpler solution to the problem, which is that ordinary flats should be sold on leases of, say, 999 years. Those who erect blocks of flats or convert a house into flats sell them on 99 or 125-year leases and then scarper because they are not interested in the freehold. If the leases were for 999 years the freehold could be vested in the leaseholders.
I spoke about elderly people with short leases. Is it possible to put in place some sort of system whereby elderly people who have lived in their flats for a long, time but are unable to sell them because of a short lease could sell them on notional 99-year leases? That proportion of the price received that can be attributable to their flats could be passed over to them and the rest passed over to the freeholder, or something like that.
I was rather cross when the hon. Member for Knowsley, North (Mr. Howarth) read out a quote from the Consumers Association because I was going to do that myself. However, although he was good at reading out its reservations, he did not quote one part of the letter, which says:
In brief, we broadly welcome the developments to date.
I have received a paper, called "A Programme for a New Parliament", from the Royal Institution of Chartered Surveyors, of which I have the honour to be a fellow. It asks for a better deal for leaseholders and tenants and says:
Many people in rented and leasehold accommodation have to endure low standards of management and maintenance. The government has tried to help some tenants through its Tenant's Charter. But many tenants and leaseholders in both the public and private sectors still receive a poor service from landlords. Organising even essential repairs can be a major problem.
There is cross-party support for the introduction of a system of commonhold under which leaseholders would be given the right to buy their freehold. Management of the common parts of blocks of flats would then become the responsibility of a commonhold association comprising of all the flat owners. What more can be done?
A statutory code of practice should be prepared for all who manage residential property—whether rented or leasehold, public or private sector. It would lay down a set of minimum standards which all managers would have to meet. The RICS is currently preparing just such a code in close liaison with the Department of the Environment.
A commonhold form of tenure may suit the needs of some people. But introducing it poses many problems. It should only be available with the agreement of both the leaseholders and the freeholder. The needs of many leaseholders may well be better served by giving them a statutory right to extend their leases, a right already enjoyed by commercial leaseholders. This would overcome the difficulty that leaseholders can experience in selling flats with short leases." Those who have been listening to my speech will doubtless be able to point out a number of contradictions in what I have been saying. That just goes to show how difficult and complicated a subject this is. We have to be terribly careful about what we are proposing and doing. Dispossessing good landlords and freeholders of their properties is something which no Conservative Government should undertake lightly.
I emphasise what has already been said by my hon. Friend the Minister about the treatment by the London
borough of Waltham Forest of leaseholders who have exercised their right to buy their flats from the council. Waltham Forest council has behaved in the most disgraceful way towards those leaseholders. It has sent out demands for sinking funds—demands that lead to sinking hearts in my constituency. These demands are often undetailed and have figures written in at the bottom in hand. This is a London borough behaving like this.
Some of the service charges are for exorbitant amounts. People get demands for £2,000 on account. As a result, the London borough of Waltham Forest leaseholders' association has been set up. That just goes to show the demand that there is for a voice for these people who feel themselves so pressurised by the council. There are now more than 2,000 members of the association, which has sent delegations to see me and my hon. Friend the Minister. They are looking to us for help. I am grateful for the assistance that he has already given and I look forward to the further assistance that he will doubless give in the future.
Mr Steven Norris (Epping Forest)
First, I make my declaration of interest in leaseholds as chairman of Haven Services Ltd. Secondly, I apologise to the House for being absent during the first part of the Minister's speech. I was carrying the Home Secretary's bag from his office to the House before he delivered his most welcome statement on the national lottery.
I congratulate my hon. Friend the Member for Dulwich (Mr. Bowden) on his good fortune in the ballot and on what I am assured was a most lucid survey of the problems of leaseholders in Britain. I wish to enter one or two notes of caution along the lines of those of my hon. Friend the Member for Milton Keynes (Mr. Benyon), whose contributions to our debates will be sorely missed by those of us who know him to be one of the most honourable of all right hon. and hon. Members. He has a most distinguished record of contributions to many debates over many years.
The Government are proposing and extremely un-Conservative act. As my hon. Friend the Member for Milton Keynes said, they are proposing to dissieze on a scale which has not been contemplated since—I am sure that the historical researches of my hon. Friend are complete—the dissolution of the monasteries.
We are talking about the right to enfranchise and purchase long leases and the recent announcement of the right to extend leases by providing an extension to the balance of the existing lease plus 90 years. We are establishing a new right to householders who were previously excluded from the terms of leasehold reform legislation to buy their properties, whether or not the landlord likes it, and there is now the new right of commonhold.
My hon. Friend the Minister was right to suggest that there is often confusion over the differences between leasehold enfranchisement and the principle of common-hold. I have no great difficulty with the concept of commonhold, because my hon. Friend made it clear that compulsion was to be absent in deciding when and where commonhold might be appropriate. I believe that he is right. There might be merit—not exclusively but on many occasions—in having a form of ownership of units of occupation within one larger unit or building, which is essentially what we are talking about, of the sort that commonhold seems to represent. I hope that in the next Parliament my hon. Friend, if he has not then moved on to be the Minister of State or the Secretary of State of another Department, will be able to advance that concept. I am sure that it would be generally approved.
With leasehold enfranchisement, we are surely in extremely dangerous territory. We are saying that we, the Conservative party, should require an individual to sell an asset—not that he wants to or has any intention of doing so, and not that he has been anything but the most prudent, decent, honourable and conscientious landlord—merely because the tenant of the property that the landlord owns has decided that he or she would like to make a windfall gain.
Mr John Wheeler (Westminster North)
Surely my hon. Friend recognises that Parliament decided upon that principle in 1967. The decision has been made. We are proposing to extend the principle to a few remaining houses, chiefly in central London. Surely he recognises also the impossibility of enfranchising the £1 million flat in Westminster under commonhold but leaving the £1 million house next door to it still subject to the leasehold regime.
Mr Steven Norris (Epping Forest)
First, I am surprised that my hon. Friend should regard the occupants and tenants of a £1 million flat as being deserving of our attention as persons in dire need. Secondly, I say that two wrongs certainly do not make a right. The fact that the House, before I became a Member of it, introduced—in my view, unwisely—the concept of forcing people to sell assets that they had no intention of selling does not mean that we should compound the felony by extending the principle still further.
I do not doubt the good intentions of my hon. Friends, but there are at least three significant disadvantages in following their preferred route. The suggestion to extend leases sounds perfectly reasonable, but the idea is that someone who has only the tail end of a lease, which is not easy to sell, should be able to buy the balance plus 90 years. As my hon. Friend the Member for Westminster, North (Sir J. Wheeler) knows, if such a property were a commercial property, under the Landlord and Tenant Act 1987 the owner would have the right not to extend the lease if he intended to use the property himself or to redevelop it. There is no suggestion that that facility will be available under the proposed legislation.
Let us suppose that I have a block of flats. When the leases on that block come to an end, I want to redevelop it—but I cannot do so because I am now told that I must allow the tenants to buy the remainder of their leases and extend them for another 90 years. It does not matter whether I am compensated for that; no amount of compensation imaginable would be adequate to compensate me for the development loss that I would suffer. However, that is what the motion envisages—unless my hon. Friend the Minister wishes to intervene and say that that is not the case. As he appears to be reasonably comfortable where he is sitting, I can only assume that it is the case. It is nonsense. It is a disgrace that a Conservative Government should even think of doing such a thing.
Let us consider the difficult business of the person who owns the tail end of a lease. There are not many of us who, when contemplating purchasing property, have not thought about the seductive appeal of getting much more premises for our money, provided that we are prepared to accept a shorter lease. It is a well-known choice, which is available to us all. We can have freehold or we can have a 20 or 30-year lease—but on a much grander property—for the same price.
If someone is prepared to buy a 30-year lease, he knows what he is buying. He knows that the value of the lease will diminish and that, at the end of the 30 years, he will not have an asset. That is why he can purchase the occupancy of those premises, with a much shorter lease, for such a small price.
Even if the person concerned was elderly—and we are all sympathetic to the plight of the elderly—and might have occupied a leasehold property for a great many years, it would be a clear breach of natural justice if we were to say that that person had the right to take from the landlord a further extension of the lease plus the balance of the lease simply because that person's circumstances appeared to require our sympathy.
My hon. Friend the Member for Walthamstow (Mr. Summerson) is a good friend of mine. He is a distinguished member of the Royal Institution of Chartered Surveyors. However, he is wrong to assume that our sympathy for a person who happens to have the tail end of the lease means that we should force landlords to sell for no other reason than that.
My greatest concern is our motivation behind the wish to change the nature of tenure of property. I agree with my hon. Friend the Member for Milton Keynes that the concept of the lease, short and long, is valuable in the way in which we make property available to people. From freehold to weekly lettings, there is a whole variety of tenures. That is good for the market and we should encourage it. It is clear that the real concern behind the wish to give tenants more power relates to bad landlords. I shall not enter into the argument about whether some Labour local authorities are worse landlords than the worst private landlords.
If one drew up a scale of awfulness, at the very bottom one would find the odd Rachman-like landlord who was cynically ripping off people in an intolerable and unjustifiable way. Above him there would be a whole raft of Labour authorities, which are often just as bad and in some cases even worse. The only justification for their actions is pure political spite. They are prepared to use the poor people whom they claim to represent as political pawns, and outrageously scare and intimidate them to make a cheap political point.
Before my hon. Friend the Minister embarks on the course that he described, I ask him to consider that the majority of landlords are decent and reasonable people. Some of us are very proud of the standards that we observe in managing property. Over the many years that I have been involved in Haven Services, I cannot recall one substantial complaint being received about the way in which we manage the hundreds of blocks that contain more than 4,000 properties.
We should be addressing instead the right that should be given to tenants when the landlord clearly does not meet his obligations. I refer to a failure to repair, or an endeavour to exact unreasonable charges. My hon. Friend the Minister says that that might be difficult to achieve, yet he proposes to take us down a complex, undemocratic, and un-Conservative path to compulsory enfranchisement and commonhold, as if that were a better alternative.
It would not be difficult, building on the Government's excellent work in improving the rights of tenants of blocks of flats that are run by management companies, to provide for a system whereby tenants could, on a number of different grounds, serve a notice on the landlord; and if he failed to respond adequately after a set period, tenants would be entitled to acquire from the landlord the freehold of the property on a basis to be agreed.
In such circumstances, there would not be much argument for giving the landlord a particularly generous deal, and perhaps that is as it should be. I envisage a situation in which the total cost of the landlord's outstanding liability to repair would be deducted from any value attaching to the freehold, so that the landlord received nothing more than the net difference. If that amounted to nothing, there would be every justification for the tenants to say, "We shall take the freehold from the landlord. He does not deserve to own it. He fell down on his obligations"—which could be expressed in a statutory form—"and did not respond to our notice."
I want to place on record, in the marvellously neutral territory of a debate on a private Member's motion, a sentiment that I might have more difficulty expressing in the course of a Government debate, such as a Second Reading introduced by my hon. Friend the Minister. A great deal of uncertain territory remains to be explored. There are profound anti-Conservative, anti-libertarian, and undemocratic issues at stake. I counsel my hon. Friend the Minister and the Government to consider carefully the alternatives that are available in improving the lot of tenants before embarking on the course that my hon. Friend the Minister described.
Mr John Wheeler (Westminster North)
I propose to be brief, because I know that my right hon. Friend the Member for Brent, North (Sir R. Boyson) is waiting to introduce an important debate, to which we shall listen with great interest.
My hon. Friend the Member for Epping Forest (Mr. Norris) will not be surprised if I say that I cannot agree with anything that he said. It echoed from the 16th century. That thought was put into my mind by my hon. Friend the Member for Milton Keynes (Mr. Benyon).
The plain truth about leasehold property is that the public no longer have any confidence in it. They have been demanding change. My hon. Friend the Under-Secretary of State and his marvellous officials will be only too well aware of the quantity of correspondence that I have sent him over the years from the public in the city of Westminster.
I do not find any person—no judge, no distinguished Queen's counsel, no lawyer, no property magnate, no capitalist, no candlestick maker—standing up to defend leaseholds as they are. All the demand is in the opposite direction.
Mr John Wheeler (Westminster North)
No, let me get on. People are saying that the concept is out of date and that they want the right to enfranchise in their higher rateable value properties as Parliament set out in the Leasehold Reform Act 1967 when it debated and agreed to the principle of this change in the law. At long last, justice is coming to that important, but relatively small group of people in the city of Westminster and elsewhere in the centre of London.
I was astounded to hear the hon. Member for Knowsley, North (Mr. Howarth), who I know has had to leave the Chamber for a moment, say that the Government have "dithered" over the introduction of the commonhold and leasehold reform Bill. Nothing could be further from the truth. In the 13 years that the Conservatives have had the privilege of being the Government of the United Kingdom, we have been at the forefront of reform and change. As my hon. Friend the Under-Secretary said in response to my intervention, the establishment of the Nugee committee of inquiry in 1984 led the way to a thorough and detailed investigation of the many problems faced by renting tenants and leaseholders in blocks of flats. It resulted in the Landlord and Tenant Act 1987 which gave the right of first refusal when a freeholder was proposing to dispose of his interest in a block of flats. It greatly extended the ability of leaseholders and others to hold to account managing agents and property owners.
Then came the Lord Chancellor's paper on the concept of commonhold. As my hon. Friend knows, this is an immensely complicated subject. It was right that the Government should consult widely to obtain all views possible. I am glad that I have been able to contribute to this debate, albeit modestly, on behalf of my constituents so that we prepare legislation for introduction into the House in a few weeks' time that will stand the test of time.
I am delighted that my hon. Friend the Minister for Housing and Planning announced on Wednesday the intention to introduce that legislation. I was glad that he could confirm that the Crown Estate would also apply the provisions of the proposed legislation as if it applied to the estate, because the Crown Estate is generally exempt under the Crown Estate Act 1961. I was glad, too, that he could confirm that the principle of charitable property would be as defined in the Leasehold Reform Act 1967.
Some say that this may damage the maintenance and quality of some of the great historic estates in central London. Of course, that is absolute nonsense. These days, historic buildings are protected by a great deal of legislation, and by planning controls when planning consents are required. However, the case for change is overwhelming, not least in the many blocks of flats in central London and elsewhere which are owned by, for example, the Harounis. Any hon. Member who has such properties in his constituency knows the sheer misery that they cause. The properties are not maintained or cared for but every penny is extracted from the wretched leaseholders and renting tenants. It is right that something is at last being done, and I pay a warm tribute to the city of Westminster and the councillors for the way that they seek to enforce the law with regard to such properties.
I also conclude my brief speech with the warmest thanks to my hon. Friend the Member for Dulwich (Mr. Bowden). He is surely a great champion of the rights of leaseholders and renting tenants in his constituency, and he has also done the House and other hon. Members a great service by making it possible for us to hold this debate. I look forward to the introduction of the commonhold and leasehold reform Bill in the next Parliament. I am glad that the legislation is ready to roll the moment the general election is over.
Mr Harry Greenway (Ealing North)
Like other hon. Members, I congratulate my hon. Friend the Member for Dulwich (Mr. Bowden) on introducing this important debate. As my hon. Friend the Member for Walthamstow (Mr. Summerson) said, some people have bought their leases from the council. A large number of those people—a number growing by the day—have inherited a worrying situation as a result. Such people and those described by my hon. Friend the Member for Westminster, North (Sir J. Wheeler) are getting together because they have many problems in common.
I associate myself with what my hon. Friends the Members for Westminster, North and for Dulwich said—I am sorry that I missed so much of what the latter said—but especially with what my hon. Friend the Member for Walthamstow said. He put his finger on the problem facing many of my constituents. I do not need to repeat what my hon. Friends have said, but I wish to make two points which are of great concern to my constituents.
First, I refer to the disappointment of many people who have bought their flat in a block in which there is no prospect of two thirds of the people wishing to become enfranchised. Can the Government show real imagination and find a way in which individual leaseholders can yet be enfranchised? We have always said that where there is a will, there is a way. There must be a way, difficult as it may be. I ask the Minister to recognise the disappointment and, possibly, resentment felt by people who cannot have the same entitlements and rights as others in similar but slightly different positions.
Secondly, service charges, especially to council tenants, are a matter of the utmost concern. So often tenants do not know what they are paying for. When they ask, they are sent a list of what has been done with the money that they have paid, but they are often highly dissatisfied. For example, they are told that the cleaning of common staircases and the mowing of lawns is included, but men tell me that their stairs are never cleaned except by their wives and women say that the lawns are never mown except by their husbands. That, rightly, causes great dissatisfaction.
Another problem with service charges is the iniquity of the difference between charges imposed on people in almost identical properties. People cannot understand why, as their properties are almost identical in layout and value to others, they have to pay different service charges. Should not there be some way in which people could be charged more evenly and more fairly?
Repairs are an issue of great disappointment and dissatisfaction for many people. If they live in a block of flats and the council requires, for example, the replacement of all the windows in the block, they ask to be allowed to get the work done themselves. It may be said that one flat could not be allowed to have different windows because it would spoil the appearance of the block. I have met many constituents who say that they could find a little builder down the road who would use materials almost identical to those used by the men employed by the council and who would do the work at less than one quarter of the cost. Why cannot my constituents do that?
We need to consider people who have bought their flat and who are approaching old age and, sometimes, penury. Some are required by councils to have work done which, in the opinion of many, is not required. The cost may run into thousands of pounds and those people may be in debt for the rest of their lives. That severe problem should be addressed.
I make my comments against a background of knowing that everyone in the categories that I have described is grateful for having been given the right to buy by this Conservative Government. I well remember how, in the 1979–80 Session, the House sat until 15 August to get the right to buy on to the statute book against the bitterest, most wicked and meanest opposition imaginable from the Labour party. Labour has no honest interest in the tenants' right to buy. Let no one say that it has. That is proved by the way in which Labour behaved then and by the way in which it continues to behave when it controls councils. There are many examples, including Ealing between 1986 and 1990. Every possible impediment was put in the way of people who wanted to buy. The evidence for that is in the figures, because the figures for the Labour period of control are very different from the figures for the Conservative periods of control before and afterwards. The proof of the pudding is in the eating.
Dr Rhodes Boyson (Brent North)
Hon. Members have referred to bad landlords, and the whole issue turns on that. Only this week, I have found bad landlords in my constituency. One has been referred to by my hon. Friend the Member for Westminster, North (Sir J. Wheeler) this morning. Some 400 flats are owned by that firm in my constituency.
The proposed legislation must answer three points. First, is it adequate to protect weak and defenceless tenants when they fall under exploitive landlords? The legislation must be adequate if it is to have my support. Secondly, have all landlords paid their taxes? Have there been checks, especially on the service charges? Thirdly, does the law need to be strengthened so that there is an obligation to provide local accounts of service charges and expenditure, and to maintain proper building insurance? Landlords could not then avoid their responsibilities with impunity.
I am anxious that those three points should be met because many tenants suffer tremendously at present. Good landlords exist; bad landlords must be dealt with. My support for the proposed legislation is conditional upon answers being given to my questions for the sake of my constituents.
Mr Gerald Bowden (Dulwich)
We have had an interesting debate on an important subject, during which many good new ideas have emerged. Anyone who has been listening to the debate or who reads Hansard will immediately realise that almost all the discussion has been on the Conservative Benches. The Liberal Democrats have not deigned to turn up to show an interest or to give the matter some thought. With the notable exception of the hon. Member for Tooting (Mr. Cox), who raised an important constituency matter related to squatters with which we can all sympathise, we have had no Labour Back-Bench speeches, and the Front-Bench spokesman merely said, "We would do something similar if we had the chance." It is Conservative Members who have instigated the discussion and made the debate.
There are differences of view on this important subject and we have been able to expose them to scrutiny and debate. It has been a notable occasion in that we have had the benefit of a speech from my hon. Friend the Member for Hampstead and Highgate (Sir G. Finsberg) who may have been making his last speech as a Member of the House. His first speech in the House, to which he drew attention, was on a similar subject. It is evident that his interest, concern and commitment are in no way diminished and his constituents must feel proud to have been represented by him over the years and glad that he has taken such an interest in their concerns.
We have also heard my hon. Friend the Member for Milton Keynes (Mr. Benyon). I am sure that, although they may not agree with the detail of his argument, hon. Members will recognise his great understanding, experience and expertise in the field and the contribution that he has made to the honourable profession of being a good landlord who takes care of his tenants' interests. It will be a great loss to the House that he will not be here to contribute to other debates on these matters in future. We shall bear in mind the thoughts with which he has left us.
My hon. Friend the Member for Milton Keynes raised the serious question—which might be taken into account by Opposition Members if they would care to listen or attend—of how far it is within Conservative principles compulsorily to acquire an existing interest. My hon. Friend the Member for Epping Forest (Mr. Norris) drew attention to precisely the same point. It is a matter for debate but the principle has been established—not only in legislation to allow compulsory purchase for the general good and planning purposes, but in the leasehold enfranchisement Act, the Leasehold Reform Act 1967.
We had notable contributions from my hon. Friends the Members for Walthamstow (Mr. Summerson), for Westminster, North (Sir J. Wheeler), for Ealing, North (Mr. Greenway) and for Brent, North (Sir R. Boyson)—
Mr Gerald Bowden (Dulwich)
Brent, North—of which we understand Wembley to be a part. My hon. Friends have all drawn attention not only to the broad principle but to the particular application that we need to consider in relation to the provisions. Our debate today leaves us in no doubt that there is a crying need for landlord and tenant law to be reformed. The question is whether we should simply tinker with and adjust the existing arrangements or whether what is needed is a major overhaul. From time to time it is necessary—as in 1925—to take a serious look at the law of property. I believe that such a time has arrived once more. Leasehold enfranchisement, the extension of leases and commonhold, provide us with that opportunity. I commend the motion to the House.