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6.5 pm
Mr. John Taylor (Solihull): I intend to make only a brief contribution to this debate, because other hon. Members have been gracious enough to allow me to intervene on them, which has given me the opportunity to register a point or two.
I should declare an interest at the outset. I am the owner of a residential long lease on an apartment in my constituency. I am therefore interested in such issues as management companies and, ultimately, I hope, the acquisition of our freehold. I should also declare that I am a solicitor, but I have not practised since 1988—I went straight 13 years ago.
As a very young, recently qualified lawyer, I was involved in some of the early applications of the Leasehold Reform Act 1967, which provided the first opportunity for people with residential leases—at that time only of houses—to acquire their freeholds. Indeed, I bought the freehold of the first house that I ever owned. However, one of the weaknesses of the 1967 Act was that the political process—which I blame collectively, rather than in a partisan way—fought shy of defining a price mechanism. There was no reliable formulation in the Act to enable either the holder of a long lease or the holder of the freehold reversion to work out exactly what sum of money could be expected to change hands for the enfranchisement. There was not even a near miss.
Therefore, cases all of a sudden had to go, at some expense, to the Lands Tribunal. It was some time before the tribunal's decisions began to form a reliable pattern of precedent so that people could say, "Right, we've got the picture now. They have made so many hundreds of decisions and it is clear what the applicator figure should be." Initially, and perhaps rather innocently, thoughts on the valuation of the reversion turned on a simple question: what capital sum would have to be prudently invested to produce the same annual return as the ground rent? That produced some very favourable acquisitions of freeholds and, as an early enfranchiser myself, I took advantage of that thinking when it prevailed.
However, with the passage of time, a different view began to be taken, using nuptial idiom—if I may say that—and the concept of the marriage value. The proposition was that the value of the whole might be greater than the sum of the values of the parts, in the hands, at any rate, of the leaseholder as purchaser. I am not supporting that proposition; I am saying that that is the way in which the thinking began to develop.
I am reminded of the rule in estate duty law that the gift may not be the same at both ends. The gift may be more valuable to the recipient than it is to the donor.
My law lecturers, all those long years ago, used to give an example. If I owned 49 per cent. of the shares in a company, and someone who owned 2 per cent. of the shares gave me that 2 per cent., I should, as the new owner of 51 per cent. of the shares, have received something of infinitely greater value than it had enjoyed in the hands of the person who gave it to me.There are subtleties in those valuations and I do not want them to be worked out expensively by our constituents. The Bill has been criticised, but I am here only to promote and advance one point: all our constituents, whether they live in Burnley, London or Solihull, will be grateful to the House for its careful scrutiny if the Bill finally goes to the statute book with a perfectly clear mechanism telling people what to expect to pay if they act in concert as long residential leaseholders seeking the freehold.
My hon. Friend the Member for Stone (Mr. Cash) said in his comprehensive and elegant remarks that the relationship between landlord and tenant is inherently adversarial. Maybe it is, but, as far as we can, we should keep that to a minimum. I do not want the price for the freehold to become a ground for argument, bitterness and, ultimately, expensive litigation. The House has it in its power to keep that potential to an absolute minimum, bearing in mind that another matter will probably be considered at the same time.
There have been discussions, not least those involving my hon. Friend the Member for Stone, about the various mechanisms for transfer of management functions, but if the long leaseholders are at war with the landlord over the price of the freehold, even when the management functions are being transferred, that will be as unpromising a recipe for fruitful negotiation that could possibly be devised.
The final form of the Bill may go one way or the other, enhancing the potentially adversarial nature of the relationship between landlord and tenant or minimising it, providing good formulation and every prospect of satisfactory negotiation between the parties.
Mr. Pike: As a solicitor, the hon. Gentleman will recognise that some people thought that they were buying out the freehold under the 1960s legislation, although all they bought out was the need to pay ground rent. Is it not important that we ensure that people know exactly what they are getting, and not only on that point?
Mr. Taylor: The hon. Gentleman obviously has extensive experience of those matters. As we agreed, he made the good point, which I acknowledged, that leasehold practice varies a great deal in different parts of the country. I am sure that the detail of what he describes from his experience is correct, but I shall answer in general terms.
The clearer and more transparent the situation, the better, not merely in respect of what one gets for one's money. There should be a reliable formula that provides a fairly accurate estimate of the money likely to be needed to acquire that defined asset, which is my only reason for striking a slightly discordant note: good scrutiny and a good final product, which the Bill is intended to be, are not helped by limiting scrutiny by timetable.
There is so much complexity here, but I detect a lot of good will and a lot of heads nodded on this side of the House when contributions were made from the other side,
and vice versa. Members want to get the Bill right, but the timetable is not helpful. It is a reality—there is nothing I can do about it—but we must make the issues as clear to our constituents as possible. We are not in the business of giving them law lectures, nor do we expect them to become amateur lawyers overnight. As the hon. Member for Rother Valley (Mr. Barron) said, he earned his living doing something completely different, so he could not be expected to understand all these matters any more than I could be expected to do the job he did at that time.I wish the Bill well and hope that it reaches our constituents in the clearest possible form as the law governing their affairs.
6.15 pm
Mr. David Crausby (Bolton, North-East): Thank you, Madam Deputy Speaker, for the opportunity to say a few words in support of an exceptionally important Bill. Nothing is more important than a measure that will deliver improved rights in the interests of everyday people. The desire to own one's home lies at the core of our natural instinct for independence and security, and it is both highly rewarding and emotive, but fulfilment of that desire cannot be complete without the principled right to buy the land on which that home stands—at a fair price, of course.
I therefore warmly welcome the proposals for those who want to acquire control over their freeholds and commonholds, thereby improving their prospects for independence and individuality, but I shall concentrate my remarks on those who choose, for whatever reason, not to buy and to continue with a leasehold. I believe in the right to purchase a freehold, but I also defend those who do not want to go to what may be considerable expense.
I have constituents in Bolton who are contracted to pay very small amounts in ground rent—sometimes little over a pound a year—and, like my hon. Friend the Member for Burnley (Mr. Pike), I must say that, financially, it is difficult to justify buying a freehold in such circumstances. Those people should not be pressured and their choice not to buy should not allow unprincipled landlords to mistreat them, thereby coercing them to buy.
One such example of abuse by freeholders is a landlord insisting on the lessee purchasing household insurance from a specific company. I fully understand and accept that landlords have a legitimate interest in ensuring that their properties are properly insured, but, let us face it, the truth is that the motive for insisting on a specific company is almost exclusively related to securing commission from unscrupulous insurance companies. Such people do not buy up ground rents to collect a couple of pounds a year.
My constituent, Mr. Raby from Harwood, wrote to tell me that, along with many of his neighbours, he had paid ground rent of £4.50 a year since moving into his terraced property in 1966. In recent years, his landlord, who lived close by, died. Mr. Raby tried in vain to find out how and whom he should pay. In 1998, he received a letter informing him that the freehold had been disposed of to a London company, which sent him a bill for just over £20. He promptly paid the new freeholder what he owned. Shortly after, he was offered his freehold for £500. He declined the offer. A year later, he was offered it for £350. Again he declined. Quite reasonably, he felt that he could not justify paying £500 or even £350 compared with annual ground rent of £4.50.
In the middle of 2000, Mr. Raby received a letter from a company called Terra Firma saying that his insurance did not meet its requirements. It claimed that his insurance was inadequate, despite the fact that it knew nothing of the terms of that insurance. It nevertheless felt able to demand that he insure in future with a company called Owners Combined Ltd. He initially put up a struggle, but the firm continued to harass him until he surrendered. As he put it in a letter to me,
- "They had me over a barrel".
In my constituency, a company called Compton Insurance Services recently bought up freeholds in the area and now insists that residents use AXA Insurance. The company's main motive in buying up freeholds clearly relates to the insurance business that that will generate. It writes intimidating letters to my constituents, insisting that they fill in application forms for the new insurance.
Mr. Warburton of Astley Bridge wrote in a letter to me
- "I was born at this address over eighty years ago and my parents and myself have paid the ground rent of £2 a year on this lease. I am insured with Age Concern and people especially at my age should not be subject to this aggro."
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