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4.34 pm
Mr. William Cash (Stone): I rise to welcome the Bill, which brings together a process that has lasted for more than 30 years. In the House of Lords, the Bill had innumerable readings, including two First Readings, two Second Readings, a lengthy exercise in the Moses Room and discussions during its unfinished Report stage. It subsequently had its other Readings during its second round. With the number of noble and learned Lords in the other place, therefore, nobody can say that the Bill has not been given the most careful consideration. It does not
follow, however, that all the matters relating to it have been resolved, and there will no doubt be issues into which we shall have to dig deeper in Committee.We are in favour of the Bill as a whole, subject to what I have just said. I should declare an interest, not only as a solicitor, but as one who lives in a block of flats that are on long leaseholds. I am not at present contemplating informing myself of the provisions for commonhold, but—who knows?—it might be suggested by tenants in the other flats.
As the Minister said, flats in blocks are at present invariably sold on long leases. This leads to two problems. First, such flats are a wasting asset. As the leases grow shorter, it becomes increasingly difficult to mortgage the flats, which is a serious consideration for the people living in them—particularly with mortgage rates as they are now, and with people being anxious to get in on the act if they possibly can. Secondly, the flat-owner is in a continuing relationship with the landlord, who has a duty to maintain the building and needs to raise money from the lessees to carry out that function. An adversarial relationship is, therefore, implicit in the arrangements from the beginning.
The commonhold provisions of the Bill are intended to address the problem of a leasehold flat being a wasting asset, by giving flat-owners full tenure of their flats. The leasehold reform provisions are intended to deal with the second problem by allowing lessees in blocks of flats to take over the management of the flats. Those provisions are also intended to alleviate the problem of shortening leases by easing the provisions for lessees purchasing the freehold and obtaining lease extensions.
The reason that so many flats in blocks are sold on long leases is a technical one. A block of flats obviously needs repairing from time to time, and the only way for that to be done in practice is for all the flat-owners to club together to pay a reasonable service charge. Sometimes the service charge is not reasonable, but that is a separate question that we shall no doubt consider in Committee. A flat is dependent for support on the flats beneath it, and dependent for protection from the elements on the flats above it. Thus are flat-owners bound together in a relationship of mutual interdependence.
Unfortunately, one of the long-established principles of English common law—which, of course, I support on all conceivable occasions—is that positive covenants do not run with the land. In practice, that means that if a block is sold off with each flat a freehold, the flat-owners can agree among themselves to contribute a fair amount to the service charge and to support each other's flats. If a flat-owner sells his flat, however, that obligation is not automatically passed on, for the reason that I have given. In other words, a later purchaser will have no obligation to his fellow flat-owners to pay the service charge or even to support the flats above him. That is the defect in law to which the Minister alluded—perhaps not in quite such detail—and it is important to get it in front of the House, because it is a practical problem of the first importance and it must be dealt with.
The defects of the system were first shown, surprisingly, at Lincoln's Inn. At the end of the 17th century, the benchers who ran Lincoln's Inn decided to go in for a bit of property development. The result is the attractive buildings on three sides of New square. Unfortunately, the benchers, no doubt being somewhat
grasping—[Interruption.] Say no more. The benchers decided to sell off the flats in the new buildings in New square as freeholds, and the result was as I have described. After a few years, none of the freeholders had any liability for any repairs and the buildings were kept in repair only because they were still part owned by the Inn and rented out. It is, of course, ironic that the home of English conveyancers produced that completely foreseeable disaster.Eventually, the matter could be sorted out only by the Inn itself obtaining a private Act of Parliament, which happened in the 19th century. I must make the point that if elite lawyers—those responsible for the great developments of the law on conveyancing, equity, trusts and the rest of it—can get into such a tangle, that is a salutary lesson to us all.
Mr. Barry Gardiner (Brent, North): Does the hon. Gentleman agree that the problem could be resolved in this country under English law if positive covenants were allowed to run with land, as they do in other jurisdictions where there are commonhold and strata title associations? Part of the problem with the Bill is that, having incorporated English company law as the basis for commonhold, one runs into such difficulties, which will be overcome, one hopes, only when the Law Commission produces its report on flying freehold.
Mr. Cash: The hon. Gentleman makes an interesting point. If so much of the Bill depends on the problem arising over positive covenants and given the fact that the Law Commission could have made proposals to deal with it, that difficulty might have been resolved, but that is a hypothesis and we face the reality before us. We are considering the Bill and no doubt we shall have an opportunity to discuss his point in Committee, but if he tables an amendment that the Bill should not proceed unless the Government make a proposal on changing the law on positive covenants, I suspect that he will receive a simple answer: that is outside the scope of the legislation. He makes an interesting hypothetical point, but I shall leave it at that.
Having made my point with respect to the lawyers in Lincoln's Inn, I must make the general point that we are no longer dealing with the elite. Following the development of enfranchisement, property rights and the relationship between voting and democracy as well as the passing of the Leasehold Reform Act 1967 and subsequent events, it is fair to say there are many more property owners, many of whom have the benefit of property ownership as a result of the right-to-buy proposals conferred by the Conservative Government under Baroness Thatcher, than in the mid-19th century.
Having said that, many of those voters have reverted to new Labour or, indeed, the Liberal Democrats. I hasten to add that I say that without enthusiasm. They may find that that was a mistake, but, none the less, it has happened, so there is a general point to make with respect to the Bill: all parties accept that it is in the national interest and that it will benefit people from all walks of life. There are many more flat owners these days, and all political parties are supported by such people.
In other countries, the problem of freehold flats has been met by legislation introducing a condominium system, sometimes known as a strata title. That gives flat
owners the management of their blocks and gives each flat owner the equivalent of a freehold of their flat. As long ago as 1987—I say this with pride—the Conservative Government produced a report from an interdepartmental working party proposing a form of commonhold. That was positively received and the late Lord Hailsham, the Lord Chancellor, asked the Law Commission to produce a report and a draft Bill. The Law Commission reported back in late 1990. After further consultation, the Lord Chancellor announced that commonhold legislation would be introduced as soon as parliamentary time could be found for it.Progress was then halted by the 1992 general election. Immediately after the election, the Conservative party devoted the available parliamentary time to the cause of leasehold reform, but by 1996 a draft Bill and consultation paper on commonhold had been prepared. The Bill was proposed in the Queen's Speech in October 1996, but never progressed owing to the general election of May 1997. The rest is history.
Originally, the Labour response to the idea of commonhold was apathetic. In October 1997 the right hon. Member for Ashfield (Mr. Hoon), then Parliamentary Secretary to the Lord Chancellor's Department, told the British Property Federation
- "The pressure of other business . . . means that there is no likelihood of legislation being introduced on this topic in the near future."
In the event, it was only in December 2000 that the Government introduced a commonhold Bill in the other place. Unfortunately that Bill failed after the calling of a general election in May last year, despite having been given a Third Reading in the other place. The Government are to be commended on nevertheless reintroducing the Bill after the election. It is a pleasure to see them fulfilling long-standing Conservative commitments.
Less commendable, I regret to say, is the Government's response to suggested improvements in the Bill. In the case of a largely technical Bill such as this, it might be hoped that an element of bipartisanship would exist. I have referred to the national interest, and to cross- currents in the population and different demographic considerations. I must also reiterate what a number of my hon. Friends have said about the programme motion.
This Bill deserves examination of a kind that would be possible within a reasonably limited amount of time, but not the limited amount that the Government are providing. It needs proper consideration, but it is clear that the Government do not intend to provide time for such consideration. I have no doubt that we will oppose the programme motion.
Sadly, in the other place the sponsoring Ministers considered it a matter almost of personal honour to refuse to accept any amendments tabled by the eminent lawyers, on both the Opposition and the Cross Benches, who opposed their proposals. A very obstinate attitude has been taken to important amendments. I shall return to the unanimity rule in a moment, as it illustrates the fact that, although the Government indicated that they were prepared to listen, absolutely nothing came of it.
The Minister has no direct responsibility for that, but he has influence. I look to him in the hope that, if we table amendments, he will be as good as his word and not only consider them carefully, but go beyond consultation to acceptance.
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