House of Commons Hansard Debates for 8 Mar 1991

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should therefore need to be persuaded that there are good reasons to change or to abolish the rental-equivalent value limits. I recognise, however, that no huge issue of principle is involved and I shall certainly reflect carefully on my hon. Friend's argument. My hon. Friend also mentioned what he described as the mass purchase by disreputable freeholders of freehold and leasehold houses in Wales and the north of England. He gave a touching description of how he was the unwilling pawn of a series of perhaps unscrupulous property dealers as the head lease of his home was passed from hand to hand. I must say that he seems to have survived the experience pretty well.

There is nothing wrong with ground landlords selling their freehold interest in houses--whether in the north of England, in Wales or anywhere else. The legal position is clear. The respective rights and obligations of a ground landlord and a leaseholder should be clearly set out in the terms of the lease agreement. New landlords do not acquire any additional rights over and above those of the original lease.

I am aware of the practices adopted by some new ground landlords who exercise rights embodied in the terms of a lease in a way that the previous landlord did not and I deplore instances in which landlords seek to enforce leaseholders' obligations in an unpleasant or threatening manner.

Mr. Anderson : The Minister said that he deplores the practice. Does he propose to do anything about it?

Mr. Yeo : Let me develop the point further.

The hon. Member for Worsley (Mr. Lewis) gave a number of examples from his constituency. My hon. Friend the Member for Warrington, South (Mr. Butler) spoke of others--courageously as threats have apparently been made against him by unscrupulous landlords. I should point out to the House that the Landlord and Tenant Act 1927 safeguards all leaseholders against unreasonable charges for consent to alterations, extensions to the property and so on. Similarly, the 1987 Act provides that a landlord cannot require a property to be insured by his choice of insurer unless the lease specifically permits that.

I certainly do not endorse the way in which a minority of landlords conduct their business. I am aware that my hon. Friend the Member for Calder Valley (Mr. Thompson), who is unfortunately not with us this morning, has a number of constituents who have been asked to pay a fee before their landlord will enter into any correspondence with them. That particular landlord even asked my hon. Friend to pay a fee for answers to his letters. Hon. Members might like to consider adopting that practice on their own account, might they not? Unfortunately, the way in which some people choose to conduct their affairs is sometimes extremely difficult to legislate for. Nevertheless, under the Landlord and Tenant Act 1987, landlords have a statutory duty to provide certain information about their identity and the insurance of the property. There are also statutory provisions requiring the landlord to make facilities available for the inspection of supporting documents in connection with the insurance and with any variable service charges that the tenants may be obliged to pay. The landlord is entitled to

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make a small charge for providing photocopying facilities where they are available, but not for providing the information that he is statutorily bound to give.

I profoundly deplore the way in which some landlords attempt to coerce their leaseholders into purchasing the freehold when they do not wish to do so and at a price far higher than they would have to pay under the Leasehold Reform Act. My hon. Friend the Member for Warrington, South referred to that abuse.

The vast majority of long leaseholders of houses who wish to free themselves from the terms of their leases already have the option to purchase the freehold under the Leasehold Reform Act 1967--whether or not the landlord wishes to sell. Moreover, most covenants would disappear with the acquisition of the freehold. The Act sets out the basis for a fair price and disputes can be referred to local leasehold valuation tribunals. I recommend that route to constituents of the hon. Member for Worsley and my hon. Friend the Member for Warrington, South who are long leaseholders encountering difficulties with their freehold landlords.

Mr. Anderson : The Minister has properly set out the possibilities available to leaseholders. But given that many leaseholders will be elderly and wary of consulting solicitors, is not there a case for including with the information that the landlord has to provide to the tenant concerning his identity and insurance information about the right to buy or extend--on the analogy of the rent book, for example? Individuals who would not otherwise be aware of their rights would then be clearly told them and would know whom they might consult.

Mr. Yeo : The hon. Gentleman makes an interesting point. We should like to find ways of ensuring that all leaseholders in that position, many of whom may be elderly and unaccustomed to taking legal advice, have a clear understanding of their rights. I welcome the fact that some local authorities that have disreputable freeholders in their areas have conducted local information campaigns. My Department publishes free booklets that set out leaseholders' legal rights and any assistance in distributing those booklets would be most welcome. Whether it is possible to lay a statutory duty on the freeholder to distribute the information is something which we would wish to consider, but I recognise that the best way to deal with the problem is to ensure that all leaseholders fully understand their rights under existing law.

This has been a useful debate and several relevant and important points have been made. I assure the House that I shall take careful note of them. I have mentioned the difficulties that we believe exist in changing the law of property and the amount of detailed work that we have put into that subject over the past few years.

The most recent legislation in that respect, the Landlord and Tenant Act 1987, has been in force for less than three years. Its impact is only beginning to be felt. However, I am only too well aware that saying that we have done a lot, and saying that change is difficult, can easily be characterised as complacency. I want to conclude, therefore, by making two things absolutely clear. First, we are committed to bringing forward commonhold as soon as possible. It is only a week since

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consultation closed and we still have to take final decisions on details. I can safely say that the version of commonhold that we introduce will tackle the problems which hon. Members have raised. We will not introduce legislation that dodges the issue.

Secondly, commonhold is the priority and over the next few months we shall be concentrating our resources on bringing that forward. However, I assure the House that once we are clear about the shape of commonhold and once we have the results of the research on the 1987 Act to which I referred, we will take a fresh look at the position of those who remain leaseholders and who, for one reason or another, are unable to take advantage of commonhold. I hope that hon. Members will clearly understand that this is an issue which we take seriously and which, as a Government who promote home ownership, we will carry forward vigorously.

12.52 pm

Mr. Donald Anderson (Swansea, East) : The Minister's speech was a gem. He said that the Government take the issue seriously ; they are concerned ; and they deplore the activities of unscrupulous landlords. However, where was the beef? As an afterthought, the Minister referred to the commitment in relation to commonhold, but the kind of problems outlined by the hon. Member for Kensington (Mr. Fishburn) and others have existed during the 11 years that the Government have been in office. I also remind the Minister that the Law Commission working party reported in respect of commonhold in July 1987.

There does not seem to be a sense of urgency about the matter. The Minister's speech was one of those "Rome was not built in a day" speeches. He seemed to say that these are complex issues and that, whenever we tamper with property law which dates back to the middle ages, deep private rights are involved. I contrast that laid-back approach--so laid-back as to be almost horizontal--with the more robust view taken by the Labour Government in 1964, when, after 30 years of Conservative Government, they faced problems that were in many ways no less acute than those facing the residents of mansion blocks in Kensington and other parts of the metropolis.

I concede that they faced a different sort of problem, but for the individuals concerned it is no less acute. South Wales contains estates with row upon row of private terraced houses, often built at the turn of the century. I refer to the Beaufort estates and others in Cardiff, and to similar estates in Swansea and the Welsh Valleys, where there was a groundswell of opposition based on the sheer unfairness and the anguish that was caused to so many of what we in Wales would term "tidy" individuals who found that their ownership and possession of their properties were threatened by the falling in and expiry of the lease.

The Labour Government of the day did not take a laid-back attitude. In 1965, shortly after the election, we introduced a temporary or holding Bill and then the major legislation--the Leasehold Reform Act 1967. I concede that I am the only Welsh Member in the Chamber this morning, but if this debate had taken place before 1967, the Benches would have been crowded with hon. Members representing Welsh constituencies. That shows that, to some extent, the focus of attention has now moved to the

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mansion blocks in the metropolis instead of being concentrated on the smaller terraced houses of south Wales.

Nevertheless, it was a major battle. The names of those involved belong on the roll call of the great. My hon. Friend the Member for Norwood (Mr. Fraser) was very involved. Sam Silkin, whose Parliamentary Private Secretary I was between 1974 and 1979, had a total commitment to this issue and did a remarkable job, helped by Leo Abse, who also was a solicitor and who used his own professional competence and knowledge, and added to the campaign led by those such as George Thomas, who became a distinguished Speaker of this House. We won what I suppose would now be called "the mother of battles" in that 1967 Act.

The battle having been largely won, what we are now faced with in south Wales and, I am confident, in several of the older industrial areas, is a mopping-up operation to solve the residual problems that were not tackled at that time, when attention was focused on the problems of the less prosperous individuals who occupied the properties that I have described. The reform was designed as a staged process.

The problems that now come to me in my mail bag derive from the activities of the unscrupulous landlords who were described in the remarkably good and comprehensive speech of the hon. Member for Warrington, South (Mr. Butler), who hails, I believe, from south Wales and who therefore has some personal knowledge of such matters. The starting point in property legislation, the law of landlord and tenant, and the related law of the ground landlord and his tenant, is that the public interest must be to ensure that we hold the balance between the stronger and the weaker elements. Almost by definition in this area, the tenant is likely to be the weaker of the two parties. Although I accept that there are also thoroughly unscrupulous tenants, the law must seek to intervene to protect tenants from the unscrupulous activities that have now come to light.

The hon. Member for Warrington, South mentioned Castlebeeg Investments (Jersey) Ltd., which has offices in Jersey, and which tends not to reply to letters from either Members of Parliament or those writing on behalf of tenants. For time reasons, I shall not repeat all the types of exploitation that are practised--they have already been mentioned by the hon. Gentleman- -but they include the insurance fiddle, in which the landlord's only interest is that his rights are adequately ensured.

Surely the landlord has no right to insist that a named insurer has the policy, but if the right for the landlord to nominate is included in the original lease, that remains the position. Surely that is wrong in principle. I accept, of course, that the legitimate interests of the landlord must be safeguarded, including insurance arrangements, extensions and adaptations.

I was recently involved in a case--I shall not give names, for obvious confidentiality reasons--in which an ordinary family of no great wealth in my constituency, wished to improve their leasehold property--to add an extension or make an adaptation. The family found--this was a Castlebeeg case--that it was difficult to get the consent of the ground landlord. Subsequently, the ground landlord insisted that his valuers or surveyors should go to the property. That added substantially to the costs of the leaseholder, who was seeking only to improve the

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property, which for most purposes was his. The extension was to add to the value of the property and thus provide greater security for the landlord.

Where there are disputes about insurance, extensions or adaptations, it should be possible to set up a simple and flexible procedure to deal with them. Perhaps the procedure should be on the lines of the leasehold valuation tribunals, which are effectively rent assessment committees in another form.

The tribunals have proved their effectiveness over the years in providing a simple remedy for the tenant. It may be that the same cheap and flexible arrangement could be provided to hold the balance between landlord and tenant in the sort of dispute to which I have referred. It is suspected that landlords, by actions which include adding to the professional fees of related companies, which perhaps they own, increase--improperly, in my judgment--tenants' costs. I have already mentioned adding to the statutory obligations that fall on ground landlords by making clear to tenants the nature of their rights. Surely that would not be difficult. Ground landlords are already under an obligation to provide the tenant with the name of his landlord and the name of the insurer. Surely it would not be difficult to make it clear to the tenant in an appropriate way that he has the right to buy or the right to extend and that he, the tenant, may wish to seek advice. There are statutory terms that apply to rent books and no great imposition would result in an extension of such terms. No reasonable ground landlord would be harmed if there were a requirement that the statutory rights of the tenant were to be made clear to him or her.

The Minister has conceded that, in south Wales, the generality of tenants tend to come from the less prosperous parts of the community and live in two-up, two-down houses. These are people who are often frightened to take professional advice from solicitors, for example. They would feel worried about adding to their costs. They should be informed of their statutory rights in the recognition that, in terms of the balance of power, property companies are allowed now to exploit and not to reveal.

Perhaps a flexible approach would be to add to the responsibilities of the leasehold valuation tribunals, which have proved highly effective, by giving them the task of resolving disputes in areas where the more unscrupulous landlords will seek to exploit tenants. When a Bill is considered to take up the greater issue that has been outlined by the hon. Member for Kensington, who is my Member--I shall not say which way I vote-- and who follows in the distinguished footsteps of the late Sir Brandon Rhys Williams, I hope that note will be taken of the arguments that have been advanced today. I am delighted that the mantle of Sir Brandon has fallen on a gentleman who is prepared to take up those issues.

I hope that, when a Bill dealing with commonhold and related matters is introduced--I anticipate that it will be my party that does so--included in that will be additional protection for the sort of tenants that I have described in south Wales and in the older industrial areas.

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1.5 pm

Mr. Lewis Stevens (Nuneaton) : I congratulate my hon. Friend the Member for Kensington (Mr. Fishburn) on selecting leasehold reform as the subject of today's debate. It is a matter of great interest to him, and he has done a great deal of work on it. I also congratulate my hon. Friend the Under-Secretary of State on giving a commitment that the Government are prepared to bring forward a Bill in, as I understood his words, as short a time as possible. My hon. Friend also said that he accepted the principle of compulsion and that the leaseholders of flats should have the right to purchase freeholds in some form or another, depending on how the Bill is drafted. That is, perhaps, the most important point for leaseholders who may wish to purchase the freeholds.

However, my hon. Friend the Under-Secretary of State expressed reservations about the availability of parliamentary time, how long the Bill would take to go through the House because of its complexity and the possibility of an election this year, or definitely next year. If we adopted the right approach to a Bill, it would be much easier to get the primary legislation through Parliament--it would be enabling legislation--than it would be if we tried to incorporate a great amount of detail in the Bill, as that would delay it both in its drafting and in Committee. I urge my hon. Friend to introduce such an enabling Bill in this Session or certainly early in the next Session.

The principles that have been expounded this morning appear to have common support across the Chamber, so I am sure that an enabling Bill would go through its stages without too much difficulty. Some of the difficulties and complexities could be dealt with through regulations at a later date. That has happened with some Bills over the past 15 years and it has proved to be successful. I urge my hon. Friend to consider that suggestion.

Dealing with leasehold reform has been delayed time and again, although it has certainly not been neglected--far from it. The subject has been of interest to individuals and to the Government. Many leaseholders, especially those in London, have long been expecting some action. The issue has been raised by hon. Members, by people outside and by various organisations. It is inevitable that something must happen, but the question is when. The speeches so far, especially that of my hon. Friend the Member for Kensington, have been responsible ones. Hon. Members have set out in considerable detail the problems and how they should be resolved, although it has perhaps not been stated firmly enough that some landlords exploit the leaseholders, either directly or indirectly by also being the managers of the flats. Many people are left with a feeling of great insecurity and uncertainty.

People purchase flats for reasons that suit them at the time. It may be the cheapest way to purchase a property, but people seldom realise how high charges can be through no fault of the leaseholder, who has virtually no control over them.

An increasing number of large and not so large houses in our cities are being converted from single occupancy properties to flats. Leaseholders' difficulties vary widely. In large blocks of flats, leaseholders' organisations are fairly well organised. If the flats have long leases, the block is likely to be well managed and the charges, which often depend on the district, are often reasonable, although rarely cheap. With the increasing number of houses being converted into flats, there is more and more scope for

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managers and landlords of the freehold property to exploit leaseholders. That is another reason for the need to introduce reforms as quickly as possible.

I shall not comment on some of the other fears that have been expressed today but shall concentrate on the subject of flats. I foresee problems in the mechanism whereby leaseholders have a right to purchase a freehold. I agree that they must have that right, but am unsure how matters can be brought to arbitration. Under the leasehold system, there already exists a possibility of arbitration when people wish to buy a freehold. We must define at an early stage how arbitration can function effectively, cheaply and quickly. It is often neither cheap nor quick to achieve a resolution.

If a majority of leaseholders want to form a commonhold association, it is relatively straightforward--provided that they can agree on the price--to define how that price will be shared by each purchaser. What about those who do not want to purchase the freehold at that time? Although the freeholder would remain in control of the other freeholds, or their equivalent, he might not wish to do so, perhaps for economic reasons. In order for the landlord to sell the freehold, will he have to sell the freehold of each flat in a block at the same time? That could create problems unless guidelines were laid down in legislation or regulations on the limit to the number of freeholds that the commonhold association could purchase. There might be a block of shares in the freehold, which the leaseholders did not want to purchase but which the landlord wanted to sell. I am worried about how the simple concept of a leaseholder having the right to purchase a freehold will affect a commonhold association.

Sir Geoffrey Finsberg : We could easily deal with that problem. A block in my constituency was owned by the Church Commissioners. I persuaded them not to sell the block to an offshore company but to sell it to the tenants. The tenants who did not wish to buy remained as tenants of the new company which was owned by the others and they paid a fair rent, laid down by the rent officer. They had a choice--they could buy or they could remain as tenants. That is a simple solution, which would take the Department only five minutes to put into law.

Mr. Stevens : I am grateful to my hon. Friend. That is an excellent way forward.

People feel insecure because of the dwindling value of their asset as leases run down and because of exploitation by landlords and managing agents. Tenants are not given fair protection under the existing law. The sooner we have a new set of conditions for the development of commonhold, the better. It is not just a choice. To protect leaseholders, it is imperative that we have such a law. 1.15 pm

Mr. Matthew Carrington (Fulham) : I, too, congratulate my hon. Friend the Member for Kensington (Mr. Fishburn). As well as being immensely fortunate in winning the debate, he has campaigned tirelessly to promote the cause of commonhold and leasehold reform. He took on the mantle that was nobly worn by his precedessor, Sir Brandon Rhys Williams, who was a dear friend of mine, and I am glad that he fights as valiantly for his constituents as Sir Brandon did. The constituents of my hon. Friend the Member for Kensington have similar problems to my constituents. We

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have neighbouring constituencies, although they touch only at the north-eastern corner of my constituency and the south-western corner of my hon. Friend's constituency. There are the same patterns of occupancy, the same types of mansion block and the same types of conversion of large houses into flats, the latter having gone on since the war.

The leasehold problem is common to west London--indeed, as we heard in the debate, common to the whole of London. It is becoming increasingly urgent, because many mansion blocks that were built in the late 19th century and the early years of this century were originally let to tenants under some form of short-term tenancy. In my constituency and in Kensington, those blocks were converted into leasehold property in the 1950s, 1960s or as late as the 1970s. On the whole, that property was let on 99-year leases and the remaining years left on the leases are causing doubts about the ability to remortgage the properties if they are sold. Those doubts figure large in the minds of the leaseholders who own them.

There is also a problem with mini-conversions. Conversions of large properties in my constituency started after the war. The properties were let by leasehold. Sometimes, there were as many as five flats to a house, but occasionally there were just two, the upstairs and the downstairs flats. That process still goes on. It is happening--this point has not been mentioned in the debate--because of right-to-buy legislation. A new group of people are becoming leaseholders in conversions and in blocks of flats which were originally council flats.

I am glad that my hon. Friend the Under-Secretary has made an encouraging commitment to rapid progress in implementing the results of the consultation exercise on commonhold carried out with the Lord Chancellor. My constituents will be grateful for such a commitment and my hon. Friend will have my strong support in making progress as fast as possible.

Because it is impossible to remortgage a property that has less than 60 years of its lease remaining, it is made difficult for the existing leaseholder to realise a price that compensates him for what he originally paid for the property. The price falls dramatically the shorter the length of the lease remaining, with a lease of 30 years producing a marked discount in comparison with one of 60 years. That is the reverse of what one normally expects in the property market in which, over a period of time, the value of property normally increases at least as fast as inflation.

The freeholds of blocks of flats or of converted houses are often bought by people, not with the intention of becoming responsible landlords or of obtaining a return through ground rent and the management of the building, but because they are increasingly interested in the flats' reversionary value at the end of the leaseholds. Blocks where leases have been let at different times, and where the leasehold drops in over a period of some 20 years, say, at the rate of a few flats per year, make an interesting business proposition.

It is often in the freeholder's interest not to maintain the block but rather to drive out existing leaseholders so as to obtain vacant possession, with the intention of selling it on or of redeveloping the property. The freeholder ceases to have an interest in protecting the property and the block may consequently become run down. That is seen increasingly in my constituency and, I suspect, in that of my hon. Friend the Member for Kensington.

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As leases become shorter, leaseholders also take less of an interest in maintaining their property than they would if they were the owners of a freehold. The consequence is a spiral of decline in the building's fabric and maintenance, which is detrimental not only to its future but to the community at large. Commonhold is the right way of addressing that problem.

Mention has also been made of the rogue freeholder, who attempts to exploit leaseholders by forcing up service charges and terrorises them by using other methods of legal and quasi-legal manipulation, in order to extract every last penny. The Landlord and Tenant Act 1987 is helpful in dealing with such persons, but it works best where there is co-operation between the freeholder and leaseholder. Where there is an active obstruction by the freeholder to implement its provisions, it may be necessary to initiate legal proceedings. They can produce a satisfactory outcome and, because of county court provisions, may not be as expensive as leaseholders fear. Nevertheless, that course is one which many leaseholders are reluctant to pursue.

Commonhold would be beneficial to all and particularly to responsible freeholders. I am sure that they would be delighted to see a proper price paid for their freehold, to reflect the true value of the building. It would also get them out of all the problems of managing a block of flats. Given that freeholders are being paid off at the market rate, I believe that commonhold would be attractive to them and to everyone's advantage. Also, that is a way to get around the problem of extending reducing leaseholds, which would become automatic with commonhold.

I strongly support the provision that if compulsion is to exist to enable leaseholders to insist that a freeholder sell his freehold--as I believe it should--a free market valuation that is satisfactory to both parties should be made by an independent valuer.

Alternatively--that is the usual wording in these matters I believe--a valuer could be appointed by the president of the Royal Institution of Chartered Surveyors. There are all sort of mechanisms for agreeing a price in such transactions and that provision would properly protect the rights of the freeholder.

I strongly support the introduction of commonhold. It is the way forward and it is long overdue. I hope that legislation will soon be introduced to enable it to happen.

At what point do we allow leaseholders to insist on buying the freehold? One suggestion is that it should be, when leases have only 60 years left to run, but in my view that is too long. In many cases, 60 years would not solve my constituents' problems and I should like the limit to be as low as 40 years. A great deal of thought needs to go into deciding what period is right and what consultation is necessary.

How many owners of flats would have to be in favour of buying the freehold of the block for that to proceed? I understand that the Consumers Association has suggested 80 per cent., and 75 per cent. has been suggested this morning. I think that 75 per cent. might be too great, provided that proper provision is built in to protect the rights of leaseholders and tenants who do not wish to participate. It seems to me that a resident, as opposed to an absentee landlord, is of substantial benefit to everyone. If the limit were 75 per cent., the freeholder would have a real ability to block sale of the freehold by keeping control--through tenancy or vacancy-- of a sufficient number of flats.

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I should like the percentage to be more flexible. For example, in a terraced house that has been converted into two flats, as is frequently the case in my constituency, there would have to be a choice of 50 or 100 per cent. That may be an extreme case, but in that situation it seems to me that the figure should be 50 per cent., rather than requiring unanimity between tenants. There is a case for flexibility, perhaps depending on the number of tenants and I commend that to my hon. Friend the Under-Secretary.

It is important that the right protections are built in for tenants and that can easily be handled within this legislation. Having said that, everyone's rights need to be protected. It is essential that leaseholders are given control so that they can insist on managing their own blocks and are able to take on the freehold, perhaps through some sort of commonhold.

I congratulate my hon. Friend the Member for Kensington and I end my speech with the wish that this legislation proceeds as soon as possible, ideally before the end of the next Session.

1.28 pm

Mr. Hugo Summerson (Walthamstow) : It is pleasant to be able to take part in this most interesting debate on a truly fascinating subject. The origins and the basis of property law go back centuries and we must be careful when we think of changing that law. By filling in one pit, we have to ensure that we do not dig another. I congratulate my hon. Friend the Member for Kensington (Mr. Fishburn) on his good luck in coming first in the ballot for private Members' motions. I also congratulate him on the tenacity with which he has pursued the subject. Last year--or possibly even the year before--he managed to persuade me to be a sponsor of one of his Bills, which takes some doing. It shows that he also has great powers of persuasion.

I have taken a great interest in the subject for a long time. I must declare several interests. I am a fellow of the Royal Institution of Chartered Surveyors, a member of the Royal Agricultural College, the chairman of a firm of mortgage and insurance brokers and the director of a company whose sole asset is a number of freeholds of small blocks of flats. So I am supposed to know something about it.

In 1989, I introduced a Bill under the ten-minute rule which called for a standard form of lease. That subject causes a tremendous amount of ill odour. A person wishing to buy the lease of a flat goes to his solicitor, who may discover a problem if, for some reason, the lease is not in the correct form and, as drafted, will not be acceptable to a building society. I experienced that problem.

I bought a small flat in Westminster about three years ago. It was handy for the House, but it was a mere shoe box with a 70-year lease. I bought it when I was still a bachelor and my wife soon ensured that I got rid of it. She said that she was fed up with tripping over me every time she went in.

Before I bought the flat, my solicitor said that the lease was incorrectly drawn and must be changed. To change it, my solicitor had to contact the freeholder, who was a foreigner. I do not know where he lived, but it was not in this country--and perhaps not even in Europe. He lived thousands of miles away, so my solicitor had to contact his

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solicitor and we all know that such cases always benefit the legal profession. My solicitor talked to his solicitor and after much toing and froing and much correspondence, because he could not be found immediately, he was tracked down going walkabout in Australia near Ayers rock. It took a long time and the freeholder then said that he was going to charge me for changing the lease. He charged me about £2,000, which was a wholly undeserved windfall for him.

The original solicitors who drew up the terms of the leases nearly 30 years earlier had made a mistake. It seemed extraordinary that the freeholder should be able to benefit from that mistake and that it should redound to his benefit each time a flat in the block was sold. Prospective purchasers and their solicitors had to go through the same old routine and every time the freeholder collected £2,000. That is a disgraceful state of affairs which does not reflect well on the legal profession.

Having delivered myself of that, I congratulate the Lord Chancellor's Department on having drawn up its excellent consultation paper. It is large and heavy and contains a lot of paper, which shows that a lot of work has gone into it. As I said, when we are thinking of changing property law, it must be done properly. The consultation paper is well considered and well thought out. I have some reservations about the complexity of the proposed legislation, but it can be sorted out.

The period for consultation has just closed. I do not know how many people wrote in with observations on the consultation paper, but I hope that many did. I hope that we shall have a chance to debate it in future. I am very glad that we have the basis for new statute law and I look forward to a full-scale debate on it.

Some of the big estates were mentioned earlier, especially the Grosvenor estate. My hon. Friend the Member for Kensington told us that he lives on that estate. He will agree that in many respects, it is a model for the management of urban property. It is thanks to the Grosvenor estate that many parts of London are so beautiful and so appreciated, not only by residents, but by visitors. On the whole, the Grosvenor estate has done a good job in preserving the appearance of some of the most important parts of our capital city.

However, it must be said that there are problems not only on the Grosvenor estate, but in other places because leases, by definition, decline in years. That may not be such a problem on the Grosvenor estate, where a lease for a flat with only two or three years left to run still has considerable value. The lease of a flat with 40 years to run is expensive. Until the great crash of 1989, it could be said that the values of leases were increasing despite the fact that the number of years on those leases was declining. That happens only in isolated cases with estates such as the Grosvenor estate which will always be in demand.

The case is different in other areas. As the term of the lease declines, its value declines. People start to experience all the problems that go with leases that are declining in years and in value. They will probably not be able to find a purchaser, because building societies will not grant a mortgage. Other hon. Members have mentioned those problems.

In Walthamstow, several blocks of flats suffer from that problem. Leases for some purpose-built flats--not conversions--that were originally long are now down to 25 years. The elderly people who live in those flats suddenly find that although they thought they had

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something of value, they do not. A 25-year lease has some value, but it is difficult to realise. No building society will grant a mortgage on a lease that has only about 25 years left to run. People find it impossible to realise the value of the equity and are in serious difficulties.

The problem is compounded by the fact that the freeholders are not performing as they should. In the case that I have in mind, the freeholders are the Freshwater group. Hon. Members have mentioned the names of other freeholders and the Freshwater group is another notorious freeholder in the London area. Constituents have come to me to complain about some of its practices, such as unitemised bills, bills coming out of the blue which are wholly unrelated to any of the usual quarter days, bills that do not comply with statute and bills that are remarkable not only for their lack of detail, but for their size. A bill will arrive which merely says, "Maintenance--£500", or whatever. That is against the law, as we all know, but it does not stop the bills arriving. Many elderly constituents are driven almost to distraction by such practices by unscrupulous people.

Even if commonhold legislation were established, there would still be a problem. The current lessees would have to purchase the commonhold, given the obvious difference in value between a 25-year lease and what is effectively a freehold. The problem could be solved by a provision allowing the assumption, on the sale of a lease of, say, 50 years, that that lease had 99 years to run. In such circumstances, rather than the entire "marriage value" going to the freeholder, a goodly proportion could go to the leaseholder, who would then be able to realise a reasonable amount of his equity on the sale of the property.

I listened with interest to what the hon. Member for Worsley (Mr. Lewis) had to say about leasehold houses. The original idea was that, on the sale of houses with long leases, estates built in the 1950s, 1960s and 1970s could be managed as estates, for the benefit of the residents. I do not believe that any greedy motivation existed then ; it was hardly worth while to collect £10 a year in ground rent from 200 houses, given the high costs of collection. Requiring all the lessees to insure with a specific company would guarantee that the amount insured was appropriate to the houses concerned. It would not have done the estate any good if a house had burnt down and proved to have been under-insured : the presence of a gaping, blackened ruin in the middle of the estate would have had a detrimental effect on the values of the other houses.

Similarly, I doubt whether the requirement for a freeholder to give the go- ahead for improvements constituted an attempt to obtain £100 here for the building of a garage and £100 there for the building of a conservatory. The aim was probably to ensure that any extensions, or insertions of dormer windows in the roof spaces, were carried out in accordance with the character of the estate. Such additions were intended not to stick out like a sore thumb, or to destroy the rhythm of the estate and thus affect its value. It is unfortunate that such good intentions have been so manipulated by unscrupulous people, whose actions have led to cries for help from lessees--cries to which we must listen.

The problem of mixed hereditaments has been mentioned, but only in passing. When, for example, a shop has a flat over it, or several flats--perhaps with part of the building serving as an office, with a garage below--there is a danger that a mixture of tenure will result. To have a

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freeholder, leaseholder and commonholder all working in the same building would be a recipe for chaos and possibly for disaster. We must be very careful before we go down that road.

The lease system works well with commercial properties. It is not, I believe, intended that the leases of commercial property should become commonhold. The landlord and tenant system works perfectly well in commercial buildings under the aegis of the Landlord and Tenant Act 1954. It is one of the better Acts relating to property. It is well understood and it governs the relationship between landlord and tenant, to the satisfaction of both parties. Some years ago I regularly attended property auctions. What fascinating occasions they are. All sorts of extraordinary- looking people make bids for property. The sale of ground rents has always been popular. At an auction that I attended 10 or 12 years ago the freehold of a house in Kensington was offered for sale. The house had been turned into two or three flats. The leases of the flats were due to expire in about 70 years. The freehold of that property was sold on a year's purchase of only £50. That sale stuck in my mind. Ever since I have regretted not buying the freehold. I bet the lessees regretted even more not buying it. The 1987 Act has put that right. I commend the Government for it. As its provisions become better known, I hope that more and more lessees will realise that they can buy the freehold of the building in which they have flats.

One might ask why anybody should want to buy the freehold of a building that has been turned into flats which have been sold on long leases. The best example that I can give is that of a small property company based in south Kensington. Unfortunately, I do not know its name. In the 1950s and 1960s enormous houses in that area were turned into flats and sold. The freeholds had little value, particularly as the ground rent amounted to only £5 or £10 a year. That dozy little property company bought many of the freeholds in the south Kensington area. Ten or 12 years ago it suddenly discovered that, due to property prices increasing sharply and the length of leases having come down to 70, 50 or 60 years, it was sitting on a gold mine. Consequently, the company has sold extensions to leases and made a killing, not because the people who run the company are particularly able, but because they have been able to exploit this aspect of the leasehold system.

It is possible to gain income other than ground rents from these investments. One can gain income from management charges and from collecting a percentage of the cost of work carried out to a building. Insurance commission has been mentioned. Some people buy only the freeholds of blocks of flats that have flat roofs in the hope of obtaining planning permission to build so-called penthouse flats on top. Others like to buy blocks of flats in extensive grounds so that they can build garages. We must bear in mind the factors that affect the values of blocks of flats.

We have heard much about short leases. We must remember the advantages of short or comparatively short leases. For example, a foreign business man who is working in this country for five years can buy a 20-year lease on a flat, at the end of which, particularly in central London, he will have an asset to sell. In addition, despite the lease running for 15 years instead of 20 years, it may increase in value.

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A further advantage of the leasehold system is that sometimes a freeholder, especially a responsible freeholder, can exert pressure on recalcitrant lessees. Property maintenance is expensive. The provisions of the Landlord and Tenant Act 1987 must be complied with, but some lessees cavil at having to spend money on maintenance and others will complain down to the last penny. Sometimes it is an advantage for a freeholder to be able to say, "Here are the provisions on the maintenance of the property, as set out in the lease. We are bound not only by the terms of the lease but by statute to carry out these necessary works." Compulsion can be valuable, but it would not be as strong under commonhold.

The arrangements whereby the freehold to a block of long-lease flats is owned by an association of lessees can work perfectly well, but from time to time a lessee will dig his toes in and say, "I do not care whether the maintenance is essential, I shall not contribute to the costs." That places the freeholder, the managing agents and, perhaps worst of all, the other lessees in a difficult position. They may know perfectly well that the block needs essential maintenance, but it is delayed by one or two people who simply say no. I realise that they may be unable to afford to contribute to that maintenance. In that respect, the leasehold system is inferior to the freehold system. If one owns the freehold of a house and the roof starts to leak, one can say, "I cannot afford to repair it this year, but I can afford a bucket. I will put the bucket under the leak and when I can afford to repair the roof I will repair it." Lessees do not have that luxury and that is certainly a disadvantage.

I have spoken about the compensation arrangements that would apply when lessees took over from the freeholder and set up a commonhold. If compensation is to be paid--and it will be--it must reflect the element of compulsion. We all know that there is difficulty with the channel tunnel and the main line to London. One may ask, "What on earth is the connection?" The connection is that someone whose house is acquired compulsorily at market value only will be much less happy about it than someone who is paid compensation based on the French model, which is very generous. Such compensation would make it easier for someone to give up his home. I suggest that if there is an element of compulsion--we shall have to wait to see what the legislation says--it should be reflected in the compensation that is paid.

We have had an interesting debate on an interesting subject. I think that commonhold will come and we must take every care possible to ensure that it works. When we have done that, I am sure that it will be to the advantage of most people who live in flats. 1.56 pm

Mr. John Bowis (Battersea) : I shall speak briefly and belatedly. I apologise to my hon. Friend the Member for Kensington (Mr. Fishburn), to the Minister and to the Opposition Front-Bench spokesmen for having been delayed by meetings both inside and outside the House. I welcome the opportunity that my hon. Friend the Member for Kensington has given us to discuss this subject, which is important to people in many parts of the country--not least in London. I represent a constituency where there is block after block--mansion blocks, tower blocks--you name them, I have them. The problems that could be

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solved by a commonhold policy are self- evident. However, I am talking not just about blocks, but about one-up, one -down conversions, where people have difficulty controlling the destiny of their own homes. Over the past few years, we have moved towards much greater self-help and collective independence for people living in blocks. We have seen co-operative movements emerge from local council blocks and I hope that, with commonhold, the same will apply to private leaseholders.

We have numerous problems in Battersea. As my hon. Friend the Member for Walthamstow (Mr. Summerson) said, some residents cannot get works done because there is difficulty in reaching agreement. The other side of the coin is that residents may object to unnecessary work being done by the freeholder and charged to them. They do not have control over their destiny. I have received letters from tenants who have had unnecessary work done to their homes at exorbitant cost by firms that arrive at unreasonable hours of the day and sometimes even at night. Such problems cannot be overcome without some help and I understand why the reform is needed. However, when an offer is made and the leaseholders are willing to purchase the freehold, the freeholder often sets the price so high that that is not feasible. I welcome the commitment of my hon. Friend the Minister. Commonhold is the way forward, although I ask that we should examine carefully the needs of elderly people living in such properties who may be frightened by the notion of compulsion. Compulsion may well be right, but we need to examine their circumstances carefully and ensure that their requirements are properly catered for in proposals which, in broad terms, will benefit all the residents.

As we consider commonhold, I hope that we shall also examine the present system of passing the freehold on to subsidiary companies. When that happens there appears to be no requirement to consult the residents of the flats or the estate. That is unreasonable. I commend my hon. Friend the Member for Kensington for raising the issue and I commend my hon. Friend the Minister for making pledges. There is virtual unanimity in the House about the proposition that an Englishman's home should become a commonhold castle rather than a feudal one.

2 pm

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