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Mr. Wills: That does not follow at all.
Mr. Cash: I am glad to hear the Minister say, from a sedentary position, that that does not follow at all, as that is a good indication that we will have an opportunity to consider—and agree—the amendment in Committee.
The Lord Chancellor continued:
- "That said, the position which the Government have hitherto maintained, and to which they still adhere unless persuaded to the contrary, is that, although there is undeniable merit in not allowing one person out of step with the proposed new regime to obstruct the entire commonhold arrangement agreed upon by the others, the sensitivities inherent in expropriating that one person may be an overriding consideration the other way. But the Government will listen."—[Official Report, House of Lords, 5 July 2001; Vol. 626, c. 887.]
Cautions can be put on for all sorts of reasons. The other day, the Minister and I spent several happy hours dealing with the Land Registration Bill. Perhaps we should have discussed this one at the same time. Easements are also prone to complication. One person prepared to be difficult in this respect can create so many practical difficulties that there must be some way of relieving the obstruction that can be caused.
Although the precedents and analogies may not be precise, I recall drafting legislation and looking at matters relating to frontages. For example, the law covering changing or extending the frontage arrangements applicable to the alley running behind stables that had been converted into new residences provided that only a certain percentage of the people involved had to agree. When that percentage was secured, the other people had to go along with the decision. If the Minister were to do a bit of digging in that area—
Mr. Heald: Will my hon. Friend give way?
Mr. Don Foster (Bath): Will the hon. Gentleman give way?
Mr. Cash: I give way first to my hon. Friend the Member for North-East Hertfordshire (Mr. Heald).
Mr. Heald: Has my hon. Friend been able to identify any detriment that would be suffered by a non-consenting
unit-owner? Clearly, one would not want greatly to disadvantage an individual, but it is hard to imagine what the detriment to an individual would be if his opposition was overborne.
Mr. Cash: Plenty of people might say no—perhaps not for good reasons. Many personal considerations might come to bear. I do not want to generalise, but things can get personal in a block of flats. Many objections could be vexatious and frivolous, although there might be other substantial issues. As I have already pointed out, somebody with no more than a minimal interest could veto a range of matters. We need to look at that carefully in Committee, and I am extremely glad that the Minister is showing such a constructive interest.
Mr. Don Foster: The hon. Gentleman looks for examples where 100 per cent. agreement is not required. May I draw his attention to the most relevant example—large-scale voluntary transfers whereby council house tenants can choose a different social landlord? In those cases, 100 per cent. agreement is definitely not required.
Mr. Cash: That is most helpful. As we proceed, other examples will no doubt be offered. The unanimity test has been exaggerated by the Government. I am not sure about their reasons as we have not been given a full explanation, but we shall doubtless have a chance to consider the matter in Committee.
As I have a number of things to say, I shall turn from the problem of unanimity to the extension of the commonhold. We should like the commonhold system to apply to all residential flats after the Bill becomes law. Allowing conversion from leasehold to commonhold would require a careful scheme. The freeholder could not have his interest expropriated, so provision would need to be made for those who did not want to convert. None the less, the Government should be able to propose a workable scheme for the conversion of existing properties. I hope that they will respond favourably to any amendments on that subject that we might table in Committee. Indeed, perhaps they will have the good sense to introduce amendments to deal with the matter themselves.
Secondly, the Government also want to restrict the ability of unit-holders—flat owners—to rent out their flats. Clause 17 gives the Lord Chancellor Henry VIII powers to make regulations to stop flat owners being granted residential leases for flats. In an intervention, I referred to the problem of regulations. I am glad to know that they will be published in draft in future.
In the other place, the Government suggested that they propose to limit renting to leases for no more than five years at a rack-rent without taking a fine. We agree that, in the abstract, it would be nice to have a commonhold association if all the members lived in the block, and stopping unit-holders renting out their property on other than short leases would contribute to that. The issue cannot, however, be viewed merely in the abstract. As a result of the Conservative reforms that culminated in the Local Government and Housing Act 1989, there is now a thriving private rental market. Equally, there is a thriving market for flats—not to occupy but to rent out.
Someone buying to rent will have a choice: a block sold as commonhold or as leasehold. If restrictions are placed on investors renting out commonhold flats, they will inevitably buy leasehold flats. That is an important consideration. We have to deal with the practicalities of the marketplace.
Thirdly, the Government have not given commonhold associations sufficiently strong powers to enforce the terms of the commonhold community statement. With leasehold property, the landlord has a right of forfeiture if the lessee breaches the lease. At first blush, that sounds extremely harsh, but in fact forfeiture is very much a last resort.
If a tenant is simply behind with the rent, all he has to do to obtain relief from forfeiture is to pay off the arrears. If he is in arrears with the service charge, the landlord must obtain a statement from the leasehold valuation tribunal that the service charge is reasonable. If the tenant has broken some other term of the lease, the landlord must serve a special notice under section 146 of the Law of Property Act 1925 requiring the tenant to remedy the breach, and even then the tenant can apply for relief of forfeiture. So there are plenty of safeguards, and very few long leases are forfeited. That is a fact. However, this weapon of last resort means that lessees and their mortgagees can be forced to pay.
With commonhold, the Government take the view that moneys owed by way of service charge should simply be enforced as normal debts. In other words, the commonhold association would have to take the defaulting unit-holder to court to obtain a judgment and then enforce that judgment. The Government envisage that a judgment will be enforced in the ordinary way. The standard method will be to put a charging order on the unit-holder's unit and then sell it if the unit-holder continues to be recalcitrant. However, the Government are ignoring the fact that a defaulting unit-holder will probably already have a mortgage on his flat and may well have a second or even a third mortgage. This means of enforcement will therefore work only if there is equity in the flat. With leaseholds, the landlord will usually be paid by the first mortgagee, who does not want to forfeit its interest in the flat. With commonhold flats, that will not apply. That is another practical point. I ask the Minister to consider these matters carefully, because if we are to make the system work it must not be snarled up by practical problems on which there should be no party political difference.
The absence of adequate enforcement provisions will, in our view, lead to disaster sooner or later. If a block requires extensive works and the tenants are already heavily mortgaged, it will take only a small number of defaulters to make the block unmanageable.
Fourthly, so-called ungrounded developments will not be permitted. That means that it is not possible to have a mixed development in which there are shops on the ground floor and a common residential area above. Surely it would be sensible for the Bill to provide maximum flexibility to encourage commonhold development. If developers have no choice but to make the whole of a mixed development commonhold, they may be reluctant to adopt commonhold due to the perceived reduced investment value of the commercial elements.
Let me turn to flying commonholds—flats over shops. The Bill does not allow flying commonholds where residential properties exist on the upper floors of a
property only, such as flats over shops. That is in line with the law on leasehold. Currently, no more than 10 per cent. of the whole block must be commercial if residential leaseholders want to purchase their freeholds. We support the raising of this hurdle, and as much as 25 per cent. has been suggested. That will encourage people to live above commercial property. Mixed-use schemes such as "Living Over the Shop" should be promoted, as that will assist urban regeneration and the provision of affordable housing in our towns and cities. I think that the Minister may recognise some of that language.
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