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Glenda Jackson: Not emanating from the mouth of Conservative Members.
Mr. Cash: It certainly is, because the point has just been made.
Fifthly, the Bill prohibits commonhold associations from charging the common parts of blocks. That may prevent commonhold associations from borrowing to finance emergency works or works of improvement. In jurisdictions elsewhere in the world, it is common for the equivalent of commonhold associations to borrow against future service charge income, and in our view it would be desirable for something similar to be made permissible under the Bill. Thus we welcome that form of tenure, but we believe that the Bill can be improved.
We also broadly support the provisions on leasehold reform. Again, however, there are problems with matters that the Government have simply not thought through. The most glaring example is that they propose that lessees should be entitled to establish a right-to-manage company. We support the right-to-manage proposals, although some of the detail needs to be considered more closely, and we shall do so in Committee. However, it is proposed that council premises, where the landlord is a local authority, should be excluded from the right to manage. Some 12 per cent. of right-to-buy sales have involved leasehold flats. Public sector tenants should not be excluded simply because of Labour's anti-right-to-buy dogma.
When the appropriate procedure has been followed, the right-to-manage company will take over the block's management from the landlord. So far so good, but there obviously has to be some means to hand over the management from landlord to the right-to-manage company. In any block, many people, ranging from the caretaker to a building company retained to carry out works, are likely to have a contractual relationship with the landlord. Some means of regulating the handover must be required—another practical consideration.
Astonishingly, the Bill as originally drafted made no provision for handover; it merely provided that, one month after the relevant notices had been served, the management should be taken over by the right-to-manage company. Despite the central issue of handover being discussed twice in Committee in the other place, it was on the Bill's Third Reading in November last year that the Government were obliged, by the arguments of Lord Kingsland, to recognise that there was a problem, and they finally decided to hold a consultation exercise. I hope that we shall not experience such resistance in this House. However, it is said:
- "Joy shall be in heaven over one sinner that repenteth, more than over ninety and nine just persons, which need no repentance."
The problem with statutory novation is that the right-to-manage companies will be extremely weak financially. The Government intend that they should be companies limited by guarantee, with lessees being liable for the grand sum of £1 each in the event of the company going into liquidation. That is obviously extremely unsatisfactory from the point of view of anyone who entered into a contract in good faith with a financially solid landlord.
The alternative—an automatic termination—is equally unsatisfactory, for the right-to-manage company could be held to ransom by a builder halfway through the works. That is another practical point. The only workable proposal may be to allow a longish handover, but I have listened with interest to the results of the Government's consultation exercise, and we shall examine their proposals with care.
Chapter 2 deals with collective enfranchisement by the lessees of flats. We welcome the principle of those proposals. In the other place, we suggested various technical improvements. Again, those suggestions fell on stony ground, but we may return to some of them on Report.
In conclusion, we are concerned that the Government are once more showing their contempt for Parliament by providing for so much of the Bill's contents to be made by regulation, but I am glad to hear that the proposed regulations will be made available to us fairly soon. We believe that it is time to consolidate the various measures that relate to the ownership of leasehold land into a much clearer, single Act. It is time that we consolidated all that law in a way that is comprehensible and transparent for the benefit of our constituents. The Opposition support the Bill, but we will make constructive proposals in Committee.
5.19 pm
Mr. Kevin Barron (Rother Valley): I completely agree with the final comment of the hon. Member for Stone (Mr. Cash). The law on leasehold is confusing on occasion even to lawyers. It should be consolidated. Although we cannot do that in this Bill, time should be provided for both Houses to consider the whole issue of leasehold and to ensure that people are made aware of their rights.
I disagree with the hon. Gentleman that the Government have not moved in another place. I have read the proceedings that have taken place in another place since the general election and, on more than one occasion, Opposition Members have thanked the Government for moving on particular issues. They may have been obscure points of law which the hon. Gentleman is more likely to understand than I am, but the Government have responded to the arguments made. It is wrong to suggest that they have not moved at all.
I welcome many of the changes in part 2 that try to clarify the position of leaseholders. Like our constituents, many of us have been confused over the years and are sometimes angered by what happens.
I declare an historical interest. Eight months after my wife and I married in 1969, we had scraped together £150 for a deposit on a home. We went to an estate agent in our village who told us that that the property that we wanted to buy was leasehold. I had worked in industry and I did not know what the term meant, so we put down the deposit and moved into the house. When I asked what leasehold involved, I was told that it meant £6 a year ground rent and, although I was not earning a lot of money at that time, that was not going to stop me buying the house.
We bought the property in 1970 and I subsequently found out that the lease was to run for 800 years. I paid the initial £6 a year—the sum went up to £8—to a landowner who used to live locally but who now lived in the Isle of Man where he presumably avoided certain levels of tax. I sent my cheque off every year and thought that that was the end of the matter.
However, a few years later, we wanted to improve the property. By then we had three children and I had also bought a motor car, so I wanted to put a garage on to what I believed was our property. I applied to the local planning authority, an architect drew up the plans and they were approved. A neighbour told me that I should write to Mr. Parkin to tell him what I was doing because he would want money off me, but I said I did not know why I should do that because I had already obtained planning permission and gone through what I thought was the law. So the garage and kitchen extension were built. Although I now suspect that I should have been, I was not in correspondence with the landowner at that time because I thought that it did not matter. I believed that, to all intents and purposes, I had kept within the planning law, so we carried on with the work.
However, when we came to sell the house in 1985, there was a big dispute about retrospective permission for the building of the garage and the kitchen extension. Months later, I received a letter from my solicitor saying that he had spoken to the landowner who was adamant that he wanted £100 to give retrospective consent for the building of the garage and kitchen extension. My solicitor also wrote:
- "As previously mentioned to you he is entitled to charge the costs of a Surveyor inspecting the extension confirming that it corresponds with the plan and reporting accordingly.
We would estimate that this would be in the region of £50."
In the end, we sent a letter to the solicitors and the prospective buyer saying that we would ensure that they would have no costs to incur because of our dispute with the landowner. That was in 1985, and I have heard nothing since. The £100 charge and the cost of the surveyor seem to have disappeared.
Mr. Gardiner: Wait until Friday morning.
I then moved into a freehold property. However, the last flat that I bought in London is in contrast to the leasehold property. It is in Abbey Court on Macleod street SE17 and, when it was built in 1986, a small management committee was put together comprising the tenants who moved in. Within about six months, the tenants offered to buy the freehold off the developer. It was the first time that he had built a block of flats and the freehold was duly bought. The flats are now run by Suthwalk management company. It is a limited company of the type described by the Minister which should be created under the Bill. There are 21 shares in the company and there are 21 flats. Each flat owner is a shareholder. The company secretary is Mrs. Shelagh Farren, who does a great job looking after all 21 of us, including four Members of the House and a leading tabloid journalist who is an eminent Lobby correspondent. Those interests are undeclared in the Library, so I might get into trouble for mentioning them.
We run a committee within the company which deals with problems. The Minister mentioned matters in which the management committee could get involved. It deals with problems such as people making noise next door, and calls people together to get things sorted out. We have no problems with parking next to the flats. The garden is looked after and the stairwells are tended and decorated. We pay a monthly service charge and an annual ground rent, but sometimes neither is requested, depending on the balance of the account. If we do not have to expend the money, we do not call it in. Most people would accept that to be a civilised way in which to organise one's life. People want to have somewhere for them and their families to live and to be able to go out to work. The way in which we manage our flats is a civilised way to achieve that.
Commonhold should be supported in the Bill. However, although the measure introduces commonhold tenure, it will, I fear, remain only a theoretical possibility for current flat owners. As we heard, existing leaseholders will have to obtain 100 per cent. agreement of all those with an interest in their blocks, including that of existing landlords, to achieve a transfer to commonhold. Moreover, fewer new developments will take place on a commonhold basis because no developer in his right mind would sacrifice the rich pickings of the leasehold system, even with the changes in part 2. I am not convinced that we are right in this regard.
On Second Reading in the other place, the Earl of Caithness said:
- "I did not like the provision that required 100 per cent. agreement to move from leasehold to commonhold. It seemed to defeat the object of moving to commonhold in the first place and I felt that it could not progress all that far."
- "there are a number of problems, some of them serious. As the Bill now stands, the main problem is the requirement for 100 per cent. consent from all interested parties—freeholders, leaseholders, chargees—before the conversion of existing properties to commonhold is possible. This will make it very difficult to convert existing leasehold blocks to commonhold. It might be possible in some small buildings containing, say, no more than three or four flats, but hardly any larger blocks would be likely to convert."—[Official Report, House of Lords, 5 July 2001; Vol. 626, c. 890-894.]
In winding up the debate in the other place, the Lord Chancellor said:
- "When the Bill was last considered, there were some who suggested that we should forbid any further leasehold development and require existing leasehold developments to be converted to commonhold. But we shall continue to maintain the position that stopping leasehold in its tracks is not the most prudent way to proceed. Instead, we shall continue to attempt to win the hearts and minds of potential developers, investors and buyers to ensure that commonhold is established as the preferred alternative for those building interdependent properties."—[Official Report, House of Lords, 5 July 2001; Vol. 626, c. 889.]
I described a problem that I had when I was a leaseholder many years ago. There are not many leasehold problems in my constituency, but many hon. Members have many constituents who are trapped in leasehold situations, so I must tell the Minister that I am a little disappointed by the Government's reticence in introducing commonhold, particularly as it is the most successful form of flat ownership outside England and Wales, whereas leasehold has consistently been shown to provide the worst form of flat ownership and management. The key to commonhold is that it removes third-party landlords and gives full control of a block of flats to the flat owners. That is the arrangement that we have at Abbey Court in SE17, and the House should be introducing it more widely so that existing owners of flats, as well as new owners, can benefit from it.
Both the Lord Chancellor and my hon. Friend the Parliamentary Secretary have said that we should leave it to the market. We can do that if we genuinely believe that people are not prepared to give up the money that they can make from leasehold. However, the House could take other action. I suggest that the Government consider providing more powers in the Bill to introduce commonhold, at least for new build, if the market does not do so. If people want to continue to build leasehold flats and use them as a form of profit generation, as they have done in the past, the Secretary of State should have the power to take action. We should not have to wait five, 10 or 15 years for a parliamentary slot to introduce further legislation. It would be reasonable for us to consider the introduction of such powers during the proceedings on the Bill.
To some extent, I accept what the Minister says about the extension of enfranchisement for current flat owners in part 2. However, the issue of valuation is very important, although it is a little embarrassing for Labour Members. On 19 November, Lord Jacobs spoke on Third Reading in the other place. I believe that Lord Jacobs was recently appointed by the Commission for Public Appointments, and I am not sure whether he has a political affiliation. He said:
- "It is true that leaseholders will gain from enfranchisement or lease extension. As the Government have indicated before, in the former case they can grant themselves a 999-year lease. But we are talking about people's homes. Why should they not have virtual outright ownership? I fear that the weakness of the Government's argument is the belief that landlords and tenants are two sides of the same coin, when the truth is that the landlord's interest increases in value, excluding inflation, on a daily basis, while the tenant's value—I remind your Lordships that this is his home—decreases in value on a daily basis."—[Official Report, House of Lords, 19 November 2001; Vol. 628, c. 921.]
This issue is extremely embarrassing to Labour Members of Parliament—look at what we said in opposition, not so many years ago. In 1995, the then shadow Secretary of State for the Environment, my right hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson), and the shadow housing Minister, my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford), declared in their proposal—I think it was a policy paper—on leasehold reform, entitled "An End to Feudalism":
- "Since the 1967 Act, which provided a simple and fair basis for valuation, the process has become progressively more convoluted . . . we believe that it is right to go back to the fundamentally sound logic behind the 1967 Act, which did not include 'marriage value' in the valuation process."
- "The concepts of 'marriage value' and 'injurious affection' are the two elements most likely to cause problems for leaseholders seeking to enfranchise . . . the easiest solution would be to scrap the two concepts entirely. They were not included in the 1967 Leasehold Reform Act and they certainly should not apply to leaseholders in houses."
I hope that the issues will be addressed seriously. It is many years since we have been able to get our hands on this area of law and make major changes, and many years will pass before another opportunity arises. I hope that the Government will take the Bill seriously in the few weeks available for consideration, and that the Opposition take seriously their own arguments that there is not much time—although there was more time in another place, because the general election interrupted the Bill's passage through that House. We must focus on the real issues and ensure that we have opportunities to vote on them.
There are many good things in the Bill, especially part 2, which deals with leasehold valuation tribunals. I accept that relevant criteria, scope and access are being considered, but it is important to note that access is all about who can afford it. Even if we broaden the tribunals, many people will not be able to afford access to them unless we do something else to ensure fair access. For many years, people hiding behind money and lawyers have prevented others from getting justice, and it would be fundamentally wrong if we missed an opportunity to ensure fair access. I am not talking about means-testing. We must establish a system that enables people who believe that they are being treated wrongly by the property owner to get justice.
My speech has been quite critical even though I accept the majority of the Bill. We must face the hard reality of what has been out there for many years. We must tackle the injustice that many have suffered because of leasehold reform. If we are to introduce a system that resembles the one governing my London dwelling in Abbey Court—
I hope that we are, especially for flat owners—we should do it now, get it out of the way and move on to making more progress and more improvements to people's lives.
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