I welcome the chance to raise the problem of the Laurel Way housing society. I want to make it clear how much I appreciate the efforts of Mr. Green, Mrs. Birch, Mr. Syers and all the other co-owners of the Laurel Way housing society to try to sort out the problems of the society and the highly effective and efficient job that its present managing agent, D. C. Goodenough and Company, has done in trying to put the society's affairs in order and the dwellings made fit.
Equally, I am aware that the present members are divided between those who want in the end to buy their homes, once they have been made fit, and those who want to remain co-owners. I hope that both groups will be able to fulfil their desires.
The aim of raising the issue in the House tonight is to try to ensure that the sad events that have occurred in this housing society over the past 10 years will not be repeated elsewhere.
The police were asked to study the way in which the society was managed, first, by the Collingwood housing society and, secondly, by Grange Estates. The police were satisfied that no criminal prosecution could be brought. The society took legal advice to see whether civil proceedings could be taken successfully, and concluded—mainly, I believe, because of the delays in taking civil action—that it would be impossible to bring successful civil proceedings against the culprits.
I tried hard to persuade the Housing Corporation that it had a clear moral, if not legal, responsibility for much that went wrong. It was keen to deny this and always argued that it was the responsibility not of those in London or in its regional office but of the managing agent, Mr. Whealing. The Housing Corporation made that clear on many occasions.
In the light of the experience of the Laurel Way housing society with the Housing Corporation, I believe that the general public should be warned that the Housing Corporation is not what many people believe it to be—a public watchdog, giving a seal of approval to those it helps. Although the corporation asks searching questions when anyone wishes to borrow money, and takes a long and sometimes seemingly bureaucratic time to decide whether to lend money, it accepts no responsibility for the propriety or good behaviour of the housing groups that it helps.
I believe that that was the major problem with the Laurel Way housing society. Because the Housing Corporation was involved, many people believed that it had given its seal of approval. Therefore, they did not ask enough searching questions at the right time. It may be a little harsh, but I feel that the Housing Corporation's notepaper should carry a warning similar to that on cigarette packets or advertisements—"Housing warning. The Housing Corporation may allow your home to be damaged; treat with suspicion." There are far too many people who still believe that in some way the Housing Corporation guarantees not just the money but the general behaviour of those people who borrow the money. There have been incidents up and down the country where that has been proved wrong.
Just as no one has successfully sued a cigarette company for causing cancer, so no one can successfully sue the Housing Corporation for failing to supervise one of the housing societies or associations. However, I feel that it has a clear moral responsibility which, on occasions, it should accept.
Some time during 1966–67, a Mr. Derek Stephenson owned a piece of land behind Mauldeth road in my constituency. He owned it via his company, Sackville Estates. He and a Mr. J. V. Whealing and others founded the Laurel Way housing society, developed the land, and built 53 dwellings as a co-ownership scheme. Not only did Mr. Stephenson sell the land to the society, but he also offered his services as architect, while Mr. Whealing, via Whealing, Houghton and Toms, quantity surveyors, offered his services as quantity surveyor. Via the Collingwood housing society, Mr. Whealing became the managing agent of the scheme and secretary of the Laurel Way housing society.
Mr. Stephenson employed a Mr. David Breeze to carry out the design work for his firm of architects. At the time, Mr. Breeze happened to be a Stockport councillor and, it is claimed, perhaps rather more unfortunately, served on the planning committee that gave approval to planning permission for the scheme.
The scheme turned out to be somewhat unconventional, and we now know that it contained a major design fault. The building firm involved in the construction, Hugh Owen, was run by Idris Owen, my predecessor in Stockport, North and a former mayor of Stockport.
The dwellings were finally completed between January 1971 and January 1972. Almost as soon as the houses were occupied, complaints started about water penetration and major problems of damp. From the few documents available for that period that were not destroyed, it appears that the society had major arguments with the builders about the problem of water penetration, and it clearly believed at that stage that it was due to poor workmanship. We now know that that was unfair, because it is clear with hindsight that the real problem was a major design fault.
It is also unfortunate that Stockport council's records of the original planning permission, the building inspector's report and all the information that went backwards and forwards between the architect and the builder are not available, either because of the change from the old borough of Stockport to the new metropolitan authority or because the managing agent for that period got rid of the material.
It is worrying that Mr. Whealing, as managing agent, never advised the Laurel Way housing society to pursue what was wrong. He merely pressed the builders to undertake minor remedial work, and in 1976 he suggested to the Housing Corporation that it could pay out the final settlement of accounts for about £8,000 on the basis that this was a considerable reduction to take into account the amount of remedial work that had to be carried out.
At that stage the design fault had been identified by some people, but Mr. Whealing clearly did not feel that he ought to persuade anyone to take legal action either against the local authority, for not carrying out its duties under the building regulations against the architect for the design fault or against the builder, if he still believed that it was a case of bad workmanship. It is my belief and that of counsel who have studied this issue that, had he then given advice for action to take place, there was a good chance that it might well have succeeded. However, I accept that other arguments are involved, such as whether the architect had insurance cover and whether the money might have been recovered.
Why did Mr. Whealing, as secretary to the society and managing agent, not get proper surveys carried out to establish what was wrong? That is a mystery. Equally worrying is why the Housing Corporation did not press him to do so when it had evidence that things were not right. Mr. Whealing, an experienced man in property and estate management, failed to carry out his duties—or did he choose not to carry out his duties?
In 1978 the Housing Corporation was prepared to hand over the development to the Laurel Way housing society on the basis—as was said at the handing-over ceremony—that the problems had been sorted out. After 1978 the problems continued and water penetration got worse. After 1978 the Housing Corporation persuaded Mr. Whealing to leave Collingwood housing society without making public the reasons. The housing society was not satisfied with Mr. Whealing at that time. Mr. Whealing took the business of managing the Laurel Way housing society to a new company that he created—Grange Estates. Instead of putting Laurel Way housing society's problems into fresh hands, he took them with him and the problems continued.
During 1980 and 1981 reports were obtained from the National Building Agency. That involved the society, with considerable difficulty, having to borrow more than £00 to remedy the defects. The work is now in hand. I hope that it will solve the problems once and for all.
Once the first report from the National Building Agency was obtained in 1980, Mr. Whealing, instead of showing it to all the members of the society, called a meeting and encouraged members to imagine that they could buy their houses without the repairs being done under the Government's 1980 legislation. That could have resulted in some people buying properties with major defects and others buying from them without any knowledge of the position. That would have been a grave scandal. Public health inspectors were suggesting at that time that some of the houses were so unfit that they ought to be made the subject of closing orders.
When the majority of the co-owners discovered the reports and the misleading information that they had been given, they insisted on dispensing with Mr. Whealing's services. The new managing agents have brought a professional approach to the issue and the position of the society has improved.
Why did the Housing Corporation not use its powers to compel Mr. Whealing to take action in 1976 or thereabouts against the architect, the builder or the local authority, or all three, relating to the defects about which the technical staff of the Housing Corporation knew?
Why did the Housing Corporation insist that Mr. Whealing should leave the Collingwood housing association? If it had sufficient grounds for insisting that he should leave Collingwood, why was the Housing Corporation prepared to see him set up Grange Estates? I do not believe that it could have stopped him setting up Grange Estates, but it could have insisted that Grange Estates should not manage schemes which had Housing Corporation money in them, such as Laurel Way and others in Stockport and south Manchester.
Why did the Housing Corporation allow Grange Estates to talk to the co-owners about buying in 1981 when the defects were known but had not been divulged to the co-owners?
Will the Minister consider the propriety of councillors involved in giving planning permission allowing building inspectors not to carry out their full duties, because some of the defects that came to light suggested that some of the drains were not properly inspected when the original building was taking place? It is disturbing to have a scheme being supervised by an architect, who was a member of the local council, when the council's building inspectors were supposed to be supervising that work.
Finally, the Housing Corporation did not look after the public interest. Should it not say that it made a mess of things, and that it did not provide the supervision that people could reasonably expect? Instead of expecting the co-owners to make good the defects and the damage, should not the Housing Corporation give a grant rather than a loan to put the matter right? After all, it was the inefficiency and incompetence of the Housing Corporation that failed to ensure that legal proceedings were taken early enough, which might have made it possible for the co-owners to recover from those responsible the money to put the property right.
I realise that the Minister will claim that he has fairly limited responsibility, but a public body scandalously failed to carry out what most people believed was its moral responsibility to supervise the investment of public money in such a scheme. I hope that the Minister will be able to set some of those fears at rest tonight.
The hon. Member for Stockport, North (Mr. Bennett) tempts me with his constant references to health warnings and smoking to make the long speech about the evils of smoking that I would have made in my previous capacity. However, I shall resist that temptation and begin by congratulating him on raising the important and interesting case of the Laurel Way co-ownership society. He has ably and fully demonstrated the difficulties that the members of that society have experienced in their efforts to secure the repair and improvement of their properties, following the occurrence of construction defects. I endorse the hon. Gentleman's remarks about the efforts of the members of the cooperative, acting in a voluntary capacity, to tackle the very serious problems facing both them and their neighbours.
The hon. Gentleman has also demonstrated their persistence and his energy in pursuing various matters with the Housing Corporation. He has effectively turned the attention of the House from the previous Budget business of the day to focus on the specific topic of immediate concern to a group of co-owners at Heaton Mersey in his constituency. I shall try to shed some light on the issues that he raised, when he spoke with feeling and detailed knowledge on the subject. Perhaps it would be helpful to provide the House with some essential background on the recent history of the Laurel Way housing society and its dealings with the Housing Corporation. In doing so I shall sketch in the picture on co-ownership societies in general and shall explain the relationship between the Department of the Environment and the Housing Corporation, including the responsibilities that my right hon. Friend the Secretary of State for the Environment has with regard to that body.
As the hon. Gentleman probably knows, co-ownership societies have existed since 1961 to offer their members a form of collective ownership in which they have full responsibility for the management of their own estates. Around 40,000 flats and houses have been provided by these housing associations in England, Scotland and Wales. These dwellings have been constructed on estates consisting of seven to 100 or more units. The estates are run by an elected management committee which is answerable to the co-owners, although it may use professional agents and contractors to see to the day-to-day maintenance and management of the properties and common facilities.
These societies are industrial and provident societies registered with the Registrar of Friendly Societies and normally also with the Housing Corporation, which approves their rules. Under these rules the members jointly own their land and property and only the co-owners themselves can be members.
On joining, each member buys a small non-returnable share in the society, pays a returnable deposit, and signs a tenancy agreement under which he or she is bound to make a regular contribution to the costs of the society, including its mortgage and maintenance expenditure. The monthly charge is linked to the value of the property when first occupied by the co-owner and the costs of upkeep, including repairs and additional loan charges that may result from major works—as happened in the case of the Laurel Way society.
These societies may receive financial help from the Housing Corporation in the form of interest-bearing loans for the initial development of the scheme and for any subsequent works. The society, through is members' monthly payments, bears the full cost of such loans at the current rate of interest charged by the corporation. Although co-ownership societies do not qualify for grant aid from the Department in the form of housing association grant, they enjoy tax relief on behalf of their members, deducted at source from their mortgage and qualifying loan charges.
Members are free to leave at any time. When a co-owner leaves and is replaced after at least five years of membership, he or she is entitled to a cash sum from the society which is based on a percentage of any increased value of the property and also credits the co-owner with the sums that he or she has paid towards the repayment of the society's joint mortgage for the scheme. However, under the 1980 Act, co-ownership societies may, subject to certain conditions, sell the individual properties to their members. This has proved extremely popular with co-owners. This provision enables members to achieve full owner-occupation at the cost of repaying the joint mortgage.
Since the power was made available, over 20,000 co-ownership dwellings have been sold and further sales are in the pipeline. Before proceeding to such a sale, however, societies, as in the case of the Laurel Way housing society, normally take steps to ensure that the properties are in a good state of repair and do not suffer from any structural defects—especially those which might be common to all the properties and which may require joint action by all the members. This is no more than common prudence would dictate, and is manifestly in the interests of the co-owners themselves.
The hon. Gentleman touched on the role of the Housing Corporation, which was set up by the Housing Act 1964 and was granted further powers under the 1974 and 1980 Acts. Its role is to promote, fund and supervise housing associations in their task of providing homes. Its management is vested in a chairman and 11 board members appointed by my right hon. Friends the Secretaries of State for the Environment, for Scotland and for Wales. Its work is directed from its headquarters in London, but day-to-day contact with individual associations is maintained by a network of regional offices throughout Great Britain. In the case of the Laurel Way housing society, its contact point would be the north-west regional office in Manchester. The corporation has direct responsibility for the management and control of the capital funding for housing associations within cash limits set for each country by my right hon. Friends the respective Secretaries of State, but they do not themselves have any involvement in particular associations or schemes.
Will the Minister make it quite clear that when the societies say that they have got funding from the Housing Corporation, that tends to mislead people into believing that the corporation is doing a little more than providing the money and that it is in some way guaranteeing the propriety of the housing association or housing society?
I understand what the hon. Gentleman is saying, but it betrays some misunderstanding of the role of the Housing Corporation. The society, as a co-ownership body, should be self-sufficient. The corporation has an involvement in registration initially, and in the approval of the loans, but normally little else. It has power to audit the accounts that have to be submitted each year under the registered housing associations, and it has the power to conduct inquiries under section 19 of the 1974 Act, but it is up to the co-operative itself to deal with most of the day-to-day management of the development. It is its responsibility initially to make sure that the development is effected in a responsible way. I shall come back in a moment to the role of the Housing Corporation, and I hope that I shall say something helpful in that respect.
The Laurel Way housing society has a scheme consisting of 18 two-bedroomed flats and 35 three-bedroomed houses, constructed in 1971. It is a co-ownership society supported by 40-year mortgages with the Housing Corporation and the Leeds Permanent building society. It is self-financing and receives no subsidy other than in the form of option mortgages. The society has always maintained full repayments on these loans from the monthly contributions made by its members. However, it has had two setbacks to which the hon. Gentleman referred.
The first was when damp penetration occurred shortly after completion of the scheme. This led initially to a dispute between the society's architect and the contractor who had built the scheme. Each denied responsibility for the defect. The Housing Corporation's regional technical officer agreed remedial works with the society, which were then carried out by a different contractor. This operation proved to be successful, and did not require an additional loan.
The second setback arose when further defects became apparent and a full survey was commissioned from the National Building Agency in 1981. The NBA concluded that major works would be required to eradicate the new structural problems and further damp penetration that was identified. The initial estimate for the work was £450,000.
The society was advised by the Housing Corporation to consider litigation against any party involved in the original construction. The corporation agreed in principle to make further loans available for remedial works, subject to arrangements for such loans to be repaid. There is no provision for grants to a co-ownership society in those circumstances. The society finally obtained counsel's opinion in March 1982 which established, as the hon. Gentleman said, that it had no claim against any party involved. Following this, the corporation again stated that loans would be available and was prepared to accept a position whereby, provided that all rental income was used to service loans, rents would not have to rise immediately to the normal level required by the co-ownership rental calculations. The loans would be repaid by rent increases, sales to members or a combination of both.
The society obtained a tender for remedial works that was submitted to the corporation in October 1982. This was accepted, subject to assurances from the society about repayment of the loan.
The society's managing agents finally put forward a package in November 1982 showing proposals for the repayment of the loan, and on 1 December 1982 the regional office approved the package and the granting of further loans of £310,000 to enable the remedial works to proceed. As far as I am aware, no further problems have arisen and the repairs contract is proceeding.
An important aspect of this story was the society's decision to pursue the sale of individual properties to those of its members who wished to buy under the powers granted to them by the Housing Act 1980. Approval in principle to sales was given by the Housing Corporation in December 1981, subject to the properties being brought into a satisfactory state of repair. Those sales to individual members must enable the society to pay off all Its debts, including the further loans issued for repair works.
If seven or more members do not purchase their flats or houses under this arrangement, they may perpetuate a viable co-ownership society under their existing tenancy agreements. The detailed terms of the sales and the resulting arrangements for the remaining co-owners who do not wish to buy are matters that cannot be resolved until the current building works have been satisfactorily completed and the final costs assessed.
In that time changes of membership and other factors might affect the eventual outcome. We cannot anticipate the future course of events and the negotiations that will be necessary. The Housing Corporation will advise the society and will tell it the conditions that will be applied to the corporation's consent that must be granted if the sales are to go ahead.
Looking back over the events, the most significant feature is that, despite the problems outlined by the hon. Gentleman, the society has maintained its mortgage payments. Looking forward, the signs are that the society will be able to cover the additional loans without difficulty and that individual sales will be achieved on favourable terms. The corporation has been acting generally within the remit given to it. While I cannot answer for, and indeed may not be aware of, all the detailed negotiations in which it has been engaged on this case, I am satisfied that its officers have been anxious to pursue the interests of the Laurel Way society and its members as far as they are able, bearing in mind the fact that they have been dealing with a co-ownership society that is fully responsible for the upkeep, repair and maintenance of its properties.
Towards the end of his remarks, the hon. Gentleman asked me several questions. Happily, they are all directed either to the local authority or to the Housing Corporation rather than to me. I shall pass his questions to the responsible authorities, and I shall ensure personally that he receives replies to them, including the specific questions about the relationship between Mr. Whealing and the Collingwood housing society. The Housing Act 1980 specifically precluded duality of interests, which, until then, was perfectly legal. Perhaps the post-1980 divorce to which the hon. Member referred was a result of the introduction of that legislation.
I am grateful to the hon. Member for drawing the facts of this case to our attention and for enabling me to clarify certain points for the benefit of the House this evening. I have no doubt that he will continue to follow the progress of the society in the resolution of any further problems, and I am sure that the Housing Corporation will continue to provide advice and practical help when required.