Commonhold and Leasehold Reform Bill [Lords]

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Mr. John Taylor (Solihull): You will remember, Mr. Hurst, that earlier in our deliberations I said that it was often a disadvantage to be a lawyer. I said that in a sincere manner rather than a jocular one, and I want to explain it in a simple way. Lawyers are trained to find negatives, flaws and technicalities. The advantage of the layman is that he knows whether a technicality matters in real life. That is the juryman's judgment.

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The lawyer sees a hairline fault in something, but the layman asks whether that fault broadly matters. In the context of the remarks made by the hon. Member for Bolton, South-East (Dr. Iddon), do the technicalities matter? What about the human suffering that he described?

Unusually for me, I want to offer the Committee a layman's observation from my experience. In 22 years of high street practice as a provincial solicitor, I never came across a forfeiture case, with either the freeholder or the leaseholder as my client. I ask the Committee to acknowledge that sense of scale. It will arrive at decisions on the clause, so I ask it to consider how wide the grievance is and how many people are affected by it. I will not answer my own questions; I merely place my humble experience in aid of the Committee.

I shall deal with the clause, which I know is what you want me to do, Mr. Hurst. Subsection (2) breaks down into three paragraphs. Paragraphs (b) and (c) are linked by the word ''or'', but no ''and'' or ''or'' links paragraphs (a) and (b). Do paragraphs (a) and (b) or paragraph (c) have to be fulfilled, or is it only one of paragraphs (a), (b) or (c)? I do not know whether we need just one of those three options to be fulfilled or whether we need two of them. It would be helpful to know whether paragraph (a) should be linked to paragraph (b) by an ''and'' or an ''or''.

The explanatory notes do not help me. The (a), (b) and (c) options are set out on page 54 without any ''ands'' or ''ors'' at all. At least the Bill is superior in that there is an ''or'' between paragraphs (b) and (c). Looking at paragraph 278 for further guidance on (a), (b) and (c), one finds that it refers to ''i or iii above''. The author has lost sight of whether he is using small letters or roman numerals. That is an unhelpful state of affairs. I am a simple Back-Bench Opposition Member, but I seem to have found a weakness and I should be glad if someone would explain it to me.

Shona McIsaac (Cleethorpes): I am in favour of the abolition of forfeiture. The problems associated with it have been well demonstrated by my hon. Friend the Member for Bolton, South-East, and, on Second Reading, by my hon. Friends the Members for Brighton, Pavilion (Mr. Lepper) and for Brent, North.

Section 146 notices can allow the seizure and sale of a person's home to pay a debt. That right can be abused by the unscrupulous, but we have heard that good landlords do not need to resort to it—there are many other ways in which moneys owing can be retrieved. People's homes are not often seized, as my hon. Friend the Minister mentioned, but the fact that the law allows someone's home to be seized is, surely, against natural justice in an age when there are alternative means of obtaining money that is due.

Dr. Julian Lewis (New Forest, East): One reason why homes are not seized is that the threat alone is often enough to cow the tenant into compliance. I know of a case in which someone stood out against the threat of forfeiture and the landlord backed off. In the meantime, however, other tenants in the same building had caved in, probably unnecessarily, but they dared not take the risk of resistance.

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Shona McIsaac: I thank the hon. Gentleman for that intervention. I was coming to the threat of seizure, as it is pertinent to this morning's discussion. While cases of seizure are few, the threat of it can be used extensively and it can be used by the unscrupulous as a way of getting a great deal of money.

In some cases, after the lease of a house has been transferred, the new freeholder writes to the tenant to say that the rent is now X, they have breached their covenants because they have done X, Y or Z, or they have not paid the ground rent. They then say, ''You could risk losing your home if you do not pay this.'' That is bullying. It bullies people into paying large amounts of money—because of the risk of losing their homes, they are so scared that they simply cough up.

As my hon. Friend the Member for Bolton, South-East said, leases can be drafted to include the words, ''by way of further rent''. That gives the freeholder the right to issue legal proceedings for forfeiture without a dispute over the service charge being resolved, either in a court or before a leasehold valuation tribunal. That is pertinent to the clause because such freeholders threaten action before a breach has been determined. That is akin to criminal harassment for money.

According to the law—the Leasehold Advisory Service has confirmed this—if the ground rent is a day late, that can constitute a breach. Even if the leaseholder then, a day late, decides to pay the £2 or £4, it can be refused and proceedings started.

Gareth Thomas (Clwyd, West): Does not the case that my hon. Friend cites illustrate the need for a test of proportionality or reasonableness to be introduced into the clause, even if the Government are not prepared to go so far as withdrawing the remedy of forfeiture which one can, perhaps, accept is a remedy that should be available to a landlord in the last resort?

Shona McIsaac: I totally agree with my hon. Friend. We must introduce proportionality into this. That is why many of us feel so strongly about forfeiture and the threats that are used before any determination of breach has been reached in either the courts or the leasehold valuation tribunal.

My hon. Friend the Member for Bolton, South-East mentioned a letter from the Council of Mortgage Lenders, which represents more than 98 per cent. of the residential lending market. It states:

    ''On many occasions, lenders have unwillingly had to become involved in disputes between leaseholders and their landlords, invariably because the landlord has threatened forfeiture action against the threat. This usually arises where the two parties cannot resolve the position and forfeiture is used as a severe method of recourse that can ultimately lead to the leaseholder losing their home and the lender losing its security.''

So, it is not just the poor homeowners being threatened—financial institutions, such as building societies and banks have their security threatened too. That is why they so strongly support reform or abolition of forfeiture.

I think that I have demonstrated my strength of feeling on the matter. The Government do not, at this stage, want to abolish leasehold as a form of housing tenure—many of us have campaigned for abolition for

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some time—and they do not want to abolish marriage value either. Perhaps they can offer an olive branch and abolish forfeiture.

Mr. William Cash (Stone): So far, no mention has been made of council houses. In my constituency, people have been evicted in some pretty horrendous circumstances. I want to be sure whether the considerations that are being applied to the private landlord will automatically—in the minds of those who deal with these matters, whether or not the term ''forfeiture'' is used—be expected to apply to local authorities in cases of non-payment of rent and breaches of the rules prescribed by that authority.

I am not trying to make a provocative point, but I want to enlarge the debate. We must bear in mind that certain rules and regulations, whether they are called covenants or rules, apply to people living in properties. I just want to know what the Government's reaction would be to the suggestion that where there is a breach of such rules, there would be no way of using some form of contractual enforcement analogous to forfeiture.

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I am trying to enlarge the debate, because the matter involves some important considerations. The Government will probably find that there is more sympathy among Conservative Members who have not yet spoken for the proposal than they might imagine. The issue will be important and it will not be resolved by generalities. I should be grateful if the hon. Member for Cleethorpes (Shona McIsaac) would respond to my point, but perhaps she does not want to at the moment.

Shona McIsaac: The cases of council house tenants and owner-occupiers of leasehold properties are very different. It is always a tragedy when somebody loses their home, but local authorities or housing associations can seek to recover rent in cases of non-payment. If a council tenant falls into arrears with the rent or service charges or if a person has purchased a freehold and is struggling with the mortgage payments, most building societies and banks or local authorities do not come back two days later and threaten such people with the loss of their home. They usually go to extraordinary lengths to come to some sort of accommodation with them.

When people are in rent arrears on council properties, councils do not evict after day one. The local authority owns the property. I will discuss the different standards applied to council house tenants and leasehold tenants in relation to marriage value and purchase price. Draconian threats before there has been any determination of breach must be avoided. With council house tenants and those with mortgages on freehold properties, one has to determine that there has been a breach before any action can be taken.

Mr. Cash: Has the hon. Lady examined clause 159, which says that someone with a long lease is not liable to pay ground rent unless the landlord has issued a

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notice in accordance with the requirements of that clause? I am engaged in a process of inquiry. The hon. Lady mentioned ground rent before. There are restrictions in the Bill and we all want it to work.

Clauses 160, 161 and 62 deal with forfeiture on failure to pay service charges and already contain increased safeguards for tenants and the leaseholders. I refer back to your wise remarks, Mr. Hurst, about some of the examples that have been given, which raise some serious questions. Make no doubt about it, I have great sympathy with the hon. Lady's arguments. I simply want to return to whether it is a black and white issue.

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Prepared 24 January 2002