Leaseholders' Protection

– in the House of Commons at 3:30 pm on 7th June 1995.

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Photo of Mr Piers Merchant Mr Piers Merchant , Beckenham 3:30 pm, 7th June 1995

I beg to move, That leave be given to bring in a Bill to limit the annual maintenance charge which may be levied on leaseholders and a leaseholder's liability for certain works, where the freeholder is a local authority or housing association. The Bill is intended to address a specific injustice facing many leaseholders whose landlords are either local authorities or housing associations.

At the outset, I should make two points clear. First, the Bill does not cover leaseholders in the private sector. I do not deny that there are problems in that area, but they are generally different, and the remedies should be different too.

Secondly, my Bill does not purport to be offering a comprehensive or the only solution. I would be willing to incorporate other measures or to vary the specifics as a result of suggestions which I hope that my initial proposals will prompt. However, the basic problem must be tackled—that of the sheer size of annual maintenance charges being imposed on many leaseholders, and the underlying causes.

In my constituency, some leaseholders suddenly received demands in excess of £20,000, with curt warnings, such as "Pay or face eviction." The highest annual bill brought to my attention was £25,850, for a new roof and double glazing.

In a letter to me, the leaseholder concerned wrote: We are being forced to pay for things we do not require and we have no way of affording. We are under immense stress and strain not knowing how we are going to cope—it is an absolute trauma on top of the problem of being unemployed. We are desperate and fear that we will lose our home. Such leaseholders are not, by any stretch of the imagination, wealthy. Often, they face an annual bill which is larger than the original cost of their property. That is an absurd situation. For them, it is a financial nightmare. It has brought them to the edge of personal disaster, causing untold strain, undermining their whole sense of security, leaving them haunted by the prospect of imminent homelessness.

Alongside that problem are complex disputes about the nature of the maintenance work that needs to be done. Leaseholders often claim that they are being forced to pay huge amounts for work that is unnecessary or which they do not want—for example, double glazing. Other leaseholders tell of the verbal guarantees they were given at the time of purchase that certain renovation works would be carried out at not cost to them—guarantees later reneged upon.

There are disputes about repairs versus improvements, and renovation as against remedying structural design faults. Often the lease is inadequate or unclear, an arcane area into which I do not intend to venture today.

The first proposal in my Bill is a rough and ready one aimed at bringing fast protection to these financially embattled leaseholders. It would put a clear statutory limit, a cap, on the amount that a leaseholder could reasonably be charged by the landlord or agent in any one year. The exact amount will be fixed, after consultation, by regulation.

There is already acceptance of the concept of a reasonable limit in the Landlord and Tenant Act 1985. However, that is an uncertain protection, usually requiring lengthy and often expensive litigation, and producing inconsistency in practice. A fixed figure would be clear to all parties, who could plan in the certain knowledge that it would provide a sure quantity of protection.

Such an idea recognises that it is legitimate for a freeholder to expect a leaseholder to contribute to general works, and that sometimes those works may be major. By signing a lease, the leaseholder accepted certain responsibilities, and I do not wish to extinguish those. Nevertheless, the Bill would put into figures a cap above which an annual demand might be widely considered unreasonable.

My second proposal is designed to prevent an unscrupulous landlord from issuing bills up to the annual limit each year, which, when compounded, could also become unreasonable. I propose a further maximum charge over any such five-year period, which would also he fixed by regulation.

My third proposal seeks to give leaseholders more powers in the decision-making process, as a means of reducing maintenance charges. It would give a leaseholder the right to obtain his own survey to determine what work was required, followed by the right to obtain his own tenders for that work, combined with longer statutory notice periods and tighter regulations on consultation. The landlord would be obliged to take the leaseholder's survey and tenders into account, and would have to show good reason for not accepting the lowest tender price for the least work deemed necessary.

My fourth and final proposal is to define more clearly what works a freeholder can insist must be done—those that are mandatory on the leaseholder, as opposed to those that would be optional and might be accepted or rejected by the leaseholder. A local authority or housing association would be unable to force the leaseholder to contribute to works in the latter category.

Such a distinction might appear difficult to make, but closer examination convinces me that it would be relatively easy to list most works in one of two categories. For example, the exterior painting of a block or the repair of a leaking roof would fall into the mandatory category, while double glazing or a purely cosmetic improvement scheme would not.

That "exemption clause" would immediately protect many leaseholders against expensive projects in which they do not wish to participate. On the other hand, they could opt in if they wished: it might well be in their interest to do so, so that they could benefit from the economies of scale that might be available.

Together, these measures would give extensive new protection to leaseholders without freeing them from the necessary obligations that leasehold—as opposed to freehold—brings. They would also help to achieve a better balance of power between leaseholders and public-sector freeholders.

At present, the problem is one of imbalance. Public sector freeholders are mighty organisations with huge financial muscle; they appear less amenable to leaseholder pressure than the average private sector freeholder, normally a small organisation that depends on leaseholder good will for ease of running. There have even been suggestions that some local authority housing departments or housing associations have a hidden agenda to force out leaseholders as part of a design to return properties to tenancy only. One housing official said that to me in so many words.

My scheme is deliberately designed to have no adverse public expenditure consequences. Indeed, it is preferable to some existing suggestions that would have such consequences. The leaseholder consent provisions would force landlords to cut the more ambitious modernisation projects to acceptable levels; long-term renovation would have to be staged over a number of years, rather than pushed through in one go. Public sector freeholders would have to behave like freehold home owners in the maintenance of their property, taking one step at a time as finance allowed.

In the very few remaining cases in which that was simply not possible—for example, urgent works to ensure structural safety—it might, rarely, be necessary for the freeholder to draw on other funds. That small amount—in comparison with the total held—would have to come from efficiency savings. There is some potential there, as my Bill would also prevent any extra costs resulting from the Bill from being imposed on tenants.

Question put and agreed to.

Bill ordered to be brought in by Mr. Piers Merchant.