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8.30 pm
Mr. David Lepper (Brighton, Pavilion): I pay tribute to the excellent and eloquent speech of my hon. Friend the Member for Brent, North (Mr. Gardiner). I endorse many of his positive comments on the Bill, as well as his criticisms.
The city of Brighton and Hove has about 25,000 leasehold tenancies, some in purpose-built blocks and some in Regency and Victorian conversions. The symbol of all that has been wrong with leasehold legislation is Embassy court on the border of my constituency and Hove. It is a grade 1 listed building and one of the few surviving examples of the work of the 1930s architect Welles Coates. I remember it from the late 1960s with its gleaming white exterior and plush interior. It was home to Keith Waterhouse and other celebrities of the time. Now, the constant refrain that I hear from visitors is, "When is that eyesore going to be demolished?" It has a history of 30 years of shameful neglect by a succession of incompetent and unscrupulous managing agents and freeholders.
The leaseholders faced a legal maze that made the case of Jarndyce and Jarndyce look open and shut. Embassy court became Bleak House over that 30 years, despite the pride and best efforts of many leaseholders, often of
advanced years. A number of those leaseholders have enfranchised, but the costs of refurbishment—in particular, late in life as many of them are—are prohibitive after the years of neglect.The no-fault right to manage that the Government have introduced in the Bill would have been a real help to my constituents in Embassy court, but it was not available. It will be now, but it is too late for them. The majority of the people who come to my surgery or write to me about leasehold are concerned about management. They do not necessarily want to enfranchise and they might or might not be interested in commonhold. Management is the issue.
Although I welcome the proposals for a no-fault right to manage, two issues must be considered. One, which has already been touched on, is the landlord's right to be a member of the right-to-manage company not only in his own right but in respect of the leases that he has.
The fact that the Bill does not contain a provision to allow for the regulation and registration of managing agents is a major omission. In Brighton and Hove we have, I believe, the only pilot scheme for the registration of managing agents in the country. It is a voluntary scheme. Our partners are the council, the leaseholders association, the Association of Residential Managing Agents and the Leasehold Advisory Service. About 17 or 18 local managing agents have signed up to the scheme's basic charter of minimum standards. However, the council officer, Kathryn Greig, who has done sterling work on behalf of leaseholders within the council, tells me that because the scheme is voluntary it is somewhat toothless. Some agents have been excellent and have responded to complaints within days. Others have chosen to leave the scheme rather than be asked to answer for their behaviour. One ignores correspondence that it does not like.
All that points to the need for a statutory scheme. I welcome the fact that the noble Lord Falconer said in the other place on 19 November that the Government would consult on the need for a statutory scheme. However, there is no need to consult. The new right to manage will be weaker without legislation to back it up. Lord Falconer's answer also made it clear that if there was legislation after that consultation it would be at the earliest opportunity. Now, I have only been here for five years, but I know what a moveable feast "the earliest opportunity" can become when it is mentioned in this Chamber or in the other place.
I pay tribute to Shula Rich of the Brighton, Hove and district leaseholders association, and to Kathryn Greig and her colleagues on Brighton and Hove city council, for the work that they have done to support leaseholders. What is happening in Brighton and Hove—despite some criticisms—is probably a model for other parts of the country.
Under the current proposals in the Bill, the chances of commonhold thriving face many obstacles, and I believe that there is a need for a sunset clause. We should let commonhold bed down, but give a clear signal that after, say, five or 10 years, all new developments must be commonhold or, as my hon. Friend the Member for Brent, North suggested, give planning authorities the power, based on their understanding of their own areas, to make commonhold a requirement. We allow them to specify the proportion of affordable housing in planning schemes, and we expect them to fulfil a presumption in favour of
brownfield sites over greenfield sites. Why should we not give them this additional power, to be used in the light of local circumstances? I know that the chair of the planning applications committee of Brighton and Hove city council has suggested that, and would welcome its introduction.I welcome the proposals to make enfranchisement easier. However, many hon. Members have pointed out that in circumstances in which people wish to convert, the requirement for 100 per cent. agreement is unreasonable. We do not require it for enfranchisement; why should we do so for conversion to commonhold? The requirement offers a loophole to unscrupulous landlords to take leases—even one lease—to scupper a conversion. Let us make the qualifying proportions for conversion the same as for enfranchisement. That would call the bluff of the property companies who have been buying up leases in blocks. It would also test the resolve of those who claim that they wish to convert to commonhold, because it would present them with some problems. We should, however, let the leaseholders make that decision, rather than have the Government set parameters that form an obstruction to conversion.
Shula Rich has drawn to my attention an important issue about forfeiture that has been mentioned often in this debate. Both LEASE and Ministers say that the incidence of people losing their homes through forfeiture is very small. However, the Brighton, Hove and district leaseholders association tells me that it has helped thousands of leaseholders over the past five years, and that the majority of the cases that it has dealt with have, at some stage, involved the threat of forfeiture—even cases involving some of the most reputable solicitors in Sussex. I shall name one: DMH. In a letter sent to a leaseholder on behalf of one of its clients, it states:
- "You have received a demand for payment of Ground Rent and Service Charge from the freeholder's agent in the sum of £1,105.32 . . . we are now instructed to instigate proceedings against you.
This action will involve the preparation and service of a notice under Section 146 of the Law of Property Act 1925 . . . We point out that you are responsible for the costs . . . You should be aware that such action could result in the forfeiture of your lease and the loss of your home."
As has been pointed out, there are other means of debt recovery—such means must exist; that is only fair—that are much fairer than the threat of forfeiture. It is the threat that is insidious, particularly when accompanied by certain other refined practices. For example, leaseholders might return home to find the door of their flat superglued up. Alternatively, the landlord may move in belligerent neighbours next door to threaten them and make their life hell. The phone calls that I receive do not always suggest that people will really lose their homes, but the elderly in particular are frightened by such threats, so I endorse what my hon. Friend the Member for Brent, North said about the end of forfeiture.
Other hon. Members rightly talked at length about the injustice of marriage value, so I shall concentrate on a problem for leaseholders to which I was first alerted 20 years ago—the threat of forfeiture. I welcome the proposed recourse to a leasehold valuation tribunal. That is a safeguard, but it does not remove the threat posed by
the armoury of the unscrupulous landlord or managing agent and there are already remedies through debt recovery.Although I welcome much of the Bill, especially the right to manage on a no-fault basis and the introduction of commonhold, I am less sanguine than my hon. Friend the Member for Brent, North about its chances of success. However, those who call for it to be withdrawn—scuppered completely—are politically inept and do nothing to help the majority of leaseholders. We have probably the only opportunity in this Parliament to legislate. We say that we are taking our time because we want to get the legislation right, yet in many ways we have made a pig's ear of it. We have a legislative slot, however, so I ask Ministers to go the extra mile and put an end to feudalism.
8.42 pm
Sue Doughty (Guildford): Affordable housing is a major problem for many of our constituents, particularly in the south-east, and as a result there are many leasehold properties, especially in my constituency where, despite what the public appear to think, a lot of people live in small leasehold properties. It is often said that beggars cannot be choosers and there is a shortage of property in the area, so I disagree with the hon. Member for Huntingdon (Mr. Djanogly), because people do not always choose to live in a leasehold property. It may be the only one that they can afford and if they have to live in a leasehold property to stay in the area, that is what they do.
We have our share of poor landlords and managing companies that take unfair advantage of people for whom leasehold properties are the only option, so, on the whole, we welcome the proposed reforms and hope that the issues, which are long outstanding, can be resolved. However, time in Committee is short, especially given the many concerns and the technical nature of some measures, and work remains to be done to protect leaseholders from exploitation by unscrupulous landlords and management companies.
The hon. Member for Huntingdon said that there are 1,000 conscientious landlords to perhaps one bad one, implying that the rotten apple in the barrel causes the problems, yet time after time hon. Members have told us about large companies with responsibility for tens, hundreds or thousands of properties that use the nature of the leasehold to extort money from people for whom there are few remedies. I do not suggest that every large company is unscrupulous; I am sure that that is not the case.
We have talked about forfeiture, but less about what happens when people sell their properties, although the insights of the hon. Members for Rother Valley (Mr. Barron), for Bolton, North-East (Mr. Crausby), for Burnley (Mr. Pike) and for North-East Hertfordshire (Mr. Heald) were helpful.
The Bill provides for appeals, through tribunals, for more information about how management charges have arisen. That is not so easy when a leaseholder wants to sell and move. As I am sure the Minister will appreciate, when a property such as a flat is on the market, a huge amount of pressure is put on both buyer and seller to push through the legal procedures. After all, those who sell properties do so for a reason: they may want a better
property, to move because of a new job, have embarked on a new relationship or need to downsize. In any event, for those who are selling, time is of the essence, and the same applies to buyers.This is a time at which people are under extreme pressure, and will often accept what they would not accept if they had time to consider. They need to resolve the business to mutual satisfaction, and sometimes they will pay money just to escape from a situation. That is well known and exploited by management companies and landlords.
I have a letter about a property owned by one of my constituents, Mr. Kiley, and his partner Ms Ivory. It is from Mr. Kiley's solicitor, and what it contains is typical of what happens when a solicitor tries to resolve matters. Part of what is involved is trying to find out how much a leaseholder owes, so that contracts can be exchanged and the move can get under way. We have all been there: we know the pressure people are under. Delays cost money, often for those who can least afford it.
The letter, which was sent to the management company DGA plc, related to 20b Martyr road, Guildford. It contained the following passage:
- "Over the last two or three weeks in particular you have continually assured me that the long awaited fax was to be sent imminently. You finally confirmed to me on Friday morning, 2nd November, that Mr Kiley was in credit with your company to the extent of approximately £250; faxed confirmation would 'definitely' be with me during Friday; at 2.30 pm on Friday I was to have faxed confirmation within 10 to 15 minutes."
- "Notwithstanding all of the above, I enclose copy of the faxed statement received from your company . . . later on Friday afternoon showing two sets of 'yearly service charge in advance' and (notwithstanding no expenditure)"—
- "two 'end of year balancing charge' figures and an alleged net balance due by Mr Kiley of £704.28."
That is not untypical. When a flat is to be sold, the solicitors acting for the buyer—especially when the buyer has a mortgage—must serve notice on the landlord or the management company that the flat has been sold, and mortgaged. They must obtain a receipted copy of such a notice. In the ordinary course of events, a landlord or managing agent can legitimately refuse to receipt such a notice if there are arrears of rent or service charges. It is a heaven-sent opportunity.
Because solicitors acting for a lender have a duty to the lender to obtain the receipted notice, they almost invariably insist that the seller of the flat must discharge the service-charge arrears—whether or not there are any—before they can advise their client to purchase. It is at that stage that an unscrupulous landlord can recover unjustifiable sums from flat owners. Although the Bill provides for the provision of full information about management charges, and for the resolution of disputes, it is when a sale is in the offing that there is not enough time to bring about such a resolution. Time is of the essence. The Bill does not deal with that problem; nor does it suggest any penalties for landlords who use such opportunities to recover unjustifiable sums.
I am advised that some landlords regularly use the device when a property is being sold, and vendors have no option but to pay. If there are no penalties to deal with what, if it did not take place in this way, would be seen by some as a criminal activity, people will continue to engage in that activity. I urge that in Committee amendments be tabled to exact real penalties on landlords. I suspect that landlords and agents are acting in that way in respect of thousands of properties. These are not small fish and they need to be dealt with. It is extortion; there is no other word for it.
In another case, it is possible for dubious charges to be levied regularly on the purchaser. At one group of properties in Guildford managed by a separate company of managing agents, the leases of the flats contain a requirement that when the flat is sold the incoming owner should enter into a covenant with the landlord to observe the terms of the lease. The leases do not state that the covenant has to be in a specific form or that any costs have to be paid to the landlord in relation to it.
Nevertheless, the management company stipulates that it does not have to approve the deed of covenant and that an administrative charge of approximately £100 plus VAT has to be paid to it. It always collects. It says in linked correspondence that unless the covenant fee is paid to it, it will refuse to register notices of transfer and mortgage. By that means it does very nicely. Every time a flat changes hands, it receives £100. It is not a large sum of money, and we have heard of much worse incidents, but it is a constant cause of aggravation and it is wrong.
The Bill fails to provide remedies to avoid those sharp practices. It fails to provide penalties to deal with those landlords and that is a regular swindle. Such action by a landlord needs to be circumscribed. It is criminal. I hope that the Minister will look at what should be done. The right to manage would remove the problem for some people but it will not be universally available. We cannot say that that will provide the remedy. Can we look at that matter in Committee to rectify that injustice?
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