Commonhold and Leasehold Reform Bill [Lords]

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Shona McIsaac: I not believe that any of the issues are black and white. As legislators, we must ensure that where abuses occur, we do something to prevent them. I will admit that there has been some tightening up in the other clauses that deal with the matter. However, that tightening up does not address the issue of threat, which is pertinent here. Seizure is rare, but the threats are frequent, as I said earlier and as the Leasehold Advisory Service confirmed to me. A ground rent is increased, a notice is issued, but if the payment of that ground rent is a day late, the freeholder has a right to refuse to accept payment and embark on forfeiture proceedings. That is most pertinent to the debate. If the hon. Gentleman is looking for some other supporters for the abolition of forfeiture—

The Chairman: Order. The abolition of forfeiture will be dealt with in the debate on new clause 12.

Shona McIsaac: The Association of Tenancy Relations Officers, which is a national association of local government officers—the hon. Member for Stone (Mr. Cash) mentioned local authorities earlier—supports the abolition of forfeiture. It says that forfeiture is rare but the threat of it is frequent. We must stop people being harassed with the threat of losing their homes.

Andrew Selous (South-West Bedfordshire): Clause 160 is not adequate. It does not go far enough. There are two main reasons why I find it inadequate. We are deeply committed to considerations of fairness, justice and social justice. It cannot be right that someone can lose their home and a large sum of money purely because they owe a relatively minor amount.

I have in front of me a letter containing a section 146 threat addressed to Mr. L. R. Philip of Flat 2, Shanklin court, Hove, East Sussex, who owed only £1,200, but was told that unless the sum was received within seven days, legal proceedings would commence. The final paragraph states:

    ''You should be aware that such action could result in the forfeiture of your lease and the loss of your home. Please ensure that this matter is given your immediate attention.''

I do not accept the argument that, because forfeiture is used only rarely, it is not a problem. If it is used only rarely, I wonder why it is necessary to have it on the statute book at all, given that it means that people must face such worrying and unfair threats.

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Forfeiture is akin to state-sanctioned theft. I have no problem with someone being required to pay a debt that they owe under an agreement into which they have freely entered. However, I have enormous problems with the fact that the law allows landlords to take vastly greater sums than are owed and turn people out of their homes. For those reasons, I find clause 160 inadequate. It does not go far enough and I look forward to our debate on new clause 12.

Gareth Thomas: I congratulate my hon. Friends on the cogent manner in which they have presented their arguments on the clause. I share many of the sentiments expressed, although I would perhaps not go as far as others, because I accept that as a long stop it is necessary to preserve the landlord's right to forfeit in exceptional circumstances. I hope that the Minister will be able to respond constructively to this interesting debate.

If the Government's avowed intention and the Bill's purpose is to deal with the mischief caused by the imbalance of power between the landlord and the leaseholder, why did the Government not import a requirement for proportionality or reasonableness into clause 160? Had they done so, landlords who sought to use the draconian remedy of forfeiture would have to satisfy the court or tribunal that they had met not only the requirements in subsection (2), but the requirement that the grounds for forfeiture were reasonable and proportionate in all the circumstances. I am puzzled that the Government have not introduced that element into the clause.

I am even more puzzled because the Unfair Terms in Consumer Contracts Regulations 1999 apply to tenancy agreements and leases. I refer the Minister to the January edition of Legal Action, the monthly journal of the Legal Action Group. An article by Dermot McKibbin tells us that the regulations apply to leases and, importantly, that the Office of Fair Trading has recently published guidance on the application of the regulations, which require the importation of an element of reasonableness and proportionality before a landlord can take advantage of a forfeiture clause.

The article refers to forfeiture and rent increase clauses, saying:

    ''Private tenants have long been confused by forfeiture clauses in their agreements whereby their landlord appears to be entitled to evict them summarily from the property without any reference to the requirements of the Protection from Eviction Act 1977. The guidance''—

the OFT guidance—

    ''recognises that a landlord may reserve the right to forfeit in the tenancy agreement. However, terms that appear to reserve the right of re-entry for minor breaches are likely to be unfair. Forfeiture clauses need to make it clear that it is unlawful for a landlord to evict a tenant and re-enter the premises without a court order.''

The article suggests that the breach must be sufficiently serious to match the aim of forfeiture, which is to take away someone's home. It is a reasonable proposition that that should happen only in exceptional circumstances, where a very serious breach is perhaps the culmination of many factors over time.

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Given the view that the Office of Fair Trading takes of the regulations, which the Government introduced, why can it not be made explicit in clause 160, in particular, that the breach that forms the basis of the forfeiture proceedings must be serious and that a court must consider forfeiture reasonable in all the circumstances for it to take effect?

Dr. Iddon: Obviously, my hon. Friend supports forfeiture in extreme circumstances, but does he agree with my suggestion that leaseholders should be compensated if forfeiture stays on the statute book and is used in exceptional circumstances?

Mr. Thomas: I understand the strength of that argument, but it might be more appropriate to ask the Minister.

To conclude on what I hope is a valid point, the parliamentary draftsmen could tackle the issue before Report stage. There is surely a lacuna in clause 160.

10.15 am

Mr. Adrian Sanders (Torbay): I rise to support the hon. Member for Bolton, South-East. Two groups want to retain forfeiture: one is represented by the Government, and the Minister will explain why, and the other is the British Property Federation. It is interesting to consider the BPF's case for retaining forfeiture, which states:

    ''Forfeiture remains an important management tool for leasehold property''

and that

    ''it is often the only effective sanction that a manager has over a recalcitrant or unco-operative leaseholder.''

The BPF wants it to be preserved

    ''until replaced with a mechanism which is more appropriate to modern-day property management.''

Even the British Property Federation, therefore, recognises that forfeiture is not an appropriate modern-day property management tool. The BPF also says:

    ''The Federation has no objection to the proposals on forfeiture, although we do not believe that they represent as complete or as effective a proposal for the modernisation of the forfeiture process as was proposed in the BPF response to the November 1998 consultation paper. We understand that the Law Commission is currently working on proposals for a revision of the law on forfeiture and the termination of tenancies.''

It will be interesting to hear what the Minister can tell us about that.

I agree with hon. Members who recognise that the important point is not how often forfeiture occurs, but how often it is used as a threat, and we know from our postbags that it is used continually. My suggested solution—I do not know whether the hon. Member for Bolton, South-East would go along with it—is that we should change the statute to allow the landlord a first charge, rather than a right to seek forfeiture. That is the change that is required.

Dr. Iddon indicated assent.

Mr. Sanders: I am glad that the hon. Gentleman agrees. The Law Society may well be working on changes to the relevant statute.

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Gareth Thomas: The hon. Gentleman makes an important point when he says that the real abuse is not so much that forfeiture occurs in many instances—indeed, it appears not to—but that landlords use the threat oppressively. Does the hon. Gentleman agree that we could make an important improvement to the Bill by introducing a mechanism to penalise landlords who use the threat of forfeiture recklessly, wantonly or oppressively without due consideration to reasonableness?

Mr. Sanders: The problem is how we determine reasonableness. Current law still defends and supports a practice that, to the layperson, seems patently and blatantly unreasonable, but which still occurs.

The greatest differential between the monetary loss from forfeiture and the amount owed exists in regard to non-residential leases, and forfeiture should not be allowed at all in such cases. I would have expected that to have been achieved under the Bill. For long leases, forfeiture could be abolished straight away without an alternative, because the law provides other ways of recouping non-payment of such moneys. In the longer term, there should be a statutory first charge for all leaseholders, which should apply for new leases as well as for existing leaseholders. The hon. Member for Bolton, South-East can be assured that he has the support of both sides of the Committee.

Mr. Cash: So far—it is not over yet—we have had an interesting debate on an extremely important feature of the landscape in respect of leasehold properties. As I said earlier, the Government have added further restrictions to those in the Housing Act 1996. You made it clear, Mr. Hurst, that we would have the opportunity to consider the principle of abolition in the debate on new clause 12, but the debate has already veered in that direction.

I have already said that Opposition Members have considerable sympathy with the cases put forward and the arguments being made. I, too, received a copy of the letter from Fiona MacMillan and from the other correspondents mentioned this morning. Doubtless, they put their arguments also to the Government. The Minister is nodding, so they have obviously received copies. However, the number of letters does not represent a tidal wave.

I listened with great interest to the arguments on proportionality, reasonableness and procedure. They are important matters and cannot be ignored. I agree that some cases are extremely hard, some are extremely bad and some call out for remedy. I take the view at this juncture that the issuing of threats as a mechanism for triggering an unfair and unreasonable response is wrong.

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