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I agree with that. Our property-owning democracy will not be complete until we tackle the anomalies of the leasehold house system.Why is there a problem with leasehold houses? There used not to be a problem. The old landlords, who were connected with the estates, who managed them responsibly and who collected the ground rents annually without fuss, are now selling out to a different breed of landlords who are less rooted in the area and who have an eye to quick capital gains or quick profits out of the transactions in which they engage. Added to that, we find that many of the old 99-year leases, which were established towards the end of the 19th century, are now falling in, or are about to, which exposes many elderly people who live in such properties to a lot of anxiety about the roofs over their heads and to exploitation by the landlord. The position will get worse.
As the hon. Member for Worsley said, freeholds are sold in packages. At auction, the price reflects the ground rent value. The landlord works over the package as soon as he has it, to try to entice or to force the tenants to buy their freeholds, usually at a price far in excess of that established by the Leasehold Reform Act 1967. Once the landlords have made their quick capital gains, they put the package straight back on the auction market, and a new landlord, determined once again to work over the package even harder and perhaps using less scrupulous methods, gets in on the act. There is a vicious circle of decline, with increasingly less scrupulous landlords buying up packages and working them over.
The hon. Member for Worsley has already given the examples of Munny Ltd. It had hundreds of properties in my constituency and about 4,000 in the country. One of the directors of the company was Mr. Samuel Antonelli, who liked to be known, in rather avuncular fashion, as "Uncle Sam". He trades from a carpet shop on Clapton common in the east end.
The letters that he sent to thousands of his tenants were clearly designed to frighten them. He demanded money for ground rents already paid and he demanded money for insurance or substantial waiver fees if the tenants had already insured with other companies. He demanded money for the retrospective approval of extensions and alterations. He even demanded money for approval of extensions and alterations that had been known to the previous landlord. He also demanded extortionate prices for freeholds, using scarcely veiled threats. I will quote some of the language that he used to threaten tenants :
"If you don't buy maybe you enjoy the excitement of solicitors, judges, bailiffs, moving vans and public auctions Some freehold ground rent buyers and/or owners are off-shore companies, bad neighbours, former spouses, or even a black sheep member of a family. You can't pick your family, only your nose Future freeholders will always be checking your lease for new money making ideas (you will learn to pay for them) Think about the times that you would like to go on holiday or even just shopping and your freeholder places your ground rent in a public auction and the auctioneers ask you to stay home so that possible buyers can view your property and/or confirm location of For Sale' sign."
Uncle Sam added, rather gratuitously that he was
"not willing to give interviews without payments to his Charity account."
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Several tenants also received letters headed in bold letters, "Breach of Lease", with various monetary demands, together with the statement :"It is not our practice to send written demands for Ground Rents. After the due date BAILIFFS--
which was always written in capital letters--
"will be instructed to collect on our behalf."
Uncle Sam is not the kind of person with whom I should like to go on holiday. One should realise the impact of such language on elderly pensioners, when there are unsubtle threats of eviction and court cases, and when all sorts of financial penalties are threatened. In a separate case in my constituency, two separate landlords demanded ground rents from the same block of properties at the same time. That was rather confusing for the tenants. They could not check with the Land Registry, because there was a continuing and lengthy dispute between the two landlords and because there are long delays in registering properties with the land registry. After failing to pay to the two ground landlords ; the usual threats of bailiffs and evictions followed--the general reprehensible conduct. Even I received threats from one of the companies, Sapna, in case I ever raised the matter in the House. [ Hon. Members :-- "A breach of privilege."] It is indeed a possible breach of the privilege of the House. The law needs to be changed. It needs only simple changes. I am afraid to say that, so far, the Government have refused me those changes. However, we now have a new regime, and it is always worth floating the possibility of introducing such simple changes. They could be piggy-backed on the commonhold Bill which we all expect in the near future. After all, if there are 1 million properties with, say, 2 million people living in them, it is a thought that the approach of June may be a suitable time to start acting on the problem.
The legislation need not be confiscatory. The hon. Member for Worsley came up with some good ideas with which I wholly agreed, but I have eight suggestions of my own to make. First, to avoid any future leasehold problem, positive covenants should be allowed to run with the freeholds of houses ; it would then be possible to ban the sale of any new leasehold houses, so that the problem would not recur. Secondly, housing associations could be appointed as licensing authorities to deter the sharks from becoming involved in leasehold package operations. Thirdly, although landlords may be justified in demanding insurance, the law should be amended to prevent the unreasonable withholding of consent to the use of the tenant's chosen insurance company. That may already apply in case law, but it needs clarification.
Mr. Donald Anderson (Swansea, East) : I am delighted that the hon. Gentleman has raised that point. Companies--especially Jersey companies in south Wales--have insisted on fixed and tied insurance deals, no doubt engaging in a professional tie-up with insurance companies, which receive the premiums. Surely, as long as the property is adequately covered, the landlord's interest should be satisfied.
Mr. Butler : As the hon. Gentleman knows, I come from south Wales, and I remember the case of Castle Beggs Investment, which may be the one to which he is referring. Demands for insurance are a stick with which the landlord can beat the tenant to try to persuade him to buy the freehold at an inflated price.
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Mr. Anderson : Moreover, there must be arrangements between companies such as Castlebeegand insurance companies, as a result of which a ground landlord is given a financial incentive by an insurance company. Such action may be a means of pressurising the tenant, but it is also a means of raising finance for the company.Mr. Butler : It can raise some finance, but the real advantage comes from the capital gain achieved by the sale of the freehold at an inflated price. That is part of the pattern of general harassment of leasehold tenants.
Another example is the refusal by landlords to grant permission for alterations or extensions unless the tenant coughs up several hundred pounds. Statute law should prevent the unreasonable withholding of landlords' consent in such cases.
Fifthly, landlords should be statutorily obliged to serve a ground rent bill and to provide a receipt at the tenant's request. Sixthly, any offer letter--such as the one from Munny Ltd., offering the freehold at an inflated price--should state whether the sum has been calculated under the provisions of the 1967 Act and should also inform the tenant of his rights under that Act. It is surprising how few people realise that they have such rights.
Seventhly, if more than one landlord claims the right to ground rent from the same property, it should be possible for the tenant to pay the money to a solicitor until the ground landlord can prove his right through the land registry. Eighthly, ground landlords should be legally obliged to warn tenants five and 10 years before their leases expire, and to notify them again of their rights under the 1967 Act. Those eight simple, non- confiscatory measures would crack down on irresponsible landlords and minimise harassment. I hope that my hon. Friend will take them on board, and that the manifesto writer, if he is listening, will note that he may be able to bring a smile to 2 million faces in the United Kingdom at no cost to the Government. I hope that that appeals to him.
10.55 am
Mr. John Fraser (Norwood) : The prologue of my speech, which relates to landlord and tenant law, is unconnected with the rest. A particularly daft decision by the Court of Appeal on the forfeiture of leases was reported this week. Section 146 of the Law of Property Act 1925 allows leases to be ended by means of a notice of forfeiture. The same Act provides that, if such a notice is served, the tenant can serve a counter- notice and apply to the court for relief from forfeiture. Let us assume that a notice of forfeiture is served because the tenant has built a porch, which is technically in breach of his lease. The tenant need only apply for relief against forfeiture, which the court would normally grant. It might award a small amount of compensation to the landlord, but the tenant would not be penalised in the long term : the court would take the sensible view about the respective interests of landlord and tenant. According to this week's Court of Appeal decision, if a landlord does not serve a section 146 notice and exercises his old common-law right to enter the premises and demand forfeiture of the lease in a mediaeval fashion, the law will not allow relief against forfeiture. If that is the law--as a majority decision in the Court of Appeal has decided--the law is an ass, and should be amended as soon
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as possible. It was a disgraceful decision. As is clear from some of the examples given this morning, an unscrupulous landlord could take advantage of that decision, and a tenant whose lease had 950 years to run could find himself homeless.Let me begin the main part of my speech in the standard way, by congratulating the hon. Member for Kensington (Mr. Fishburn) on his luck in the ballot. I agree wholeheartedly with what he said about his predecessor, Sir Brandon Rhys Williams, who was a stalwart champion of leasehold reform. For most of the time he was out of touch with the rest of the Tory party, on that issue and many others--for instance, the right of workers to sit on the board of directors, and rights relating to pension schemes. Intellectually, he often seemed to be on the side of the Labour party.
Throughout my political life I have campaigned for political reform and I am only sorry that the hon. Member for Kensington has tabled such a wishy- washy motion. It makes no proposals apart from the proposal that the law be changed. The hon. Gentleman had the chance to table quite a lengthy motion ; in view of all the problems, it is disappointing that he did not choose to specify the reforms that he would like to see.
I have been involved for a large part of my time in politics with leasehold reform, not least because part of my constituency embraces the Dulwich college estates where there have been considerable leasehold problems. Between 1962 and 1964, together with Sam Silkin, who subsequently became the Member of Parliament for Dulwich, I acted as rapporteur of the Dulwich leaseholders association. We knew that thousands of people in Dulwich, Norwood and other parts of south London risked losing their homes when their leases expired. When we held meetings at places such as Kingsdale school and William Penn school, hundreds, if not thousands, of people turned up. From that experience I know of the very deep anxiety and the gross exploitation of leaseholders. The lesson that I have learnt is that the shorter the term of the lease the greater the exploitation and the greater the anxiety.
The result of our efforts between 1962 and 1964 was a report that included recommendations about preservation of the amenities of the estate. It formed the basis of the Leasehold Reform Act 1967. In 1965 a Labour Government introduced a temporary provisions Act. As it was a hung Parliament, it was impossible to get the legislation through then. The temporary Act was based largely on the report produced by Sam Silkin and me. However, the Leasehold Reform Act 1967 has stood the test of time.
Mr. Gerald Bowden : The hon. Gentleman has paid a generous tribute to the part that my Labour predecessor in Dulwich played in leasehold reform. Will he also acknowledge the part played by Sam Silkin's predecessor, Robert Jenkins--a Conservative Member who for many years fought for leasehold reform in that constituency? There has been an all- party effort and campaign in Dulwich.
Mr. Fraser : Yes, all-party, in the sense that the Conservative Member of Parliament wished leasehold reform to take place, but it was not all-party in the sense
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of the Conservative party endorsing the views of the Conservative Member of Parliament for Dulwich. One should draw that distinction.Mr. Anderson : My hon. Friend will remember the very special south Wales interest. Against the views of the Conservative party nationally, brave individuals such as Sir Raymond Gower stood out. However, their views went against the strong tide of Conservative opinion, which at the time acted very much as the party of the landlord. Only people such as my hon. Friend and Sam Silkin in London, George Thomas--now Lord Tonypandy--and particularly Leo Abse in south Wales spearheaded the campaign that resulted in the Leasehold Reform Act 1967.
Mr. Fraser : That is absolutely right. We must pay tribute to those other champions of the cause.
When there was such agitation and campaigning in south Wales, London and other parts of the United Kingdom the real problem was leasehold houses. The development of leasehold houses predated the development of leasehold flats. The leases of houses were coming to an end. Almost 25 years later, there is now a problem with leasehold flats. When the 1967 Act was passed there was no problem over the leases of flats, but it has now assumed great importance. There is a basic human--indeed, animal--instinct about wanting to be in control of the space in which we and our families live. We want to be free from domination and exploitation in our own territory. That is why we demand leasehold enfranchisement. The word
"enfranchisement" has three different meanings. It means to be freed from slavery--adopting the French word "franche " meaning free, and in French, the word "franchise" means freedom. Enfranchisement also means to be given the vote. To be able to participate in the control of the mansion block in which one lives is an extension of democracy. The third meaning, more recently adopted, is that of acquiring one's freehold or superior interest. In my view, however, the third meaning embraces both the first and the second.
If we study the history of almost any country, we see that there have been movements for land reform and enfranchisement. In this country there have been campaigns by tenants, crofters, peasants, farmers, traders, craftsmen and business men. Many of them were successful. The aim was to free tenants from the shackles and domination of landlords. Without the intervention of the law, the rights of landlord and tenant are seldom equal. Almost always there is domination by the landlord of the tenant, for self-evident reasons. That can never be left to market forces.
The legal structure of the ownership of blocks of flats and terraces of maisonettes in south London and other cities has always been based on the dominance of the landlord over the tenant. That was the only viable legal structure for the ownership of flats. No other legal system was available. Our land law was invented long before long leases were granted for flats. The market developed early this century. Only now, in the 1990s, do we have the problem of the shortening leases of residential flats. Unfortunately, because of the inadequacy of the law relating to landlord and tenant, the leasehold system is the only practical way of disposing of long leases of flats, not
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least because--as the hon. Member for Kensington said--positive covenants are not enforceable against the successors in title when one disposes of the freehold.All of our law relating to flats and maisonettes is built on a domination that is almost an integral part of the landlord-tenant relationship. In turn, domination is the mother of exploitation. The law relating to flats should satisfy two basic human instincts--first, the right to be in control of one's own home and, secondly, the right to collective security.
In practice, the collective need in the case of leasehold houses does not matter very much ; it is relatively unimportant. Under the 1967 Act, the lessee can always buy the freehold. It is rare to find a freehold estate that possesses any communal facilities. We are the poorer for not designing new estates with communal facilities. That is not true of Dulwich where there are woods, commons and other areas that people can enjoy. In 1967 we devised a successful system that accommodated both the desire to own the freehold and the need to preserve local amenities. However, because of the nature of our land law, there are no communal areas, drying areas, playgrounds for children or visitors parking space on new estates. All the land in a freehold development has to be conveyed away.
There is something to be said for trying to ensure that in future the commonhold system is extended to the development of what are now freehold estates so that a communal element can be provided. However, I should not be sidetracked down that path. All that matters to lessees of houses is the right to control their environment by being able to buy the freehold. For householders, the right to buy the freehold is supremely important and the right to extend a lease is marginal, but for flatholders the right to buy the lease and to have continued security is supremely important and the right collectively to buy the freehold may be more marginal.
I congratulate the Law Commission and the Lord Chancellor on producing the discussion paper, which gives us an opportunity to move to legislation. Acting on the findings of the Law Commission, the Lord Chancellor has suggested a new system of land law and has set out a series of questions that we should answer. One question that is mentioned time and again in his report is whether there should be compulsion to enable the majority of leaseholders to acquire the freehold or commonhold of their block of flats. My answer is that they should be able to use compulsion against their landlord to purchase the superior interest and to run their block of flats. Many other questions in the report should be answered in more detail. The Government have plenty of legislative time on their hands. They planned to call an election in June and ditched a great deal of legislation. We are getting an extra week for the Easter recess, which is a sure sign that they have little business to consider. My practical suggestion is that they should introduce a commonhold Bill and commit it to a Select Committee, which could consider the Lord Chancellor's report. We should try to ensure that it reaches some agreement on the detailed provisions for commonhold reform so that after the election the Labour party can introduce its Bill, based on the Committee's mature consideration, and get on with the reform fairly rapidly. A draft Bill is available, to which one or two changes may have to be made in the light of this debate.
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The Government could get on with it in this Session of Parliament. Evidence could be taken from outside bodies under the Select Committee procedure.Three questions must be answered. First, should England and Wales--there is no problem in Scotland--adopt the option of a commonhold system of ownership, by which individual owners of flats would have perpetual rights, akin to a freehold, and would collectively enjoy the perpetual rights, responsibilities and ownership of the common parts? The answer of the Law Commission, the Labour party and almost every leaseholders' group that I have met is yes. We shall hear from the Minister shortly, but the Government's answer is a definite maybe.
Secondly, should a majority of residential leaseholders have the right collectively to enfranchise, to buy the freehold, regardless of whether the landlord agrees--that is compulsion--or is a good or bad landlord? We must consider the market value in detail because it would be discounted considerably by the rights in residence of leaseholders. As long as ransom values and marriage values are excluded, I do not think that there is a problem with valuation. My answer, and the answer of leaseholders and the Labour party, to that second question is yes, but the Government's answer is no. Under the Landlord and Tenant Act 1987, the Government had the opportunity to allow collective enfranchisement. As an environment spokesman and a Back Bencher, I have tabled amendments enabling the Government to endorse that principle, but they refused them. Following the Nugee report, they did not give leaseholders the right collectively to buy their freehold ; they gave them only the right of first refusal. If a landlord tells his tenants, "I want to sell my freehold for £100,000 and I am offering it to you first", those tenants still have no right to buy the freehold. Although the landlord cannot sell it to anybody else without offering it to the tenants for £100,000, he is not compelled to sell. That was the first weakness of the 1987 Act. The second weakness of the 1987 Act--we could not have foreseen this at the time--is that, in practice, it is impossible to get many tenants together to pay a substantial sum for the freehold, particularly if they have short-term leases. It is a good idea in principle, but the 1987 Act certainly does not give tenants the collective right to enfranchise and acquire the superior interest. As there is no right to buy the superior interest, and because the rights of first refusal do not work well, should leaseholders of flats have the right to extend their leases in much the same way as the leaseholder of a house has the right to extend his lease by 50 years under the Leasehold Reform Act 1967? That right is not often exercised for houses because it is usually preferable to purchase the freehold. Given the shortness of leases, should the tenants of leasehold flats also enjoy that right? My answer is yes, yes, yes. I have presented private Members' Bills to that end. I have taken every possible opportunity to amend the Government's housing legislation to that end. I drafted Labour housing policy to that end--
Mr. Lewis Stevens (Nuneaton) : The hon. Gentleman encourages us to allow people to extend their lease. Would not he want to limit the period for which leases can be extended?
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Mr. Fraser : I have thought about that, and I think that the right interim solution is for all leaseholders to be allowed to extend their leases by up to 50 years. Some will say that a block of flats may have a life of less than 50 years. That can be the only reasonable objection to my proposal. One could add the proviso that if the life of the block of flats was less than 50 years, the extension should be for less than 50 years. We must bear it in mind, however, that the central thrust of the Government's proposals is that if the tenants acquire the commonhold, that problem will exist in any case. Therefore, my preferred solution is for tenants to have the right to extended leases and then to be left to sort things out for themselves. Let the tenants, not the landlord, make the decisions.
Leaseholders agree with me that there should be a right to extend leases. Leaseholders are sometimes driven to distraction by the thought of their dying leases. As they get shorter and
shorter--certainly once they have less than 50 years to run--they become unsaleable at a reasonable price that would enable people to acquire another home. The properties become unmortgageable for a reasonable advance. Moreover, it becomes uneconomic to improve them, and that affects the whole community. If one has a short lease, it becomes uneconomic to install expensive double glazing, central heating or insulation. I have given three sound reasons why, in the public interest, we should allow the extension of such leases. Leaseholders are bitter about their exploitation at the hands of freeholders and property speculators who sometimes sit like vultures on the branches of their superior property interests, feasting on the dying leasehold terms. Let me give the House an example that I came across the other day. In this case, the freeholder is prepared to consider granting an extension of lease, but his solicitor has told the tenant that he must give an unconditional undertaking to pay not less than £460 in solicitor's costs before the terms of the extended lease are seen--even if they turn out to be unacceptable and even if the work involved is worth much less than £460.
A second case involves someone who lives quite close to my mother in Streatham. She is a lady in her 80s. There are only about five years left on the lease of her flat. She has no prospect of being able to sell or live anywhere else. On any reasonable valuation, the cost of purchasing the freehold or getting an extended lease would be about £25,000. In this case, however, an unscrupulous landlord who had not been seen for getting on for 12 years, extracted £59,000--the life savings of that woman, who wanted the security of her own home. No kind of market is operating under those circumstances. In my constituency I have many rows of maisonettes--a familiar scene in London and perhaps in other English cities. The properties are very desirable ; they are almost like houses. Unfortunately, the leases have only about 30 or 40 years to run. The landlords and freeholders of those maisonettes routinely charge two or three times what on any objective assessment is a reasonable price for providing an extension of the lease.
The company that owns the freehold of a block of flats in Peckham Rye--I think that it is in the constituency of the hon. Member for Dulwich (Mr. Bowden)--is now charging about £8,000 to extend leases that still have about 50 years to run. I calculate that if one invested that £8,000 at current compound rates of interest, it would be worth well over £1 million by the time the existing leases expired. On any reasonable calculation, the fee that should be
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charged for the extension of those leases is about £2,500. I do not say that the landlord is unscrupulous in other ways, but his valuation is certainly unscrupulous. He is trading on the fears and anxieties of elderly tenants and those who simply cannot move from one part of London to another because of the shortness of their lease. In addition to demanding an excessive price for the extension of the leases, the freehold company is charging a minimum of £460 for solicitors' costs and £250 for agents' fees, even though practically nothing may be done and the agent, if not the landlord, is a captive.Ask any leasehold flat owner with a dwindling term whether he should have the right to extend the lease and the answer will be yes. The creation of commonholds does not solve that problem. Let me put the question clearly to the Minister : should the resident owners of long leases of flats have the right to extend those leases, analogous to the rights of householders under the Leasehold Reform Act 1967? My answer is yes ; the Labour party's answer is yes ; the leaseholders' answer is yes. Unfortunately, I suspect that the Minister's answer will be no and that there is about as much chance of a Conservative Government providing the right to extend leases as there is of a prioress turning up at an Ann Summers tea party.
Let us examine the Tory party's record on this matter. The Conservatives voted against the Leasehold Reform Act 1967 and called it Rachmanism in reverse. Since then, they have had 12 years, but they have never given the right to people collectively to purchase the freehold of flats or individually to extend the leases on their flats. The 1987 Act gave them another opportunity. I tabled an amendment that would have provided for the right to extend. Let me quote the answer that we got from the Minister on that occasion : "Anyone buying a lease should not be under any illusion about the nature of the interest which she or he is purchasing ... Leaseholders of flats do not have the right to extend their leases, although they may be able to negotiate an extension."
We know all about negotiating extensions and about exploitation. The Minister continued :
"I am not sure that we would be justified in giving such a right, which would override the terms of a contract that had been freely entered into between the landlord and the tenant."
But the contract had not been freely entered into at all : the tenant had no choice in the matter. It is a case in which the law needs to intervene.
The Minister then said :
"The hon. Member for Norwood argued, rightly, that the Leasehold Reform Act has been on the statute book for 20 years. What an issue it was, I understand, 20 years ago in one part of my constituency in Oxford. That is certainly accepted by all political parties, but that is not in itself an argument or justification for leasehold enfranchisement of those living in flats." [ Official Report, 5 May 1987 ; Vol. 115, c. 600.]
The Minister was talking about my amendment to allow leaseholders of flats with short leases the right to extend them. I should like a different answer today, although I suspect that I will hear the same answer as I received back in 1987.
The Government could have changed the law in the Housing Act 1980, the Housing and Building Control Act 1984 and the Landlord and Tenant Acts of 1987 and 1988. I gave the Government the chance to change the law in amendments that I tabled. However, they did nothing. The real test of the Government's good will towards leaseholders of flats can be seen in the Housing Act 1988.
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In that Act the Government ratted on leaseholders. They treated them treacherously. When the lease ended, a person used to become a statutory tenant with a rent fixed by the rent officer and with generous relief from schedules of dilapidations. That was an important part of the tenant's negotiating rights. If the tenant was negotiating to buy the freehold or to extend the lease, he could tell the landlord that he had a statutory tenancy with a fair rent when that lease ended. That would make some difference to the value. However, the Government ratted on that in the Housing Act 1988. According to the 1988 Act, once a long lease ends, the tenant will no longer be a statutory tenant and have a fair rent. He will be an assured tenant without any rent control. That substantially altered the bargaining scales between the landlord and the tenant. By ensuring that the leaseholder was an assured tenant when the lease ended, the Government robbed them of the rights of succession for a spouse or other members of the family if the leaseholder were to die after receiving the assured tenancy at the end of the lease. We know something about the Government's attitude in this respect. Over the years improvements to leaseholders' rights have always attracted obstruction and resistance from the Tory party. The word "Tory" is an Irish word that symbolises the absent exploiting landlord. Except in an attempt to save Tory seats such as Dulwich, Streatham, Hampstead, Westminster and North Kensington, it seems that the Conservative party has little real interest--Mr. David Martin : Will the hon. Gentleman give way?
Mr. Fraser : I was about to say that the minimum qualification for Tory party policy is to save the Finsbergs, the Fishburns, the Sheltons, the Bowdens and the Wheelers and--if we had any--the dealers as well.
Mr. Martin : The hon. Gentleman is concentrating on matters that he says divide the House. My hon. Friend the Member for Kensington (Mr. Fishburn) is trying to promote a reform for which there is wide support on both sides of the House. Some of us with constituency interests are waiting to support that reform. We do not want to hear a diatribe against Government policy which could be made in debates on Government Bills, not in private Members' time.
Mr. Fraser : At the end of the day, that depends on the Government introducing a Bill.
The Labour party's policy with regard to leaseholders has been clear and consistent for many years. I quote from Labour party policy from as long ago as 1985--I remember it well because I drafted most of it myself--and the policy remains the same today :
"We will give leaseholders important new rights and safeguards : the right to hire and fire the managing agents in blocks of flats ; maximum limits for management fees ;
the right to have freeholder's accounts examined by an auditor of the tenant's choice
the right to extend the lease (as is the law on houses) ; the right to buy the freehold collectively ;
the right to covenants in leases that, for instance, clearly fix the responsibility to repair and ensure
revised legal framework for the sale of flats and maisonettes." That policy encompasses the commonhold system that we have been discussing this morning.
We have stated our policy consistently and argued for it for some time. Commonhold will certainly come.
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However, the immediate complementary need with commonhold is the right for leaseholders to extend their leases. My experience of these matters dates back nearly 25 years. I believe that the Government do not have the guts, the determination or the conviction to make that change. We await a Labour Government to provide the solution. 11.35 amMr. Gerald Bowden (Dulwich) : I congratulate my hon. Friend the Member for Kensington (Mr. Fishburn) on his twofold good fortune. First, he has given us the opportunity to debate leasehold reform ; secondly, he has had the good fortune to win the draw to sponsor a private Member's Bill to open up, and perhaps place on the statute book sooner rather than later, the opportunity for the tenure of commonhold. My colleagues and I are delighted to be co-sponsors of the proposal and we hope that it will become legislation. I noted the claim of my hon. Friend the Member for Kensington to apostolic succession to Brandon Rhys Williams in inheriting the mantle of leasehold reform in Kensington. I can claim a similar succession. As I said earlier, two of my successors in Dulwich, one Labour and one Conservative, were greatly concerned with the need to ensure that the proper rights of a landlord are related to the proper rights of a tenant in the relationship between leasehold and freehold and the difficulties of trying to reconcile what can sometimes be conflicting interests.
The history and development of Dulwich has been the history and development of English land law, and the development of land under the freehold and leasehold systems. I was interested to note that my hon. Friend for Kensington attributed scriptural authority to the idea of leasehold and its relationship to freehold, stating that, on that, "all law stands."
I wondered whether, on this occasion beyond all others, our Chaplain this morning might have varied the time-honoured Prayers said in this House and used one of Cranmer's collects from the Prayer Book :
"Let us pray for all those who are troubled in mind, body or estate."
Today we are concerned with those who are troubled in estate. We have all witnessed the uneasy relationship between leaseholders and particularly those leaseholders for whom the leasehold is their home, and freehold landlords, especially commercial landlords.
My remarks this morning will be largely addressed to the interests of my constituents in Dulwich, many of whom are leaseholders of the estate governors of Alleyn's College of God's Gift. I have given them their full title, but in future I will refer to them as the Dulwich estates governors.
For the past 300 years, there has been benefit in the way in which the estate governors have exercised their stewardship and developed Dulwich. Over the years, into the 1980s, they have maintained Dulwich as a highly desirable residential suburb of London. Their good stewardship has ensured that the amenities of the locality are maintained. Having said that there is great good will and stewardship on the landlords' part, and while there is no malice or bad feeling on the part of the leasehold tenants, there are clear signs that problems are arising, and that there must be a new way of looking at the relationship.
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That is not peculiar to the Dulwich estate or to the other large landed estates in London. Over the years, there have been makeshift arrangements to try to find something that approximates to a commonhold.My hon. Friend the Member for Kensington said that the idea of a flying freehold is not unknown in Scotland. Indeed, it is well established there. There is evidence that certain developers or ground landlords have attempted to sell, with their flats, what they purport to be flying freeholds, but that is not a creature known to English law. In a sense, it is an unidentified flying object from north of the border. Closer inspection when it has landed in England and Wales reveals that it does not bear real scrutiny. Great scepticism naturally surrounds this, because what purports to be flying freehold is nothing more than a lease in fancy dress, masquerading as a freehold. It enjoys few of the benefits that a leasehold should have, and certainly none of the benefits that a freehold should have.
Clearly, therefore, there is a gap that needs to be filled, and it is the duty of the legislature to fill it. Although this morning's debate may not be taking place in the most thronged of Houses, it is nevertheless an opportunity to see that this matter is put on the agenda for further discussion. We are looking for a framework in which the uneasy relationship that exists in many places between the leaseholder and the freeholder can be developed.
We must remember the interests of the leaseholder whose flat is his home. As has already been said, there is some magic about the word "home" as opposed to "house". Most people who are owner-occupiers regard their home as more than a commercial investment ; it is more of a personal investment in which they have invested not only their money, but their personality. In due course, they may wish to capitalise on that investment with some benefit--perhaps on retirement or when their family has grown up and moved away--and move, perhaps, to less costly and smaller accommodation. They wish to take with them the surplus that they have realised on selling the original investment.
That is a benefit which has been enjoyed by the freeholders of houses and many people recognise it as a provision for their retirement. Therefore, it seems particularly unfair on leasehold tenants who have purchased long leases, perhaps early in their working lives, and who, for a period, see the lease increase in value, but who then find that it declines in value just when they want to capitalise on it and make other arrangements for their retirement. They are not enjoying the benefits that they could rightfully expect from the investment that they have made in their own homes over the years. Therefore, the social context of this issue--let alone the legal and financial context--should give us cause for further consideration.
This problem could and should be solved by the proposals that my hon. Friend the Member for Kensington has explained to the House today and advanced in his Bill. There is clearly a need for change. I have seen an example in my constituency--I am not referring to the Dulwich college estate in this instance--of the way in which the tenants of a block had the opportunity some 20 or so years ago to purchase their flat from the former freeholder, the Greater London council.
At that stage, what amounts to an early model of a commonhold was established. There is a management company through which the owner- occupiers with long
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leases individually have an equity stake in the freehold. Therefore, they are both equity stakeholders in the freehold interest of the block and possessors of a leasehold interest in the flat that they occupy. That system takes account not only of long-lease occupants who do not wish to join in but of tenants who have remained council tenants and who wish to remain in the block. In any future Committee stage that considers these proposals Ruskin Park house in Camberwell should be regarded as an illustrative model for future commonhold developments.I return to the Dulwich college estate, where recognition of the need for change exists not only among the tenants who wish to purchase a longer lease or to ensure that they have a greater say in the way in which their block is managed or to enjoy something broader and wider than their leasehold interest at the moment, because that natural desire is also recognised by the estate governors--the landlord. At present, they are embarking with good will upon an experiment with one block to ascertain the way in which such a model might be developed.
However, there is a need for urgency as well as good will. Although negotiations can be conducted with good will, we also need a statutory framework. That is why I agree with my hon. Friend the Member for Kensington that we need a Bill containing such provisions, and we need it now. Putting my own gloss on it, I suggest that a solution might be achieved by establishing a statutory framework while holding voluntary negotiations with the freeholders to move towards a commonhold when a substantial number of the leasehold occupants of the block--for example, 75 per cent.--wish to do so. That should be attempted on a voluntary basis first, because that would help both sides, especially where the landlord is benign and has an interest in the well-being of the estate as well as the leasehold tenants. However, if the voluntary negotiations fall, founder or come up against some impossible obstruction, mandatory arrangements should be brought into play. Many obstructive landlords might put on the face of a benign landlord with a view to protracting the negotiations and hoping that the request and requirements to move to a commonhold would dissolve. We should therefore be able to move to a statutory phase if the voluntary negotiations should fail. The voluntary negotiations would be expedited if existing leaseholders were given the opportunity in the meantime statutorily to extend their leases for a period. That would not only protect the leaseholder, but would show that there would not be any immediate residual advantage to the freeholder in not negotiating, or in dragging his feet, until the majority or all the leases fell in, when he could then negotiate from a different basis.
The need for such change is agreed by all parties. I am not making any party political point, nor am I claiming solely to represent a particular constituency interest in the face of opposition from the Government. All sides have the will to look at this problem afresh and find ways of dealing with it. We could take this issue forward from a debate such as this morning's if that will can be shown to exist in the House to the same extent as the need exists in our constituencies. My constituents who have an interest in these matters--some of them vote for me, of course, while others certainly do not--will benefit from the
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proposals that my hon. Friend the Member for Kensington has outlined. I hope that it will be possible to introduce legislation at an early moment.11.50 am
Mr. David Martin (Portsmouth, South) : I am grateful to my hon. Friend the Member for Kensington (Mr. Fishburn) for giving us the opportunity to discuss leasehold reform. At quite an early stage in my representation of Portsmouth, South I received an extremely articulate letter from the chairman and the secretary of the St. Helen's Court lessees association. St. Helen's Court is a substantial block of flats on the front at Southsea. The letter summed up the position that has been so elegantly and expertly presented by my hon. Friend the Member for Kensington, especially in terms of the leasehold reform that is required.
My hon. Friend the Member for Kensington conducted a fascinating tour of the history of leasehold. He explained how it came about and the developments that took place, especially in the 19th century, which were subject to the leasehold arrangment. One of the main signs that leasehold has become a dated concept and that something needs to be done is that it is an arrangement which is no longer employed. No one erects blocks of flats and uses the arrangement that is set out in the letter which I received from the St. Helen's Court lessees association.
Instead, we have the sort of arrangement which my hon. Friend the Member for Dulwich (Mr. Bowden) mentioned, although in a slightly different context--that flat owners have a share in a management company which owns the freehold. If an owner passes on his flat within the block, he also passes on a share in the management company. That company organises the common parts externally and internally, to the satisfaction, it is to be hoped, of all those living within the block.
I had experience of such an arrangement when I lived in a block of eight flats in Hammersmith. That was when I first owned a place in London jointly with my brothers and sister. Developments along these lines are common. The arrangement ensures that those who are buying what is effectively a leasehold have control of the freehold, with a share in a management company. The fact that the arrangement is used so widely rather than the arrangements that existed traditionally for leaseholds shows how unsatisfactory the leasehold arrangement has become. It is an arrangement that is not used in modern times. I welcome to the Government Front Bench my hon. Friend the Member for Suffolk, South (Mr. Yeo), the Under-Secretary of State for the Environment. I shall listen with fascination when he makes his contribution to the debate. I have been in correspondence with my hon. Friend, as I was with his precedessors, on behalf of the extremely articulate people who make up the St. Helen's Court lessees association. I shall couple what I have to say about their representations and the representations that they would wish to make through me with what appears in the Lord Chancellor's document on commonhold. I believe that the Lord Chancellor is approaching the issue in good faith with a desire to act positively. I have no doubt that his experience of Scotland will motivate him strongly to act practically to improve English law in this respect.
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There is a good summary at the end of the consultation document. The heading on page 32 is"Particular issues on which comments are sought".
I shall briefly go through some of the issues and highlight areas where I believe that practical arrangements can be made for commonhold that could be incorporated in a Bill sooner rather than later. The first is :
"Should there be a provision whereby the long-leaseholders of premises suitable for conversion to a commonhold could require the freeholder (and the owners of superior leases) of wholly or mainly residential buildings to sell them the freehold (and superior leases) in order to convert to commonhold?"
The question in the consultation document whether there should be compulsion is an important one and the answer is that there should be.
The second is :
"What should be the basis of payment for the freehold (and superior leases)? In particular, should there be any, and if so, what qualifications on open market value?"
The simple answer to that is that there should be market value with no element of confiscation in legislation. It is felt that there should be reference to ground rents in dealing with valuation. The third is :
"Should any compulsion provision be available only if all the long- leaseholders want to take advantage of it, or should it be available to a specified majority of them? If the latter, what majority should be specified?"
The answer is 75 per cent. I understand that 80 per cent. has been canvassed, but 75 per cent. would be a sensible balance and it is one that I support.
The fourth point is :
"If the compulsion provision were to be available at the instance of a majority, how should the position of the non-participants be dealt with after the establishment of the commonhold?"
What to do with those who either do not want to or cannot afford to go along with the new commonhold arrangements is a crucial issue. The answer can be simply summed up--only the leaseholders who wish to convert should be involved and they would have to bear the cost of the conversion. Those not wishing to convert, and their successors, may subsequently join the commonhold association on payment of a sum to be agreed. I leave it in that form for the moment--on payment of a sum to be agreed. In the meantime, they should pay any ground rent and maintenance charges to the commonhold association. That would be a sensible arrangement.
The fifth point is :
"Should there be provision to override the opposition of mortgages of long- leaseholders?"
As we have heard, the building societies are very much involved and we need to satisfy the mortgagees. Where necessary, application could be made to the courts to override the opposition of mortgagees. If they were unreasonably withholding consent to the arrangements, that would be a matter for the courts.
My last point on the issues on which comments have been sought by the Lord Chancellor relates to whether there should be a ban on long leases of commonhold units. As the report said :
"Bearing in mind the implications for compulsion, should any such ban cover all long leases, or should it only apply to the grant of long leases following the establishment of the commonhold? Should the Leasehold Reform Act 1967 be extended to provide for the enfranchisement of long-leases of commonhold flats (if it is decided not to ban long-leases of commonhold units)?"
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