Commonhold and Leasehold

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Ms Keeble: I do not want to add much to the debate. The clause balances several conflicting priorities. We have heard repeatedly throughout our proceedings that we must recognise the rights of both the freeholder and leaseholder and deal with what happened in the past, under the 1967 Act, which provided special terms for a particular group of people. We have extended the current rights of leaseholders so that they can buy during the extension, and have further undertaken that we shall consider closely the provision of information.

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Therefore, I would argue that we have made good provision within the clause.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 10, Noes 7.

Division No. 10]

Crausby, Mr. David Hendrick, Mr. Mark Iddon, Dr. Brian Keeble, Ms Sally McIsaac, Shona
Marsden, Mr. Gordon Stringer, Mr. Graham Thomas, Gareth Woolas, Mr. Phil Wright, David

Cash, Mr. William Doughty, Sue Lewis, Dr. Julian Sanders, Mr. Adrian
Selous, Andrew Taylor, Mr. John Wiggin, Mr. Bill

Question accordingly agreed to.

Clause 144 ordered to stand part of the Bill.

Clauses 145 and 146 ordered to stand part of the Bill.

Clause 147

Extending meaning of service charge

and management etc

Question proposed, That the clause stand part of the Bill.

Mr. Cash: This clause is important in various respects. It extends the meaning of service charge and management. Schedule 9 is related to it and makes several changes to the provisions relating to the management of, and service charges in respect of, leasehold properties. The changes apply to the provisions on improvements.

I have seen an interesting e-mail, which arrived today and was addressed to my hon. Friend the Member for Leominster, drawing our attention to this clause. It comes from a member of the commonhold and leasehold reform working party, who said that the working party had

    ''informed government officers that it thought that this clause should not be in this Bill. Government has indicated that the main reason for this clause to be in this Bill is to enable PFI and other long term framework agreements and that this clause is crucial to the governments wider agenda.''—

I do not know what the Government's agenda is. No doubt it is to win the next election—that does not mean to say that they will be successful. The e-mail continues:

    ''The London borough of Camden has been piloting both PFI and Partnering with pretty unpromising results. While there is evidence supported by a couple of cases at the Leasehold Valuation Tribunal that management and monitoring of the contracts were a shambles and that, although costs escalated, performance was poor, with the authority finding that it had no appropriate measures to deal with poor performance. (Although it could withhold money, it still had to make other arrangements to deal with the defective work, plus pay compensation to residents for failure.) It was also the case that key council officers were dispensed with, leaving no officer qualified to properly monitor the contracts.

    As part of the government's wider agenda, this clause will have implications for public sector workers, as well as workers in the construction industry and associated professionals, but these have been excluded from consultation.''

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The author of the e-mail says that he thinks that the clause should be removed from the Bill, or at least deferred so that it can receive the wider consultation and scrutiny that it requires. That surprises me.

I think that the hon. Member for Brent, North (Mr. Gardiner) is a member of the commonhold and leasehold reform working party—he might be its chairman. Is that right? Nobody seems to know. In any event, he has taken a very active part in the consideration of the Bill because he is chairman of an all-party committee.

As this letter emanated from the London borough of Camden—a part of the world that is not notoriously conservative—Labour Members could have put that argument. I wonder whether they have received representations along those lines and what merit they attribute to the points made. It will be interesting to know whether it is correct that a reason—possibly the main reason—for the clause was to enable PFI and other longer-term framework agreements to be implemented. We have been asked to raise the matter and it is clear that the Government will not do that. I therefore look to the Minister to reply and shall be grateful to hear what she has to say.

Ms Keeble: I am grateful to the hon. Gentleman for having raised the issue. I have met, if not the author of the letter he quoted, then someone from the group that raised the concerns about Camden. I have not had a copy of the letter, but I suspect that the concern is much more about clause 148 than clause 147. However, if you will allow me to do so, Mr. Hurst, I shall deal with those concerns under clause 147 so that we do not have to go through the matter again.

Clause 147 is small. It refers to schedule 9 and concerns leaseholders of local authorities and registered social landlords. It would help those people—

Mr. Cash: The letter mentions clause 147. However, in the other place, an amendment was moved on Report by Lord Richard, and replied to by Lord Falconer, in response to Baroness Gardner of Parkes. It related to estate management schemes. It seems that there was some suggestion by the Government that, although they could not find room to resolve the matter in the Bill, they were thinking of trying do so later.

Ms Keeble: The clause would help the local authorities and registered social landlords, who are often required to contribute to the cost of improvement to their buildings or estates under the terms of their leases. It would ensure that their landlord consulted them before such works were carried out and that they would be able to challenge unreasonably high bills for such work. In addition, some social landlords are being required to provide loans to cover the cost of improvements, where such costs are payable through service charges. The concerns raised with regard to clause 147 are more applicable to 148, because that clause has some implications for long-term contracts, which are relevant to PFI arrangements, among other things.

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5.15 pm

I will respond to the hon. Gentleman on long-term contracts and then explain some of the other measures that we are taking to advance the situation. I hope that I will be able to reassure him. There will be a new requirement for landlords to consult leaseholders before entering into any contract for the provision of works or services that is due to run for more than 12 months. There is a growing tendency for landlords to enter into long-term contracts for property maintenance. Such contracts can achieve significant cost savings through economies of scale, but there is clearly scope for abuse. We want to ensure that leaseholders are made aware of plans to enter into long-term arrangements and are given the opportunity to comment.

Detailed consultation requirements will be specified in regulations. That will provide flexibility to deal effectively with the variety of procurement practices that are developing in the public and private sectors. I take it that the hon. Gentleman's specific area of concern is public sector procurement arrangements. He is right that several issues are being examined with respect to that.

We are setting up a public sector leaseholders working party to deal with the concerns raised. When I met the group that the hon. Gentleman spoke about, I gave a specific undertaking that the working party would hold its first meeting in February and the group seemed very much reassured by that. We hope that the working party will consider some of the issues in detail before coming up with regulations. That should deal with the hon. Gentleman's concerns. If any other issues arise out of the letter, I will respond to them in detail once I have had a chance to examine it. However, I think that the main concerns have been dealt with, whether they apply to clauses 147 or 148.

Question put and agreed to.

Clause 147 ordered to stand part of the Bill.

Schedule 9

Meaning of service charge and management

Question proposed, That this schedule be the Ninth schedule to the Bill.

Mr. Bill Wiggin (Leominster): Schedule 9 consists mainly of amendments to existing legislation that insert the phrase ''or improvements'' after existing references to ''repairs''. Who will decide what is an improvement and whether it is positive or damaging to the value of the property as a whole?

Ms Keeble: I do not have a precise definition of an improvement. I will write to the hon. Gentleman about that to ensure that I do not give a misleading answer here.

Question put and agreed to.

Schedule 9 agreed to.

Clause 148 ordered to stand part of the Bill.

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Clause 149

Statements of account

Sue Doughty (Guildford): I beg to move amendment No. 92, in page 72, line 18, after 'period', insert—

    'on commencement of the tenancy or on notification by the tenant of his intention to terminate the tenancy.'.

The Chairman: With this it will be convenient to take the following amendments: No. 93, in page 72, line 18, after 'period', insert—

    'and on notification by the tenant of his intention to terminate or assign the lease'.

No. 91, in page 73, line 36, at end insert—

    '21A Penalty for non-compliance

    If, on an application made by the tenant to a leasehold valuation tribunal, the tribunal determines that the landlord has failed to comply with the provisions of section 21(1) above, it may award compensation to the tenant in a sum not exceeding three times the service charge for the year in which the non-compliance occurred.'.

Sue Doughty: In moving the amendments, we are trying to draw attention to the problem that arises when a leasehold property is either bought or sold, by ensuring that the clause provides for regular information about service charges in a specific accounting period and a written statement of accounts. When a property is bought or sold, people are effectively under the cosh, trying to make transactions in a timely manner. At that stage, solicitors request statements about standing moneys payable.

Some members of the Committee were present when I raised the subject on the Floor of the House. For those who were not, I will set out some of the problems that are faced when property changes hands. We all know that time is money when people buy and sell. If there is delay, the buyer or seller tends to incur a knock-on cost. He may be waiting to move into a property and so is renting. He may have to travel long distances or be waiting to raise money through the sale. Eventually, there comes a point when it can be easier to accept something than to deal with it.

Unscrupulous landlords have a chance to set charges that bump up the costs to an outgoing owner or possibly to charge for non-events to an incomer. I had that brought to my attention by a solicitor in Guildford who had dealt with several such properties and seen the same events occur repeatedly. For example, a constituent of mine asked for a terminal statement when he wanted to sell his property. He believed that he was owed about £250. After much pressing, he received a statement from the management company claiming that he owed £704.

There are reasons why solicitors tend to advise buyers to go along with the charges. When a flat or house is sold, solicitors have to serve notice on the landlord or managing agents that the property is to be sold and mortgaged and there must be a receipted copy of the notice. If that receipt is refused, the property cannot be sold on, as there must be a clean sheet. Unscrupulous landlords can delay the final statement until the last minute, in the hope or expectation that people will not query the bill, especially if they have had to go through several

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rounds of correspondence merely to get hold of it in the first place. Such landlords hope that no questions will be asked. That is when solicitors weigh up what is in their clients' interests and often advise them to pay up rather than incur further delays.

When a firm of managing agents manages several leasehold properties, the leases of the flats contain a requirement that when a flat is sold the incoming owner should enter into a covenant with the landlord to observe the terms of the lease. However, leases do not state that the covenant has to be in any specific form, or that any costs have to paid to the landlord in relation to it. The managing agents stipulate that they have to approve the deed of covenant and they charge £100 plus value added tax for the privilege of doing nothing. Unless the covenant fee is paid to them, they refuse to register notices of transfer and mortgage. By that means, they regularly pick up £100 plus VAT every time one of the properties changes hands.

Amendments Nos. 92 and 93 belong with the other provisions that suggest that we need correct statements. I assume that the tribunal could consider the situation if the statements were incorrect and that the tenant could take the matter to a tribunal.

We also had substantial concerns about penalties on managing agents, which was the reason for the third amendment. No legislation will be effective without penalties and those should be enforceable. The firm of managing agents that delayed and added unjustified charges in the first case that I mentioned was expelled from the Association of Residential Managing Agents, but there is nothing to prevent it from remaining in business and continuing those practices.

Such exploitation by landlords or managing agents is unjustifiable, opportunistic and near criminal, and we should not rely on regulation to deal with it. Rather, the leasehold valuation tribunal should award tenants compensation at a fair level to provide a disincentive to repeat offenders, who will not want regularly to face a tribunal over the same offence.

In view of the debate in the other place, does the Minister have in mind another form of effective sanction against landlords or managing agents who undertake the activities that I described?

I have relied on the advice of the solicitor who brought the issue to my attention and who believes that such activities are widespread and wrong and go unpunished. That cannot be allowed to continue, which is why we tabled the amendments.

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