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5.52 pm
Mr. Peter Pike (Burnley): I welcome the opportunity to speak in this debate. I broadly support the Bill, but I hope that some improvements will be made and some amendments agreed.
I congratulate the Government on being bold enough to introduce the commonhold proposals. They have been discussed for many years. The previous Conservative Government considered commonhold, but never did anything about it. At least a Labour Government are now introducing the proposals and going ahead.
I want the Government to do two things, which have already been touched on in the debate. The 100 per cent. rule is a worrying factor, because the agreement requires unanimity on the part of the people who live in a property as well as the owner or of the leaseholders and the freeholder, and because other interested parties are also involved. We need to consider more closely the definition of interested parties. Clearly, we need to consider those aspects as the Bill progresses in Committee and on Report. The provision would make it easy for someone to put a veto on an agreement and stop progress being made, which might not be in the best interests of the majority.
As the Bill is drafted, the majority of commonhold properties will initially be new build. Again, the Government could be a little bolder. They could make it clear that if a property is not to be freehold, commonhold should be the preferred option for the developers, unless there are good reasons why that should not be the case.
I hope that the Government will consider those two matters. Virtually every hon. Member who has spoken, apart from the Minister, has expressed concern about them.
On the leasehold provisions, as I told the hon. Member for Stone (Mr. Cash), the Bill will go a long way towards introducing some of the measures that we tried to include through amendments to the Leasehold Reform Housing and Urban Development Bill in 1993. At that time, we were well briefed by the Leasehold Enfranchisement Association, which also has concerns about this Bill. Many of the provisions that we tried to introduce in 1993 are involved today.
I want the Government to accept that leaseholds in the south and London are very different from those in Burnley and other parts of the country. The problems in my part of the country are different from those in London.
My only dealings with a London leasehold property were while my daughter was out of the country last year, when I had to sell her flat. I had to buy an extension of the lease before I could sell it as the building society would not give the purchaser a mortgage without an extension. It seemed crazy to have to pay several thousand pounds to extend the lease to complete the sale. The property in which I live in London is not leasehold.In my constituency, the leaseholds are not short and the property is not as valuable. Nearly all the leases are for 999 years, with minimal ground rents and, in many cases, minimal conditions attached. In the past few years, I have studied many leasehold documents. Although the handwriting is good, many of the leases drawn up in 1887 are difficult to deal with, as they are extremely lengthy. It is hard to follow the exact conditions laid down and to decide whether the provisions that the present freeholder claims are contained in the documents are there. They are not always there. I have had to tell several people who have implied that a lease contains conditions relating to insurance, for example, that the document in question gives them no right to do what they are trying to do. One has to spend a lot of time studying each document, as they are not all exactly alike.
I have bought the freehold of the property in which I live in Burnley. For many years, I advised people not to bother to buy the freehold. I said, "Why bother to buy, when you are only paying £1, or £5 a year and you have 800-odd years to go?" Also, the conditions were minimal. Why did I decide to buy my freehold? I was fortunate enough to be able to do so and I saw the problems of my constituents. I did not want to suffer a similar hassle or problem and I could afford to buy, so I paid £250 plus the legal costs and bought it out. I was paying only £4 a year. Even then, the landlord was overcharging. The lease stated that it should be £3.87, but I never argued about the extra 13p; I always coughed up the £4 when he asked for it.
Mr. John Taylor: The hon. Gentleman has effectively pointed out that leasehold traditions in different parts of the country are very different. He talks about 800-year leases in Burnley. In contrast, in the west midlands, residential leases are almost always 99 years. There is a different sort of pressure on the leaseholder as the 99 years contracts to 60, 50 or 40 years and the lease becomes difficult to dispose of.
Mr. Pike: The hon. Gentleman has a valid point. The majority of hon. Members who speak today will be talking about that sort of problem. A number of Members who represent London will highlight the problems with 90-odd year leases when they are reduced to 60 or 30 years. As the number of years reduces, the value that my hon. Friend the Minister mentioned is reduced and it becomes increasingly difficult to sell the lease. The person who is looking for a mortgage is not prepared to take such a lease on.
I am trying to highlight the problem that my constituents face. What is their particular difficulty? The ground rents are not significant. The problem is that people are now being told, "You must insure with us and buy this particular insurance." The people who have now bought the freeholds are in most cases no longer local—
they are either from London or, in some cases, Wales. They can make more money from the commission that they get on the insurance than they can from the ground rent.My hon. Friend the Member for Rother Valley (Mr. Barron) mentioned that people make alterations to a property without having obtained permission to do so, and that a charge might then be made for retrospective approval. In some cases that could be £250, and I have heard of cases in which £600 or so has been charged. That nearly always comes to light when the person concerned wants to sell the property and has found someone who is willing to buy. Nine times out of 10, they pay, whether their solicitors advise them that it is a reasonable figure or not. They pay because, in Burnley, if people want to sell a house, they sell it as soon as they have somebody willing to buy. There are 4,000 houses standing empty there.
The other week, during a by-election, I canvassed someone who told me, "I bought my house five years ago for £24,000. When you knocked on my door in May it was worth £16,000; last week, when I asked the solicitors what it was worth, they told me it was worth £6,000." People just cannot sell their houses, so if they find someone who is willing to buy, and they are told by the freeholder to pay £250 or £600, they cough up, fair or not, to get the sale. They know that far too much time will be taken up arguing about fairness and unreasonableness if they do not. That is the difficulty that we have to deal with.
Although I accept that part 2 addresses the problems that exist in the south, and that other aspects of the Bill are important to many people in London, Brighton and other areas where such problems exist, there are other issues that we must deal with as the Bill progresses through the House.
I have had a lot of dealings with various local solicitors, and with the Burnley and Pendle Law Society. I would like to quote from a briefing that the society sent me the other day. It emphasises the points that I have already made, but it is interesting to hear what its members, as legal professionals, have to say. The briefing states:
- "The problems arise out of leases that were created in the 1880s and 1890s in particular and of a long leasehold nature of 999 years plus and with what are now nominal ground rents. I acknowledge that the ground rents when created could be compared to a week's wage whereas nowadays the same rent would not even buy a pint of beer."
- "The covenants contained in the leases are the biggest problem with which we have to contend. Most leases created over a hundred years ago contain very few covenants and the few that did exist were rarely enforced, e.g. insurance, approval of change of external appearance by additions. However, these covenants have now proved to be a major problem in that the ground rents held by local landlords have now been sold to commercial companies that read through the leases with a fine tooth comb to see what can be gleaned in the form of fees—the ground rents are a minor issue. Where any lease contains any provision about approval of insurance, it leads straight to the property owner having to insure the property through the freeholder or alternatively paying an administration fee for releasing the provision—these fees can be quite expensive. A similar situation applies where a house owner wishes to erect e.g. a kitchen extension—if the lease makes provision for approval being required then the freeholder will charge a fee for the approval."
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