House of Commons Hansard Debates for 8 Mar 1991

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My short answer to that is that there should be no disagreement about the granting of long leaseholds within the sphere and control of the commonhold association, once set up. That would be a matter for the association.

Those are the particular views that I wish to express. They are highly sensible, and are based on my constituency interest. I have already referred to the St. Helen's Court lessees association, the chairman of which is Mr. Gould and the secretary of which is the honourable alderman Frank Sorrell, both of whom have been most helpful in informing my mind on those issues. They represent many more people in my constituency who have problems similar to those that they face.

My final and crucial point is to question whether we have a Minister who will vigorously promote such reform in his Department. Without that vigour and enthusiasm, the commonhold provisions are never likely to reach the statute book. I personally know my hon. Friend the Under-Secretary. I must ask whether he is the sort of chap to hustle when the going gets tough. My experience of my hon. Friend on the golf course would lead me to say, "Yes, he is that sort of chap," but I wanted further guidance.

I looked at Andrew Roth's "Parliamentary Profiles" to see whether I could learn anything about my hon. Friend that I had not learnt from my personal contact with him. The only problem is that the book is rather out of date, because the modern version has not yet reached "Y". I noted one or two of my hon. Friend's past performances. He contested Bedwellty against the Leader of the Opposition in 1974, but failed to win it--not a good start. However, it gets better. He is described as

"Energetic, ambitious, independent minded, socially-conscious reformer."

That last word was the one that I was looking for, and most wanted to see. My hon. Friend is a reformer, so we can guarantee that, to the best of his ability, he will be promoting these ideas within his Department--ideas wh ichhave achieved such support not only on the Conservative Benches, but on the Labour Benches.

Whether before a new Queen's Speech in November, or at the time of a general election, I look forward to seeing my hon. Friend in his shirtsleeves, with those colourful braces that were on display at the time of the leadership election, promoting this reform as a major pillar of Government policy. We shall never again suffer the loss of a by-election such as we suffered yesterday if we have in the forefront the reform of leasehold and the creation of commonhold. I have no doubt that, once the full force of the Under-Secretary's enthusiasm and energy is applied to this problem--I am delighted that he was chosen by my hon. Friend the Member for Kensington to reply to the debate--and works in conjunction with the Lord Chancellor's ideas, we shall be able to show our constituents that the Government have achieved a reform that is second to none.

11.55 am

Mr. George Howarth (Knowsley, North) : I, too, congratulate the hon. Member for Kensington (Mr. Fishburn) on choosing this important subject. I canvassed in the by-election that brought him to this place--although not for him. I have never spoken to so many answerphones as when I walked through the streets of his constituency.

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I am conscious of his sharp constituency interest in the subject. It is proper and commendable that he should take such a line on behalf of his constituents.

I, too, should declare an interest, because I own a leasehold property and am sure that I would benefit in some way from any reform of the legislation, along with 3 million others. Therefore, I shall not hesitate to continue to pursue the matter.

Over the years, many problems have arisen from a legal framework that was never intended to do what it currently does. The problems can be split into three categories. The first is the neglect and mismanagement aspect of leaseholds, the worst problems of which appear to relate to maintenance, management and insurance of buildings, together with the difficulties of getting value for money from service charges. The problem of mismanagement is rooted in the fact that responsibility for the upkeep of a property tends not to lie with the leaseholder, who is likely to be both the occupier and the person with the greatest financial interest in the property. The landlord who controls the management of a block of flats is usually non-resident and therefore has little incentive to have work done promptly, efficiently and economically. Several speeches have brought home that point strongly.

When repairs are carried out, a landlord or managing agent almost always has effective control over the choice of contractor, while the leaseholder has little option but to pay the bills. At worst, that unequal arrangement can lead to leaseholders paying large sums for virtually nothing, for fear of forfeiting their leases if they refuse to pay the charges levied by the landlord or management agency with which they do not agree. Although methods of legal redress exist, they are often expensive and difficult to use.

The second major concern is the difficulty in selling leasehold flats. Again, hon. Members on both sides of the House have outlined that problem, which involves difficulties over the satisfactory resale value of a leasehold flat, especially where the terms of a long lease have diminished significantly. That problem is primarily caused by the fact that leases are granted for a limited period only, after which ownership reverts to the freeholder. Naturally, the value of the property declines towards the end of the lease.

Research has shown that mortgage lenders require that the term of a long lease is between 25 and 35 years beyond the term of the mortgage, which is usually 25 years. Thus, flats can become unmortgageable and greatly devalued on the open market, with leases as long as 60 years to run. Many 99-year leases were granted in the 1950s and 1960s, and will soon be approaching the 60-year threshold. We can expect the saleability problem, which is already too common, to worsen. My hon. Friend the Member for Worsley (Mr. Lewis) outlined amply the third set of problems and my hon. Friend the Member for Swansea, East (Mr. Anderson) mentioned them in a brief intervention. They do not relate specifically to London but involve south Wales, the south-west and, to a limited extent, the north of England. My hon. Friend the Member for Worsley put the case forcefully. In the 1960s, developers offered long freeholds--usually for 999 years--at low ground rent. Unfortunately, because the value of that ground rent has diminished over the years, the buildings are often

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auctioned--my hon. Friend gave an exhaustive list of firms in his constituency active in that regard--and sold to organisations that deliberately set about harassing owner-occupiers under obscure clauses in leases. In the words of the right hon. Member for Old Bexley and Sidcup (Mr. Heath), that is very much the unacceptable face of capitalism. The problem must be resolved.

Hon. Members with constituency interests have put the case forcefully, but the most extensive evidence has been collected by the Consumers Association. I am grateful to the association for the extensive briefing which it has given me and, I am sure, other hon. Members who bothered to ask for it. The association highlighted difficulties arising specifically from the major problems that I mentioned. In 1990, the association published a request in Which? for letters on this subject. The letters come under several headings, the first of which is neglect of the building fabric. One person said :

"All 17 residents are extremely annoyed and unhappy about paying for a Service we are not getting The downpipes on the outside walls were neglected over several years which resulted in dampness which has blasted the plaster in my dining room the Managing Agents are a joke--their internal administration is farcical and, above all, we believe they are not complying by the terms of the lease." Under the heading of delays in getting repairs done and escalating costs, a resident stated,

"I live in a block of eight converted flats, all of which are owner- occupied since August 1988 Correspondence began at this time to urge the landlod to undertake the repairs needed without delay. He was always slow to respond, if at all, and evasive The landlord to date has not yet instructed that these repairs go ahead, with the result that the dry rot has spread over the past two years. The flat in question is now uninhabitable, as are some of the rooms in the flat downstairs".

Sir Geoffrey Finsberg (Hampstead and Highgate) : I am sure that the hon. Gentleman appreciates that, under earlier Acts, tenants can go to court to obtain a management order. Tenants can also go to environmental health officers of public health departments. The hon. Gentleman is right to say that the means are already available, but does he agree that they should be used more?

Mr. Howarth : I accept the hon. Gentleman's point. As has been said repeatedly in the debate, it is often difficult to track down a managing agent. A name will be recorded somewhere, but it may be difficult to find the person. Often, a freeholder lives abroad or there may be no record of his name. It can also be expensive to apply the law and difficult to track down the person who should be taken to court. I accept that provisions already exist, but the evidence is that it is difficult to pursue those people.

On the subject of unreasonable freeholders, another resident wrote :

"The vendor has failed to maintain the property, breaching the terms of the lease. He was claiming moneys for insurance, repairs, solicitors fees, and cleaning of common parts--none of which have been substantiated and which I wholly refute. The property has also been greatly devalued as a result of all the problems, plus the fact that I have spent in the region of £3,000 without any result." That answers to some extent the point made by the hon. Member for Hampstead and Highgate (Sir G. Finsberg).

The resident of a large block of flats wrote :

"Our management agents are renowned crooks, who take advantage of the overwhelming power they have in order to make as much money as quickly as possible, by asking high service charges, while on the other hand flaunting their responsibilities and the law. Mr. G uses his own building contractor, D Property Services, to do repair and

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redecoration work on the buildings Apparently, even if lower estimates are obtained by residents, they come back with a slightly lower estimate again. They then commence work and find other things that need doing. The bill then goes up and up We are not even sure whether we have proper buildings insurance cover We as a residents' association are at our wits end. We obtained a surveyor's report to estimate repair work to the building, which is put at £70,000 plus. This is incredible, because in 1985, £41,000 was spent on the building Apparently, the flat roof was redone, but five years later needs total replacement. How can that be? It is obvious that the sum of £41,000 did not all go on the building."

Absentee landlords and the lack of contact with them were the subject of another letter to Which? :

"Our leaseholder has emigrated to Australia, where we send our annual cheque for ground rent and maintenance'. There has been no maintenance to the property since it was converted. Even after the hurricane last year, the already-leaking roof was not repaired, and the owner of the top flat has had to repair it herself. The management company turned out not to exist."

On service charges and accounts, another resident wrote : "I paid the first year's service charge and then asked to see the accounts, to see how the money had been spent--which I understand they are obliged to do. After five years, I am still waiting. I usually receive a bill each year, and I tell them that I cannot pay it until I see the accounts for the first year. Consequently, I have paid nothing since 1985. Fortunately, we have not needed any major repairs, but reports of minor ones have always been ignored."

Another letter received by Which? stated :

"The new freeholder imposed a flat-rate service charge of £50 for the cost of administering the lease. We have steadfastly refused to pay this sum The leaseholder has made no attempt to examine, visit or maintain our property. All running repairs have been arranged and paid for with the other flat owners."

Building insurance was the subject of another letter to Which? :

"In early February this year, we were hit by a hurricane The wall holding up the land below our principal approach road collapsed, closing our approach road The lessor, it emerges, has not insured us sufficiently to cover this kind of event. Dealing with the insurers is complicated by the fact that our policy is not in our names. So far C's"--

the lessors--

"have done nothing about this, and over three months have passed since the loss adjuster's report was submitted to them. What can you do with such casual management? One feels quite helpless. Meanwhile, three of our 12 apartment owners are offering their apartments for sale. Despite much interest, all prospective buyers say the same thing-- We will only be interested when your present difficulties are solved.' So these lovely properties stand blighted If we were freeholders, we could all club together and get the work done." Those are just a few of the many examples that could be cited of the problems that confront leaseholders.

It is our intention to be co-operative, so, on behalf of the Labour party, I make an offer to the Minister. Earlier this week, my hon. Friend the Member for Hammersmith (Mr. Soley) published a document entitled "New Rights for Leaseholders", which makes four main points. First, we call for the right to buy the freehold collectively from non-resident freeholders at market value ; secondly, for the right to extend the lease ; thirdly, for the right to choose managing agents ; and, fourthly, for the right to examine the freeholder's accounts. The first demand is in line with the principle being articulated today.

In answer to the question of the hon. Member for Kensington, something to that effect will be included in the

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Labour party manifesto. He will have to take up with his hon. Friend the Minister or his colleagues what goes into the Conservative manifesto.

My offer is that, if the Government take up one, two, three or all of those demands, made in our policy statement earlier this week, the Opposition will co-operate in every way to ensure that the legislation--which we hope will be proposed by the Government--gets on to the statute book. We would do nothing to detain or delay such legislation and would co-operate as fully as possible, by whatever means--either those suggested by my hon. Friend the Member for Norwood (Mr. Fraser) in his knowledgeable and experienced speech or those suggested by other hon. Members.

I understand that the Minister is to speak immediately after me. He can intervene now to accept our offer, if he wishes. It is a genuine offer.

There are many scandals in our society, but this problem is a major scandal and need not happen. The history of the problem has been explained in some detail and we believe that there is support on both sides of the House for reform. There is certainly a need for reform, as has been illustrated by the cases that I and other hon. Members have quoted.

The hon. Member for Kensington has introduced the motion in good faith, and the House should take it up in good faith. The Opposition are certainly willing to co-operate. All we need are the right signals from the Minister when he replies. Then something could be put on the statute book this side of even an early general election.

12.16 pm

The Parliamentary Under-Secretary of State for the Environment (Mr. Tim Yeo) : I thank my hon. Friend the Member for Kensington (Mr. Fishburn) for initiating such a timely debate on leasehold reform and pay tribute to his eloquent and forceful speech. I know that he has a long and deep interest in the subject. In the relatively brief time that he has been in the House he has attempted to introduce several Bills to improve the position for leaseholders.

I noticed in The Guardian diary the other day a report that Mr. Gorbachev told the Prime Minister that he thinks that a leasehold system is best for housing in Russia. My hon. Friend the Member for Kensington might like to make his contribution to the reform of the Soviet system by travelling to Moscow to advise on the benefits of leaseholds.

My hon. Friend has continued a long campaign, started by his distinguished predecessor, the late Sir Brandon Rhys Williams, to improve the present leasehold system in England and Wales. It is a system which many consider to be less than ideal for home ownership. My hon. Friend received support from hon. Members on both sides, including my hon. Friends the Members for Dulwich (Mr. Bowden) and for Portsmouth, South (Mr. Martin), who paid a rather over-generous tribute to my qualities as a reformer. His tactful and diplomatic use of language showed the House why he is so well qualified to be the Parliamentary Private Secretary to my right hon. Friend the Foreign Secretary--a position which has had a number of distinguished occupants.

My hon. Friend the Member for Kensington has many constituents living in leasehold flats for whom he is a powerful and effective advocate. I am well aware that

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problems have arisen with the management of such properties. Those problems are a source of great anxiety and concern to many leaseholders.

Sometimes it is suggested that mangement problems associated with leasehold flats are inherent in the basic system of leasehold ownership and that they can be overcome only by allowing long leaseholders of flats to acquire the freehold--in the same way as long leaseholders of houses can usually acquire them under the Leasehold Reform Act 1967. Or it is suggested that the difficulties would be resolved were the leasehold system abolished. I am not convinced that that is the case.

In many instances, the leasehold system works perfectly well, with no cause for dissatisfaction on the part of landlord or leaseholder. It certainly works well in the case of commercial property. However, I accept that there have been many cases where things have gone wrong, especially with the management of large blocks of flats and sometimes in sheltered accommodation where long leaseholders have a legitimate cause for complaint. That is why the Government have given priority to tackling abuses of the leasehold system and have introduced those provisions now contained in the Landlord and Tenant Act 1987.

At the same time we have been pressing ahead with the development of an entirely new way of owning property, called commonhold. This is a timely debate because the consultation by the Lord Chancellor on the details of our proposed commonhold legislation, which was published last year, ended only last week. It is timely also because the commonhold proposals have generated much public interest in leasehold matters generally and particularly in the question of leasehold enfranchisement for the owners of flats and maisonettes. Many hon. Members will have received approaches from members of the commonhold flats campaign, whose aim is to give leaseholders of flats the right to purchase the freehold of the block in which they live. The debate is also timely because, as the hon. Member for Knowsley, North (Mr. Howarth) said, only yesterday the Labour party published a statement outlining its position on this issue. It is trying to leap on board the bandwagon by announcing its own commonhold proposals. It is convenient for the Labour party that we have already published a draft Bill --

Mr. Fraser : Obviously the Minister's speech was written before he heard the debate. We excuse him as he did not write it himself. We proposed a commonhold system in the policy statement from which I quoted and which was published in 1985. The Government did not initiate the proposal for commonhold--it was initiated by the Law Commission.

Mr. Yeo : We have already had a long tour down memory lane from the hon. Member for Norwood (Mr. Fraser), most of it irrelevant to the debate. Clearly, he has not seen the news release published by the Labour party which described the proposal as a "new package of rights." It is convenient for the Labour party that we have published a draft Bill as that will save it the trouble of working out its own proposals.

The main difference between the Government and the Opposition is that we are analysing the results of the

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consultation before finalising the details of the Bill. As usual, the Opposition have rushed ahead without waiting to see the results of that consultation. The degree of interest in the subject within the Labour party can be judged by the fact that the hon. Member for Knowsley, North has been supported by only two colleagues this morning.

Mr. Howarth : Three colleagues.

Mr. Yeo : Three colleagues ; I beg his pardon.

This is also a timely debate because later this month I shall receive a report on the research into the implementation of the Landlord and Tenant Act 1987. That Act considerably strengthened the position of leaseholders living in blocks of flats and for the first time gave them the right of first refusal. That is the right of leasehold tenants collectively to purchase the freehold of a block where the landlord is proposing to sell his interest. In most circumstances, a landlord who wishes to sell a block of flats must give qualifying tenants, mainly long leaseholders, the first opportunity to buy the freehold before he can offer it to anyone else. He cannot offer it to anyone else at a lower price without re-offering it to his tenants. That is not a right to buy and the landlord cannot be forced to sell his interest. Where there is a purchase resulting from the right of first refusal, the leaseholders still retain their leases, but additionally acquire a share in the freehold.

I am the first to acknowledge that that is not entirely satisfactory. The tenants collectively acquire the freehold of the block, but cannot own their individual flats on a freehold basis. Although there are a few freehold flats, the owners of such properties will know that English law does not, at present, provide a satisfactory means of creating and enforcing mutual obligations among people living in separate parts of the same building. I am aware that most lending institutions are reluctant to grant mortgages on such properties.

It is widely recognised that English law is defective in failing to provide a satisfactory machinery for the imposition on freeholders of positive obligations to maintain and repair their property, or to require them to contribute towards communal maintenance costs which can then be enforced against successors in title.

In January 1984, the Law Commission recognised that fact in its report to my right hon. Friend the Lord Chancellor on land obligations and the law of positive and restrictive covenants. With a view to solving that problem, the report set out and proposed a scheme of land obligations and recommended adoption of some form of condominium legislation similar to that which exists in America. As a direct result, the Government established an interdepartmental working group, under the chairmanship of a Law Commissioner, Mr. Trevor Aldridge, to produce proposals for similar legislation in this country. Its report, in July 1987, recommended commonhold as a new way of owning property.

As I said, the proposals for commonhold are similar to the American condominium system and to the system of strata title in Australia. Commonhold would facilitate the creation of freehold flats within a commonhold by providing a legislative framework under which such a system could operate.

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In November last year, the Lord Chancellor published a draft Commonhold Bill, which was prepared at the Law Commission, and a consultation paper which discussed the issue of compulsion and invited views on the different problems that would need to be resolved if any provision for compulsion were to be included in the commonhold legislation.

We are keen to introduce commonhold as an alternative option to leasehold. I hope that the proposed legislation can progress with the minimum delay. I was glad to hear the hon. Members for Knowsley, North and for Norwood express their support for moving ahead in that direction.

At the same time, the Government are taking great care to ensure that we get the legislation right. Introducing a new form of tenure into our law is a major step with many pitfalls and we are conscious of the need to consult all the bodies that are likely to be affected so that we can produce a system of ownership that is both workable in practice and attractive to those who will use it.

My hon. Friend the Member for Kensington described many of the advantages of commonhold and I accept his argument. He also acknowledged that commonhold is not a panacea for all the problems faced by leaseholders. As he said, it will not cut bills for essential work ; nor will it defer the need for those works. It will not solve disputes between neighbours which, regrettably, arise from time to time.

The consultation paper deals with many issues, but the question of compulsion is perhaps the most important unresolved policy issue. I realise that for many people, the main appeal of commonhold lies in the possibility of being able to compel their landlords to sell them the freehold interest in their block of flats at full market value so that they can then establish a commonhold. I accept that there is considerable public demand for that form of enfranchisement. I also accept that without the element of compulsion, the use of commonhold may be limited--perhaps confined to new buildings. Without compulsion, the situation created by an unwilling or irresponsible freeholder will not be resolved.

I also accept that such enfranchisement is likely to be unwelcome to some landlords, including those who have treated their leaseholders well and properly. The level of compensation may turn out to be the crucial factor. I especially welcome the recognition by my hon. Friends the Members for Kensington and for Portsmouth, South of the need for fair compensation. In the case of leases that are getting short, the compensation could be substantial.

Characteristically, the Labour party document is a bit short on that aspect. Its catalogue of so-called "rights" for leaseholders is not worth a great deal on close examination, as the Labour party's fox has largely been shot by our commonhold proposals, together with the provision that already existed in the Landlord and Tenant Act 1987. Labour's proposals could have damaging effects on freeholders unless the point of compensation is fully recognised. In that context, Labour's traditional hostility to private landlords is not an encouraging background. I have to say that the possibility of Labour--

Mr. George Howarth : My hon. Friend the Member for Norwood (Mr. Fraser) and I entered the debate in a constructive spirit. The hon. Member for Kensington (Mr. Fishburn) has tried to build up a consensus on the subject in the House. The Minister is not helping the case.

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We are willing to discuss with the Government, openly and genuinely, means of enacting sensible legislation. We have never suggested that we are the only people who are advancing this argument ; we recognise that hon. Members on both sides of the House have the same interests. We are making a serious offer : we are prepared to discuss the issue not in a spirit of hostility towards private or any other landlords, but on the understanding that a problem needs to be resolved. We intend to resolve it, either in co-operation with the Government or when we ourselves are in government.

Mr. Yeo : I am happy to say that the latter prospect seems fairly remote, in view of the disastrous collapse of the Labour vote in the Ribble Valley by-election. Interestingly, although the Conservative vote declined by a third, the Labour vote declined by 50 per cent. I should not have thought that that result was a subject to which Labour would wish to draw our attention today.

If the hon. Gentleman is saying that Labour recognises the need for proper and adequate compensation for freeholders who may be compelled to give up their rights as a result of future legislation, I welcome that commitment. It will certainly help either the current or the next Conservative Government to pass the relevant legislation smoothly and quickly.

Providing for compulsory leasehold enfranchisement is an important process and the decision to do so should not be made lightly. The draft commonhold legislation has proved much more complex and time consuming than was originally envisaged and the issue of compulsion is especially complex. It has raised a number of important questions that need to be resolved.

For example, should compulsion apply if only a simple majority of leasehold tenants are in favour, if a larger majority are in favour or only if all are in favour? Many people may not want to convert to a commonhold or, indeed, may not be able to afford it. What would be the basis of compensation or payment for the freehold? That is a particularly complex question, which may involve the buying out of head or superior leases. What would be the position of

non-participating leaseholders after the establishment of a commonhold? Should there be a ban on long leases of commonholder units? What will be the position of mortgagees?

All those questions need careful consideration and I do not think that anyone has suggested that there are easy answers to any of them. I am sure that solutions can be found, but it would be unwise to rush into a commonhold scheme without full and careful consideration of the implications. We shall certainly need procedures to resolve the disputes that will inevitably arise.

In my view, the real benefits of commonhold will be felt only if compulsion is included in the package. I am very sympathetic to the pleas of my hon. Friend the Member for Kensington and I have noted his suggestion that, if a general election intervenes before the current Parliament can act, a firm commitment should be included in our manifesto.

If the House passes legislation to introduce commonhold with a right to enfranchise, we shall review the rights of leaseholders who do not opt for it and I undertake to review the right to extend leases. The Government are something of an expert on the extension of leases, having

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done so twice on our own account in the past few years--and as, I am sure my hon. Friends will agree, we are likely to do again at some stage in the next 15 months.

Mr. Fraser : The Minister said that the Government will review the extension of leases. Does that mean that he is for or against, or has he not made up his mind?

Mr. Yeo : It means that the legislation to introduce commonhold will be extremely complex. No doubt its progress will allow the issues to be ventilated even further. It strikes me as sensible and, indeed, desirable to leave the consideration of whether leases should be extended--and, if so, how that should be done--until we have dealt with the question of commonhold.

The Lord Chancellor's consultation paper states that the commonhold system might equally be adopted for commercial and mixed-use developments. It could be used for housing or industrial estates, or even shopping precincts with flats or offices above. I recognise that some features of the proposals have caused concern to the commercial property market. It is notable that this morning hon. Members have not suggested at any stage that commonhold should be extended to the commercial market. The existing business leasehold system works well.

It could, therefore, be argued that commonhold for business premises is unnecessary. There is no history of lobbying by business tenants for commonhold. There is a real risk that commonhold could damage the business property investment market. It could deter investors and create uncertainty over future development. It would be generally unwelcome. Those points will be considered when the responses to the consultation paper are assessed. However, it is unlikely that we shall seek to impose compulsory commonhold on an unwilling commercial property market.

The question of commonhold for residential premises is complicated by the presence in some buildings or blocks of flats of non-residential units-- shops or offices. That will be a particular problem if we decide to include an element of compulsion in the provisions. We should have to consider whether commercial units ought to be included. The difficulties are recognised in the Lord Chancellor's consultation paper, although very little attention has been paid to them in the debate. There is no simple answer to the problem of using commonhold for mixed-use buildings. We shall have to look at it carefully in the light of the responses to the consultation paper.

When the Law Commissioner's interdepartmental working group reported on commonhold, it considered that legislation should not impose restrictions on the use to which buildings in a commonhold are put. The working group believed that if commonhold were restricted to residential properties, problems would arise if a commonhold unit owner subsequently wished to seek a change of use of his premises for business purposes. A balance has to be struck. Again, we shall consider the responses to that proposal.

I am aware that a number of problems have arisen in recent years, particularly with sheltered accommodation, and that they have often been a cause of great anxiety to the tenants affected. However, the launch on 22 October 1990 of the sheltered housing advisory and conciliation service will go a long way towards alleviating some of the

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problems. The service is being funded by a consortium of developers, private management organisations and housing associations. It offers advice about leasehold sheltered housing, including conciliation in the event of disputes arising between residents and their developers or their managing agents. It appears to be working well. I should like the new service to be allowed time to settle down. However, we shall continue to keep an eye on the possible need for action.

Mr. David Martin : That problem has arisen several times in my constituency, particularly when the managing agent is connected with the company that runs the sheltered accommodation. It gives rise to the feeling that there has been considerable abuse, even if it has not actually taken place. I am pleased that the problem is being addressed so robustly.

Mr. Yeo : I am grateful for that intervention. We shall continue to keep an eye on any alleged abuse.

The Government's main response to complaints in the 1980s about the management of leasehold flats was to set up the Nugee committee under the chairmanship of Mr. E. G. Nugee. The committee conducted a wide-ranging inquiry into the management of blocks of flats. It collected evidence of problems and of mismanagement and identified where the main difficulties lay and the solutions that seemed appropriate. The committee's recommendations were implemented as the Landlord and Tenant Act 1987.

The Act introduced the right of refusal and also provided leaseholders who considered that their landlord or managing agent was failing in his duties under the terms of the lease with the right to apply to the county court for the appointment of a manager to take over the running of the block. In extreme cases, the Act entitles long leaseholders to acquire the block compulsorily if the court is satisfied that the landlord has failed in his duties and that the appointment of a manager would be an insufficient remedy. I recognise, however, that this is a lengthy and complex process and is unlikely to be used frequently.

Sir Geoffrey Finsberg : I pressed that issue on the Government at the time. There is no need for the process to be lengthy or expensive. We specified the county court. It would be helpful if the Minister provided encouragement instead of saying that it is a lengthy and difficult process. The provisions are there. In the county court the process is relatively easy. It would be nice if the Minister welcomed and backed it, instead of saying that there are problems.

Mr. Yeo : I did not intend my remark to be interpreted as being other than encouraging the procedure. We are happy for it to be used and I hope that in practice it will be sufficiently simple, but I do not think that every unhappy leaseholder will necessarily see it as an immediate answer to his difficulties.

My hon. Friend the Member for Kensington and other hon. Members argued strongly for giving long leaseholders the right to appoint managing agents. I recognise the attraction of the proposition, but my hon. Friend understated some of the difficulties that could arise. The Government considered giving long leaseholders that right, but accepted the Nugee committee's recommendation that it would blur the lines of accountability between the landlord, his managing agent and the tenant.

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A managing agent is sometimes appointed by the landlord or freeholder to undertake all or some of the duties that the landlord is contracted to carry out under the terms of the lease, but the landlord does not have to use a managing agent.

The Nugee committee concluded that the standard of performance of a managing agent could best be maintained not by giving tenants a right to challenge their appointment or by giving them a hand in their appointment, but by emphasising the managing agent's accountability to the landlord and by placing squarely on the landlord the responsibility for performing his obligations under the terms of the lease. If leaseholders appointed the managing agent, as suggested, considerable practical difficulties could occur if they wished to take legal action against the landlord, who is ultimately responsible for the duties performed by the managing agent and for the satisfactory management of the block. If things go wrong, the leaseholder's main redress is against the landlord, the other party to the lease.

If leaseholders were given the right to appoint managing agents, freeholders would have to be released from some of their obligations or they in turn would be exposed to the problems that could arise from incompetent or irresponsible managing agents. In trying to solve one problem, we should be in danger of creating another. I am sure that my hon. Friend the Member for Kensington recognises that the solution to the problem that he identified is complex and that it must balance the legitimate interests of the leaseholder and the landlord.

If tenants were ultimately made responsible for certain duties, or if they were able to acquire the freehold of a block, there would be no practical difficulties in appointing the managing agent. I shall shortly receive a report on research into the implementation of the 1987 Act, which, by any reckoning, was a major reform that considerably strengthened the position of the leasehold flat owner. I wish to assess the impact of the Act before considering further legislative changes, but if my hon. Friend the Member for Kensington or other hon. Members have solutions to overcome the contractual difficulties of giving leaseholders the right to appoint managing agents, I should be pleased to consider them.

My hon. Friend the Member for Kensington referred to the Leasehold Reform Act, which since 1967 has given the majority of long leaseholders of houses in England and Wales the right to buy the freehold or to extend leases by 50 years. He said that the rateable value limits prescribed by the Act exclude some expensive properties found mainly in Belgravia, Chelsea, Kensington and Westminster. The White Paper which preceded the 1967 Act made it clear that the right to enfranchise would not apply to the most expensive properties. The intention of the Act was to protect ordinary leaseholders, especially in the north of England and south Wales, who were disadvantaged by a leasehold system that worked unfairly against them. They were owner-occupiers in all but name.

When that Act was debated, the then housing Minister said that a line would be drawn by reference to the value of the house so that the benefit of enfranchisement was confined to those in real need. That view has prevailed and successive Governments have not wished to confer the rights of enfranchisement across the board or to apply them to people who live in expensive accommodation. I

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