Clause 152 - Right of first refusal for landlord etc.

Housing Bill – in a Public Bill Committee at 10:30 am on 12 February 2004.

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Amendments made: No. 396, in

clause 152, page 103, line 26, at end insert

', which shall be binding on the secure tenant and his successors in title.

This is subject to subsection (7A).'.

No. 397, in

clause 152, page 103, leave out line 33 and insert

'are prescribed by regulations under this section at the time when the conveyance or grant is made.'.

No. 398, in

clause 152, page 104, line 27, at end insert—

'(7A) In a case to which section 157(1) applies—

(a) the conveyance or grant may contain a covenant such as is mentioned in subsections (1) and (2) above instead of a covenant such as is mentioned in section 157(1), but

(b) it may do so only if the Secretary of State or, where the conveyance or grant is executed by a housing association within section 6A(3) or (4), the Relevant Authority consents.

(7B) Consent may be given in relation to—

(a) a particular disposal, or

(b) disposals by a particular landlord or disposals by landlords generally,

and may, in any case, be given subject to conditions.'.

No. 399, in

clause 152, page 104, line 37, leave out from 'etc.)' to 'subsections' in line 39 and insert '—

(a) in subsection (1), after ''the conveyance or grant may'' insert ''(subject to section 156A(7A)'';

(b) in subsection (2), omit the words '', subject to subsection (4),''; and

(c) omit'.—[Keith Hill.]

Photo of John Hayes John Hayes Shadow Minister (Communities and Local Government) (Housing and Planning)

I beg to move amendment No. 446A, in

clause 152, page 104, line 48, after 'by', insert 'an independent valuer or'.

The amendment would bring a degree of independence to the process of valuing properties that are resold to the landlord. There are real concerns about the first refusal enshrined in the Bill, whereby the tenant is obliged to offer their property for sale to the local authority in the first instance. The amendment, in conjunction with amendment No. 452, would bring an element of independence to the valuation process in a right-to-buy scenario when the landlord is given first refusal. There are real doubts in our mind, as I have said already, about the determination of all local authorities to deal with enthusiasm with people who exercise the right to buy.

Photo of Mr Matthew Green Mr Matthew Green Shadow Minister, Office of the Deputy Prime Minister Local Government & the Regions, Young People, Non-Departmental & Cross-Departmental Responsibilities

I am concerned, because my understanding is that the district valuer is not really part of the council; he or she is, in a sense, already an independent person. My concern about independent valuers is that one can get two such valuers into a property and they will give widely differing values. Indeed, I have known a valuer to ask a householder, ''Do you want this at the low end or the high end of the scale?'' There is a danger that the amendment might let abuses happen. Will he comment on that?

Photo of John Hayes John Hayes Shadow Minister (Communities and Local Government) (Housing and Planning)

I think that the amendment is more likely to curb abuse. In most circumstances, when someone is valuing a property, they seek more than one opinion. The amendment effectively allows a second opinion to be sought—an opinion independent of those with a vested interest who have the first right to purchase the property. If we introduce the independent element, we at least give the tenant some assurance—I will not say a guarantee, but certainly some confidence—that they will not be presented with a value that is not commensurate with the market price. In that respect, an independent valuation is a desirable means of trying to achieve a fairer settlement instead of, as the hon. Gentleman says, a less fair one.

Photo of Mr Matthew Green Mr Matthew Green Shadow Minister, Office of the Deputy Prime Minister Local Government & the Regions, Young People, Non-Departmental & Cross-Departmental Responsibilities

The hon. Gentleman is assuming that the district valuer is on the side of the council or the housing body, which I find slightly odd, particularly as councils often, in my experience, get annoyed with district valuers when they place values on things. However, I am more concerned about how the amendment is phrased. It would mean that the Bill read, ''an independent valuer or the district valuer''. The amendment is not about giving the tenant, once they have got an independent value, the right to challenge the value given by a district valuer through, say, a tribunal. The amendment says that the property could be valued by the district valuer, or by an independent valuer who has been brought in. If the amendment was more about, say, the right to appeal about the value, I would have a great deal more

sympathy with it. However, as I see it, it is not; it is about allowing independent valuers to do the work currently done by district valuers.

Photo of John Hayes John Hayes Shadow Minister (Communities and Local Government) (Housing and Planning) 10:45, 12 February 2004

That is a good point, but in essence we are trying to ensure that there is opportunity for someone other than the district valuer to be involved in the process. The hon. Gentleman has made a useful point about the relationship between that valuation and the rights and entitlements of tenants.

The wording of our amendment may be imperfect in that respect, but in probing the Minister we seek to ensure that there is an opportunity for others to be involved in the process who are not directly associated with those with first refusal on the property. We might have framed the amendment—here I am probing my own probing amendment—to enshrine the sort of right to a second opinion to which the hon. Member for Ludlow alluded.

However, does the Minister feel that giving recourse to an independent valuer is a useful way of ensuring that the price set for the property is not unreasonable from the perspective of the tenant who would be obliged to offer it to the local authority in the first instance? I return to my scepticism about some local authorities' commitment to making the process fair and reasonable. I do not have any particular authority in mind but I am mindful that, as the Minister acknowledged in an intervention, we need to be pretty insistent on consistency between authorities and we should set targets for the way in which local authorities handle such sensitive issues.

We are talking about people's homes—their principal investment and their future. The more protection we can insert into the Bill, the better. I acknowledge the point made by the hon. Member for Ludlow; perhaps we could have been even more determined to enshrine the rights of tenants in our amendment. However, he will understand the sentiment behind it, as I am sure the Minister will. I look forward to the Minister's response.

Photo of Mr Matthew Green Mr Matthew Green Shadow Minister, Office of the Deputy Prime Minister Local Government & the Regions, Young People, Non-Departmental & Cross-Departmental Responsibilities

I do not support the amendment, because I believe that it is inaccurate in what it seeks to do. It also raises the prospect of the householder paying for the valuation rather than the district valuer, who offers a free service, in effect. Perhaps the amendment imposes a charge on the householder, which I do not think the hon. Gentleman intended.

I have read section 158 of the Housing Act 1985. The hon. Gentleman has a bit of a point. There might be circumstances in which a householder felt that a district valuer's valuation was unfair. That could happen on both sides; the housing authority might think that the district valuer's valuation was unfair. The Minister obviously is not interested in section 157 of the Housing Act.

Photo of Mr Peter Pike Mr Peter Pike Labour, Burnley

Order. Let us not have sedentary interventions; they make it difficult for those recording our proceedings.

Photo of Mr Matthew Green Mr Matthew Green Shadow Minister, Office of the Deputy Prime Minister Local Government & the Regions, Young People, Non-Departmental & Cross-Departmental Responsibilities

The Minister says that I jump up on every single amendment and that he is getting tired of it. Well, in this instance I would like him to explain what right of appeal there is for a housing authority, a registered social landlord or a householder if they believe that a district valuer's valuation is wrong. I cannot find a right of appeal against district valuers in the Housing Act 1985. Their judgment seems absolutely binding.

I believe that district valuers are independent, capable people. I do not doubt their professionalism. In other areas of Government and local government there is usually a right of appeal of some sort. However, in this instance, in some cases, people should appeal to the district valuer, who is being used as the valuing authority. There does not appear to be a stage of appeal if someone believes the value to be wrong.

Although I urge the Minister not to accept the wording of the Conservative amendment, because it has all sorts of connotations that we do not want, he should address the fact that, where something seems wrong with a valuation, from the viewpoint of the housing authority or householder, there needs to be a limited second opinion—at least, something needs to be included. Although I may be wrong, the 1985 Act does not provide for that.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

My hon. Friend the Member for South Holland and The Deepings makes a good point in the amendment. The public perception is that a district valuer is part of the local authority regime. I use that phrase advisedly. It would be helpful if an independent valuer determined the price when the tenant purchaser wished to dispose of, or sell the property. That is also the view of the Council of Mortgage Lenders. I do not know precisely what the procedure should be, but it is important, in the interests of the tenant purchaser, that he should be able to ask for an independent valuation.

I do not dispute that the district valuer will come to a professional conclusion about what the price should be, but there should be some mechanism to protect the interests of the tenant purchaser. That may be difficult to put in legislation and I would, perhaps, accept that it should not be included in the Bill. I should be interested to hear what the Minister has to say on a significant point.

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

First, I apologise for my unforgivable lapse of attention during the observations of the hon. Member for Ludlow. He has consistently fascinated me throughout nearly 60 hours of debate. I feel utterly abject in my failure on this occasion.

There is no right of appeal for first-refusal purchases. It is for the parties to agree; if they cannot, the district valuer decides. It is possible to judicially review the district valuer.

The hon. Member for South Holland and The Deepings referred to the alleged reluctance of some local authorities to proceed with right-to-buy sales. The district valuer is an employee of the Valuation Office Agency—an agency of the Inland Revenue—and has nothing to do with the local authority, which is the landlord. I hope that that reassures the hon.

Gentleman and demonstrates that the district valuer procedure is reasonable in all normal cases, and in the overwhelming majority of cases.

Photo of John Hayes John Hayes Shadow Minister (Communities and Local Government) (Housing and Planning)

There is no intention to suggest that district valuers are not eminent, highly confident people. I wish to put on the record my acknowledgement of their excellent work. However, as my hon. Friend the Member for Chipping Barnet (Sir Sydney Chapman) said, some tenants will perceive them as establishment figures—not, perhaps, directly related to the local authority as the Minister described it, but certainly not someone who could be described as independent in the sense suggested by my hon. Friend—has arrived at a valuation with which they do not agree. We are told that such things can be judicially reviewed, but that would be beyond the scope of the vast majority of ordinary citizens. The key point is to have a second opinion.

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

I shall deal with precisely that issue in my brief response. Clause 152 gives landlords who have sold homes under the RTB scheme, or other bodies prescribed by the Secretary of State, a right of first refusal. The owner of the property sold under the scheme must offer it to the landlord or other body if he or she wishes to resell it within 10 years of the RTB sale.

As I said, we have consulted on the proposed procedures and the bodies to be prescribed, and the Secretary of State will prescribe in regulations the time limit within which such offers must be accepted. If they are not accepted within that time limit, the owner will be free to resell on the open market. The property will be offered at market value, which will be the value agreed by the parties. If they are unable to agree a value, it will be determined by the district valuer.

The Government intend to replicate the tried and tested arrangements for valuing properties being sold under the RTB scheme, which are covered by sections 127 and 128 of the Conservative Housing Act 1985, as well as the existing right of first refusal in cases where properties are offered back to landlords in national parks, areas of outstanding natural beauty and designated rural areas, which are covered by sections 157 and 158 of the Act.

The hon. Member for South Holland and The Deepings wants to introduce an element of competition into valuation for first refusal purposes. Superficially, that may appear attractive, but it would have the disadvantage of introducing an element of delay into the offer process. In many cases, the parties will no doubt agree that the valuer suggested by one or the other is competent and trustworthy. However, we must be realistic. The would-be seller will seek the highest price that he can get, while the would-be buyer will want to spend as little as possible; neither will necessarily have full confidence in a valuer nominated by the other, however independent that individual might be in practice.

The district valuer has the advantage of being wholly independent of the parties in any particular case and of any local housing issues that may be relevant to a fair valuation. District valuers have been

involved in RTB valuations since 1980, and the system works well. The suggested alternative would bring no great benefit, and I therefore ask the hon. Gentleman to withdraw the amendment.

Photo of John Hayes John Hayes Shadow Minister (Communities and Local Government) (Housing and Planning)

I am grateful for the Minister's comments, but I am not sure whether he answered my points; he certainly did not persuasively answer those raised by the hon. Member for Ludlow.

If one were to redraft the amendment, one might want to talk about the right of appeal, as has been suggested. In essence, however, the amendment is an attempt to inject the right to obtain a second opinion. If the Minister looks at amendment No. 452, he will see that we specifically argue that there should be an independent valuer, who both parties agree is competent. There would be a level of agreement between both parties to the process that they trusted that person to make a fair and reasonable decision.

I am not saying that the Minister does not have a point or that there might not be some confusion, but the argument is that there should be some protection for tenants in that respect, although it might apply also to landlords. The landlord might regard the district valuer's assessment as unsatisfactory, as the hon. Member for Ludlow suggests. So, the amendment is not exclusively a matter of protecting tenants, although I suspect that in the majority of cases, those who are selling will be more concerned about those matters than those buying.

The amendment would introduce a degree of independence that was not embedded in the original Act and is not in embedded in the Bill. We have the opportunity to improve the law by introducing that extra protection, that safety valve, on valuation. That is particularly important given that the Bill gives local authorities a greater role as the first point of contact for those selling a property within 10 years of buying it. If the local authority is to have first refusal, the balancing aspect of the amendment, which allows people to get a fair price agreed by an independent person, is all the more important.

Although I shall not press the amendment to a Division, I ask the Minister to think about that point. We might return to it or he might want to consider issuing guidance, but it is an important point, as was reflected in the comments of my hon. Friend the Member for Chipping Barnet and the hon. Member for Ludlow, and he would do well to cogitate on it.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet 11:00, 12 February 2004

Before my hon. Friend seeks to withdraw the amendment, I wish to point out that we are talking about a situation in which the buyer and seller will normally try to agree a price. The Minister proposes that the matter should be taken to the district valuer only when the price is not agreed. When that happens, I believe that the valuer should be independent. Although I do not impugn the district valuer, he is seen to be part of what we now call ''the establishment''. It would be better if a list were drawn up of approved local independent valuers who could decide the price.

Photo of John Hayes John Hayes Shadow Minister (Communities and Local Government) (Housing and Planning)

My hon. Friend will know that the establishment in the United Kingdom has now been penetrated—some would say infected—by the liberal bourgeoisie. He is right to be suspicious. Nevertheless, the point is important.

When there is disagreement, there is all the more need to ensure that all parties feel that the matter has been dealt with empirically. I do not want to wax too lyrical about district valuers, or they will become big-headed, but I may say that they do an excellent job. However, most tenants would appreciate the extra assurance of an independent valuation, as my hon. Friend suggests. The situation will be difficult; people will be obliged to sell to one purchaser. That is never a happy situation. Most people selling homes can sell on the open market. The extra protection seems important.

I do not want to labour the point, as it has been well made, and we may return to it. The Minister has heard our arguments. These are sensible, non-partisan issues. As we need to speed on, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 400, in

clause 152, page 105, line 2, at end insert—

'(ba) in subsection (2), for ''or surrendered'' substitute '', conveyed, surrendered or assigned'';'.

No. 401, in

clause 152, page 105, line 7, at end insert—

'(3A) In section 162 of that Act (exempted disposals which end liability under covenants), after paragraph (a) insert—

''(aa) the covenant required by section 156A (right of first refusal for landlord etc.)is not binding on the person to whom the disposal is made or any successor in title of his, and that covenant ceases to apply in relation to the property disposed of, and''.'.

—[Keith Hill.]

Question proposed, That the clause, as amended, stand part of the Bill.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

I do not wish to delay the Committee. I understand that the clause contains a requirement for the tenant purchaser to make an offer of first refusal to the former landlord. I understand that it also confers that right on ''such other person'' as the Secretary of State may prescribe. I can understand why the Secretary of State should have powers to prescribe if the former landlord is out of business or no longer exists. However, if that is not the case, I cannot see why the Secretary of State should need that power. The clause should be amended to say ''only when the former landlord no longer exists'', so that it does not give carte blanche to the Secretary of State to prescribe whomever he may like.

Photo of John Hayes John Hayes Shadow Minister (Communities and Local Government) (Housing and Planning)

I understand the Bill to intend exactly what my hon. Friend suggests, although that is not made clear. I had assumed that the circumstances to which he refers were the kind of circumstances that were envisaged. However, he is right that, if that is the case, the wording is not sufficiently tight and needs to be amended. Perhaps the Minister will comment, as my hon. Friend has highlighted an important point.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

I am emboldened by the support of my hon. Friend, which has given a tremendous fillip to my political career. I have made my point and I shall be interested to hear what the Minister has to say.

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

I confess that I did not fully catch the hon. Gentleman's drift. It is common sense that if, during the 10 years, the landlord has switched from the local authority to a registered social landlord as a result of a transfer of some sort, the current landlord in the area should have first refusal. The intention is to prescribe other local social landlords—the point that I was making—but the principle is that the former landlord will always get the first bite of the cherry if he or it is still in situ.

Photo of Mr Matthew Green Mr Matthew Green Shadow Minister, Office of the Deputy Prime Minister Local Government & the Regions, Young People, Non-Departmental & Cross-Departmental Responsibilities

Will the Minister confirm what will happen in a situation in which transfer has taken place, as happened in my constituency in 1995? In the intervening time, there have been transfers between local registered social landlords—there are some good RSLs in South Shropshire. I understood him to say that it would be open to any of those local social landlords to attempt to acquire the property. For instance, South Shropshire Housing Association and Shropshire Rural Housing Association Ltd. operate in the same area. They occasionally transfer properties to each other. Can he confirm that if one of them purchases the council houses, but in the interim there has been movement between them, it will be open to either RSL to exercise the right of first refusal? That is what I understood, and I should be grateful for clarification. It might be that one RSL is over-committed in other areas, such as new build, and that another local RSL is better placed to bring the house back into the social sector.

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

The hon. Gentleman is tempting us excessively along the path of what-iffery. When we consult on the bodies to be prescribed, we will consider such situations and the procedures to be adopted. Let us remember that we are talking about an offer within a period of 10 years. On the whole, my expectation is that the line of inheritance, as it were, on the transfers will be reasonably straightforward within such a limited period. He is as right as ever—fascinatingly so—about the need for the Government to think about all the options. That is exactly why we proposed to consult the relevant parties in detail before we write the detailed guidance.

Photo of John Hayes John Hayes Shadow Minister (Communities and Local Government) (Housing and Planning)

Will the Minister be absolutely clear about the point raised by my hon. Friend the Member for Chipping Barnet? In what specific circumstances will the Secretary of State intervene? Will he do so in the circumstances described by my hon. Friend or, as seems to be emerging as we debate the Bill and from what the Minister is saying, when a broader range of conditions apply?

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

I am grateful to the hon. Gentleman for that intervention, which enables me to invite the hon. Member for Chipping Barnet to remind the Committee of the specific circumstances, as described

by the hon. Member for South Holland and The Deepings, who leads for the Opposition, that he had in mind when asking about the provisions of clause 152.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

I understood the clause to say that, when the tenant purchaser decides to dispose of his interest in the property, he must give first offer of refusal to the previous landlord. I think that he should do so, but the clause also refers to a body or person prescribed by the Secretary of State. I would like an assurance that the Secretary of State would use that power only if the previous landlord did not exist, whether he had gone out of business, left the area or whatever else, after which the offer of refusal can be given to someone else. Personally, unless I could have such a reassurance, I would not like the Secretary of State to have the option. He should exercise his powers under clause 152 only when the previous landlord has gone out of business.

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

I assure the hon. Gentleman that there is no conspiracy. There is no intention that, by prescription, an owner of an RTB property should be required to sell to a body, which might be a body to which both he and I took exception on the grounds that it was not the appropriate one to receive the first offer.

Let me attempt again to explain the purpose of the clause. Clause 152 requires owners who wish to resell their homes within 10 years of their having been bought under the right-to-buy scheme to offer them at market value to their former landlord or to another body prescribed by the Secretary of State, such as another social landlord. The former landlord may not always be the most appropriate body, as it may have transferred to another body its remaining interest in that property or connected properties. Also, the former landlord may not wish or may be unable to repurchase, in which case other social landlords should be given the chance to repurchase the property. It seems to me that our intentions are clear: we intend to keep the property in the social sector and think that it should continue to be available for the purposes of social and affordable housing if that is the choice of the local authority, a successor body or another relevant social landlord. It seems to me that those purposes are impeccable in these circumstances.

Photo of John Hayes John Hayes Shadow Minister (Communities and Local Government) (Housing and Planning) 11:15, 12 February 2004

Those purposes may be impeccable, but the wording of the Bill is not impeccable. The intention of the Minister is clear, and there is no suggestion of a conspiracy. We are not trying to be conspiratorial, but trying to be precise. My hon. Friend the Member for Chipping Barnet is saying that this part of the Bill should be amended by the Government to make their purpose absolutely clear.

I have no doubt that the Government intend the Secretary of State to intervene only in extreme cases, such as those suggested by my hon. Friend, but the Bill does not state that. The Bill is left open, as it can be broadly interpreted that the Secretary of State may choose whom he wishes. The Minister has made it clear that that is not the Government's intention, so

would it not be wise for him to think about qualifying the Bill rather than extending the debate, so that it is clear in which circumstances the Secretary of State might intervene? For example, there might be cases in which the previous landlord is, for one reason or another, no longer available for the role described.

Photo of Keith Hill Keith Hill Minister of State (Housing and Planning), Office of the Deputy Prime Minister

I disagree. I have made it clear that the intention is to prescribe other local social landlords. I could not be clearer. I have repeatedly put that on the record. The House will have the opportunity in due course to scrutinise the proposals, and it can take exception to them if it so desires. The Government's intention is to prescribe other local social landlords, and there must be no dubiety about that.

Question put and agreed to.

Clause 152, as amended, ordered to stand part of the Bill.