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Mr. Deva: The hon. Gentleman says that the Conservative party is against the measure because it does not want to upset large landlords. But as the scheme is voluntary, how can the hon. Gentleman make that assumption?
Mr. Raynsford: Plainly, the hon. Gentleman has not been listening closely to what I have said: the Conservative party is not prepared to introduce a scheme involving an element of compulsion which will enable leaseholders to transfer from existing leasehold properties to commonhold properties, because that would threaten large landowners to whom the hon. Gentleman's party is still financially beholden.
David Marcus makes another valid point about the lack of reference to experience elsewhere. In Australia, the strata title system has been operating for many years with considerable success. One had hoped that those responsible in the Lord Chancellor's Department for
drafting proposals for the commonhold system, which operates on similar principles to strata title, would look closely at the Australian experience.
One of the conclusions to be drawn from that experience is that an appropriate body to provide advice and help with the resolution of disputes about the establishment and operation of strata titles is essential.I can see no provision in the Bill for such a service, and the only body that provides expert specialist advisory services in this field, the Leasehold Enfranchisement Advisory Service, has no guarantee of funding beyond the end of this year. I hope that the Minister will tell the House how he expects the need for advice and assistance on the resolution of disputes will be handled. I assume that his Department would neither welcome nor be equipped to handle the scale of inquiries that are likely if commonhold takes off as a viable tenure. The Australian evidence suggests a figure of about 20,000 inquiries a year on issues relating to strata title.
Clauses 3 and 5 give the Lord Chancellor's Department extensive powers to make rules and regulations. Although it may be sensible to have some of the detailed provisions--in particular, those regulations that may need to be varied in the light of experience--made by order rather than included in primary legislation, that in itself has probably helped to keep the Bill down to a manageable size compared to some of its draft predecessors. Nevertheless, it would be helpful to have an indication of how these powers will be used. Will the Minister outline the scope and main features of the commonhold constitution rules that will be made under the provisions of clause 3 and of the regulations that may be made under clause 5?
Will the Minister clarify one of the provisions in clause 16 on the recovery of service charges? That clause specifies that service charges are recoverable from the owner of a commonhold unit, or from the person who is registered as the owner where ownership has not yet been changed on the register, or from the person who is a tenant under a long lease of the unit.
Although I understand the first two provisions, which cover the owner or the previous owner, I am puzzled by the reference to a leaseholder. As I have stressed, the Bill appears to require 100 per cent. unanimity before a commonhold can be set up and specifies that only owners of units within the commonhold can be members of the commonhold association.
How, then, do leaseholders come into picture? If it were possible to convert from leasehold to commonhold with less than 100 per cent. participation, we could envisage circumstances in which some residual leaseholders might remain, but that is not provided for in the Bill. If the Bill envisages the prospect of leaseholds being created by owners of commonhold units, surely, over time, that should undermine the integrity of the commonhold.I would welcome clarification on that point.
We would want to consider further other points of detail if the Bill were to progress to Committee, but I fear that that will not happen. Although the Bill is welcome in so far as it raises the issue of commonhold--a form of tenure that we view as an appropriate framework for home ownership in flats--unfortunately, as presently drafted, it is not the right way forward if we want to open the door to a significant number of commonholds.
The hon. Member for Hastings and Rye should be congratulated on having raised the issue. In doing so, she has helped to reinforce the case for a thoroughgoing range of leasehold reform measures. Unless substantially amended, however, the Bill would not be the right vehicle in the long term for a thriving and successful commonhold sector, replacing leasehold as the main tenure for owner-occupied flats.
The Parliamentary Secretary, Lord Chancellor's Department (Mr. Jonathan Evans):
In the short time that the hon. Member for Greenwich (Mr. Raynsford) has left me to respond to the debate, I begin by congratulating my hon. Friend the Member for Hastings and Rye(Mrs. Lait) not just on her success in introducing this important matter today, but on the manner and content of her speech. She demonstrated that, in dealing with complex property law issues, she had a command of detail and could convey the essence of the Bill's proposals.I commend her for that.
I was pleased to note that speeches were made by a number of my hon. Friends. They included my hon. Friends the Members for Chipping Barnet(Sir S. Chapman), for Kensington (Mr. Fishburn), for Edmonton (Dr. Twinn), for Beckenham (Mr. Merchant), for Twickenham (Mr. Jessel), for Croydon, North-East(Mr. Congdon), and for Brentford and Isleworth(Mr. Deva).
I wish especially to single out my hon. Friend the Member for Kensington. He referred to his illustrious predecessor, Sir Brandon Rhys Williams. I am pleased that the bouquet was given to Sir Brandon. My hon. Friend will be unaware that my first experience in politics was as a schoolboy campaigning for Sir Brandon when he fought against Michael Foot in the by-election following the death of Aneurin Bevan. Sir Brandon played an immense part in the House. My hon. Friend has lived up to that in his time here.
Let me make the Government's position clear. They are firmly committed to the implementation of commonhold. As my noble and learned Friend the Lord Chancellor reaffirmed in the other place less than two weeks ago, it remains our firm intention that appropriate legislation should be introduced as soon as possible. Before I outline the steps that are being taken to advance the implementation of commonhold, it would be helpful to remind hon. Members of some of the background to the issue, most especially because of some of the comments on the period that has elapsed since the concept was first introduced.
In a nutshell, the purpose of commonhold is to provide owners in multi-occupier developments with the means of owning the freehold interest in their homes and, at the same time, to furnish them with a system for the efficient management of the development. That will have the dual
advantages of affording owners a measure of control and security that is often believed to be lacking in long leasehold developments, although avoiding the difficulties of so-called "flying freehold" schemes. The emphasis of the commonhold system will be on co-operation between owners in the development that forms the commonhold. So long as the commonhold continues, the owner of each unit is the freeholder, and the commonhold will be managed by an association comprising the unit owners.
The commonhold association will own any common parts and will be responsible for their repair and maintenance. That will be financed by a service charge payable by the unit owners. In certain circumstances, it will be possible to bring the commonhold to an end, in which case the ownership of the unit will automatically be converted into a share, fixed in advance, of the ownership of the entire property within the commonhold. Statutory rules will govern the conduct of the commonhold association and the rights and obligations of the unit owners in relation to each other.
Clearly, the success of any multi-occupied building or development will depend on the existence of a satisfactory and enforceable regime of mutual rights and obligations between the people who live in it. However, that is not provided by the present law governing the ownership of freehold land. It is, of course, possible for the subdivision of a building to be organised by means of a leasehold structure, and there are doubtless many developments that operate on a perfectly satisfactory basis, especially where the tenants also have effective control of the freehold estate by means, for instance, of a jointly owned management company.
Neither commonhold nor any other form of land tenure will ever eradicate the possibility of disputes between neighbours, as we have been reminded during the debate. However, commonhold can have considerable advantages over the leasehold system.
The first and most obvious advantage of the commonhold system is that it will enable people to own the freehold in their homes in developments that would otherwise necessitate a leasehold structure. People naturally resent what they regard as the temporary nature of ownership that a lease confers in a property for which they regard themselves to have paid full value--an observation made by my hon. Friend the Member for Croydon, North-East. People also resent having to pay a ground rent, which may be high, seemingly for nothing. In addition, there is no such thing as a standard lease. The wide variation in lease terms presents pitfalls and uncertainties for an intended purchaser, and does nothing to simplify or reduce the cost of conveyancing.
Furthermore, a lease is a declining asset and leases that are coming towards their expiry cease to be mortgageable. The security of a building society or of any other lender ultimately rests on its ability to sell the mortgaged property and to recoup the amount owing to it. Lenders rightly act with caution in advancing mortgage funds. Typically, a lease that has less than 40 to 45 years to run will frequently not be regarded as satisfactory security for a loan. It also follows that, where a lease is nearing expiry, the value of the interest that it confers will diminish. Those problems will not apply to the ownership of a unit that is a commonhold.
A further advantage is that the commonhold system will automatically provide a statutory framework of rights and obligations which is directly enforceable by and
against each unit owner in the commonhold and which will be standard from one commonhold to the next. The unit owner's position will no longer depend on the vagaries of the terms of the lease under which the property is held or on the willingness of the landlord to co-operate in enforcing the unit owner's rights.
As my hon. Friend the Member for Hastings and Rye has pointed out, one major problem with leases is that important decisions on repairs and on the provision of services are often left in the hands of landlords whose interests may be opposed to the interests of the tenants. That tension can be exacerbated, especially when the financial value of the landlord's interest in the building is negligible when compared with that of the tenants. As we have heard, there have been a number of well publicised cases. I will not go over them now, because they have been touched on by so many of my hon. Friends and by the hon. Member for Greenwich.
The Government are acutely aware of the problems that can be caused by bad landlords. For the future, the problem would be addressed by a commonhold system which would put the management of property in the hands of a democratically run commonhold association. In those circumstances, the interests of the unit owners and the commonhold association would clearly be identical. In addition, the requirement for fundamental decisions affecting a commonhold to be made unanimously will protect the interests of minorities. That has, of course, to be subject to certain measured provisions to prevent the operation of the commonhold from being thwarted by a few recalcitrant unit owners.
The Government also recognise that the problems caused by the abuse of the leasehold system by bad landlords have to be tackled immediately for the protection of existing tenants. It is not merely enough to rectify the problem for future generations by enacting legislation on commonhold. To that end, my right hon. Friend the Secretary of State for the Environment has brought forward a package of additional rights for tenants in the Housing Bill. My hon. Friend the Member for Chipping Barnet asked when my right hon. Friend would be dealing with the detail of the five proposals that he intends to bring forward. It is my understanding that my right hon. Friend intends to table those amendments in Committee. We therefore do not have very much longer to wait.
The genesis of commonhold can be traced back at least as far as 1965, when the Wilberforce committee on positive covenants affecting land recommended the introduction of an optional basis for new, large, multiple developments of a modified strata title system, similar to what had been introduced a few years earlier in New South Wales.
Matters developed further in 1984, when the issue was referred to the Law Commission. In its report "The Law of Positive and Restrictive Covenants", it recognised that the law is defective in imposing mutually enforceable property rights and obligations. The law allows only restrictive covenants to be enforced between successors in title of the original landowners, and there is no direct way in which to enforce positive covenants, such as rights of support or an obligation to keep a fence or a wall in repair.
Those problems are of course accentuated in blocks of flats, where each flat often depends on its neighbour for support and shelter. The very stability of the building depends on proper maintenance and repair of the individual flats and the common parts.
The commission recommended the creation of a new interest in land--the land obligation--that is capable of subsisting as a legal interest like an easement, and which would impose a burden on the owner of one piece of land, either for the benefit of the owner of another piece, or as part of a development scheme. Those recommendations were accepted by the Government, then superseded to an extent by the commonhold proposals that were put forward, and therefore required some substantial revision to take account of the fact.
The commission recommended the adoption of some form of condominium legislation similar to that in America, Australia and various other jurisdictions. In response to the report, the Government established an interdepartmental working group, under the chairmanship of a law commissioner, to produce proposals for similar legislation in England and Wales. It reported in July 1987 and recommended commonhold as a new way in which to own property.
In fact, the Lord Chancellor published for consultation a draft commonhold Bill, as my hon. Friend the Member for Kensington said, which the Law Commission had prepared. Following the favourable responses that he received to the general principles, he announced the Government's intention to bring forward the necessary legislation.
The original draft of the Bill was, however, incomplete in various respects, and that is no secret. It has become clear in this debate that specific problems need to be addressed in many areas. The implementation of commonhold will mark a major milestone in the development of property law. The Government are determined that their proposals are implemented on the basis of technically sound legislation that will provide a firm bedrock for the establishment of what will amount to an entirely new system of land tenure. For that reason, the Government have not seen fit to proceed with their proposals until the draft legislation has been fully thought through and reworked to make it as effective as possible.
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