Consumer Rights Bill — Report (3rd Day) (Continued)

Part of the debate – in the House of Lords at 9:45 pm on 26th November 2014.

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Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Business, Innovation and Skills 9:45 pm, 26th November 2014

My Lords, I have listened with great interest to the comments made on this important subject and I am very grateful to the noble Baroness, Lady Gardner, for giving up some time earlier today to take me through her points. The purpose of her amendment, as I understand it, is to provide leaseholders and tenants with protection from a landlord seeking to recover the costs incurred through proceedings at court or tribunal through their service charges. This is obviously a sensitive area for both leaseholders and landlords and it is important to get the right balance. It is of course important that leaseholders are provided with protections but also that the law creates parity between the parties.

Section 20C of the Landlord and Tenant Act 1985 enables a leaseholder to apply to the tribunal for an order that the landlord’s costs should not be included in determining the service charge payable by the leaseholder. At any point during proceedings, a leaseholder may make an application to the tribunal to ensure that they do not bear the costs of all the litigation. This ensures that the leaseholder knows where the costs of the matter will lie. The tribunal process is designed to be as cost effective and user friendly as possible. It may be that this could be better communicated so that leaseholders understand their rights. The judiciary has always been aware that, if costs have been awarded against the landlord, they should not get through the back door what has been refused through the front door. Tribunals must make decisions that are just and equitable in the circumstances; they are best placed to make those decisions because they are apprised of the facts.

I am a bit concerned about the perverse effect of the amendment, which could restrict landlords from ever recovering costs of legal proceedings by way of a service charge. This seems wrong. For example, in an insurance dispute resulting in the insurance company refusing to pay out, the landlord would need to instigate proceedings ensuring that leaseholders do not have to pay for repairs through service charges that might be covered by the insurance. However, I am very glad to say that the leasehold sector is large and growing; we have over 4 million dwellings in England subject to a long lease, and the noble Baroness, Lady Gardner, explained to me that there are 6 million leaseholders. Of course, there are also 2.8 million dwellings in flats. I am advised that the amendment could change the leases for flats without consultations with individuals or working with the sector to consider these matters, although I think the noble Baroness was saying something different in her comments. Be that as it may, this is an incredibly important sector, and I know that the changes and new regulations on redress introduced on 1 October may change the market place and need to be allowed to settle. Again, there may be an information problem that we would be keen to address.

Before I finish, I pick up the point that the noble Baroness, Lady Hayter, made about the ABI letter, which she was kind enough to give me a copy of earlier today. DCLG officials are working closely with the Competition and Markets Authority in relation to the remedial measures from its market study on property management services. The final report will be published next week and is likely to ask government to consider most of the points in the ABI letter. My noble friend will also be interested to hear about that report. She identified an important issue, that of legal costs that are incurred by landlords and how they are passed on as service charges. I do not feel able to accept her amendment but I shall write to my ministerial colleagues at the Ministry of Justice and DCLG alerting them to the issue, making sure that they consider the points that she made very carefully. I will ensure that we follow through as a Government and I will see her again if the need arises. There is a willingness to take this forward. In the circumstances, I hope that she will feel able to withdraw her amendment.