Commonhold and Leasehold Reform Bill [Lords]

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Shona McIsaac: Does the hon. Gentleman believe also that it is wrong that the leaseholder should have to pay for the issuing of that threat? A letter saying that section 146 proceedings are about to be issued incurs a charge to the leaseholder. The Leasehold Advisory Service estimates that it can cost between £300 and £700 plus value added tax for debts that are often as little as £20

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Mr. Cash: I have no doubt that there is a great deal of inequity in the manner in which the business is carried out. That is why, in a responsible manner, I am showing a good deal of sympathy for a significant appraisal of the position.

We heard the views of the Office of Fair Trading, which was another important contribution to the debate. We heard also that the Law Commission is considering the matter. However, the provisions of the Law Commissions Act 1965 sometimes need a bit of a rocket thrust, because it can take an incredibly long time for questions to percolate through the system. For instance, I remember interminable debates over chancel repairs—it is a mediaeval law, and once upon a time, I studied mediaeval law at Oxford.

Shona McIsaac: In the mediaeval period.

Mr. Cash: Yes.

I am well aware that forfeiture is a penalty as old as the concept of property; it is an ancient provision. It is there as a bottom line because it has been assumed that, as we have moved from the feudal system, to wider property-owing arrangements and the present day, there is a bottom line somewhere, as there is in every contract. We are considering how best to arrive at a point at which we can be not only fair and sympathetic but just to the unfairly treated leaseholder, where the threats amount to a legalisation of domineering behaviour that could be construed, in other aspects of life, as no more than criminal activity. In certain instances, it is as bad as that. I have a great deal of sympathy with that view.

At the risk of referring back to earlier proceedings, when my family founded the Abbey National building society in the mid-nineteenth century, it was largely due to the desire to spread property-owning opportunities to people who would not, otherwise, have been able to purchase houses—these are matters of social justice. There is a great deal to be said in favour of straightening out the problem of forfeiture. I was encouraged by the fact that the British Property Federation accepted that forfeiture is an inequitable right that could provide a landlord with a substantial gain. It also emphasised the necessity for a proper remedy for breaches of covenant. We must bear in mind that, in a nutshell, there are people who will exploit their tenancy—whether it is with a building society, on a council estate owned by a local authority, or it is a new form of tenure that has been created in the past few decades—sometimes at the expense of what is fair and reasonable.

Shona McIsaac: If somebody is exploiting a situation, would it not also be fair and reasonable to take him to, say, a magistrates court, rather than threaten to seize his home?

Mr. Cash: Where and how it is to be done relates, as I said before, to the maxim, ''Justice is to be found in the interstices of procedure''. There are means of achieving our objectives and I am not satisfied that the Bill does enough. That is a starting point.

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Mr. Sanders: Does the hon. Gentleman agree that the key word here is ''proportionate''? What we have at present is disproportionate to the offence and we need to find a remedy that is proportionate.

Mr. Cash: Yes, I have considerable sympathy with that view; I used the word ''proportionality'' myself. That is the expression that was used in the papers produced by the Office of Fair Trading. This is an important debate, and it is incumbent on me now to wait until I hear what the Minister has to say. I am sure that she has sensed that we are all—I do not think that there is a single person on the Committee who is not—broadly in sympathy with the arguments that are being advanced. If we can strike a balance and get the social justice element of this right, without completely upsetting the framework in this complicated area, we shall have made substantial progress. Maybe we shall return to it on Report. I must hear what the Minister says before I make my concluding remarks.

10.30 am

Ms Keeble: We have had a helpful and thoughtful debate. I recognise the strength of the views that have been put. This is not the debate on new clause 12, and you have indicated, Mr. Hurst, that you are not happy about our straying into a widespread debate on forfeiture. I shall bear that in mind. I should also point out to the Committee that the clause that we are debating provides a further safeguard for leaseholders. People might fear that it is not enough, but we have not yet reached forfeiture. To strike out an improvement to the current situation would, arguably, leave us in an even worse position. I urge hon. Members to focus on what we are talking about, which is an important further safeguard for leaseholders.

We accept the widespread concern about forfeiture. The hon. Member for Stone is right in saying that views have been heard by the Government from a number of people. My hon. Friend the Member for Bolton, South-East set out a thoughtful and careful critique. We have also heard some distressing examples of leaseholders who have fallen foul of the system. I would add a slight caveat about the Camden case—it is complicated and we are aware of it. The hon. Member for South-West Bedfordshire (Andrew Selous) set out a routine example of the way in which forfeiture can be used; a number of us have experienced such cases.

Forfeiture is a draconian penalty. Many people feel that it is unfair that a leaseholder can lose his home, possibly for the non-payment of a relatively modest debt, while the landlord obtains a windfall profit. The hon. Member for Solihull (Mr. Taylor) raised a number of issues, including the fact that in all his time as a lawyer he had not come across a case of forfeiture. It is true that, because of its draconian nature, the courts are reluctant to grant forfeiture unless the leaseholder has failed to take advantage of opportunities to remedy matters. However, circumstances can arise—for example, if a leaseholder is in hospital for a long period—in which the

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leaseholder does not get the opportunity to resist a forfeiture claim, and that can have disastrous consequences.

Dr. Lewis: In the case of Miss MacMillan, who has written to all of us, what appears to have happened is that the judge simply got the law wrong and did not resist the granting of forfeiture, as would, perhaps, normally be the case. There is no way of going back even though she has, apparently, been advised by better qualified lawyers that the judge made a mistake.

Ms Keeble: I do not want to comment on the intricacies of that case. The hon. Gentleman has given the explanation and that will stand on the record.

In addition—as a number of Labour Members have mentioned—forfeiture enables landlords to practise a wide variety of abuses. Leaseholders who feel that they are at risk of losing their homes, even if the risk is a relatively remote one, are particularly vulnerable to exploitation. The hon. Member for South-West Bedfordshire demonstrated the scale of the problem for people who receive a bill and are told, ''Deal with this or you will lose your home.'' That can be a greater or lesser threat depending on the knowledge and attitude of the person involved; for those who are vulnerable, it is a substantial threat. My hon. Friend the Member for Cleethorpes has frequently made that point, particularly in relation to some of her elderly constituents.

Mr. Bill Wiggin (Leominster): In the way in which the Minister phrased that, that would also apply to freeholders who did not pay their mortgages. The freeholder in both cases is liable only to the first charges, as was suggested by the hon. Member for Torbay (Mr. Sanders). That is the key difference.

Ms Keeble: I will deal with some of the differences when we discuss the Law Commission. The difference between leasehold and freehold is partly the reason why the Council of Mortgage Lenders and others have taken different attitudes to the power.

Demands for unreasonable charges are frequently phrased in threatening terms and leaseholders are intimidated into paying up. They do not even have to be especially threatening for people to pay up. I do not want to go into the argument about the abolition or otherwise of forfeiture, as we will return to the subject. The Bill focuses attention on the main abuses associated with forfeiture and considers ways in which to prevent some of them and improve the situation. Abuse goes wider than forfeiture alone. Throughout our proceedings, various scams and practices have been highlighted that have caused problems for leaseholders.

The main problem is that landlords have been able to use the threat of forfeiture to exploit leaseholders. Fear of losing their homes means that leaseholders have been reluctant to challenge unreasonable charges or unfounded accusations of breaches of covenants. We see that as the most pressing priority, and the Bill includes several measures intended to prevent such abuses. One of them is in clause 159. It relates to

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written demands, and a string of debates in Committee have dealt with the nature of notices and advice. We have given assurances on the subject.

Shona McIsaac: The Minister mentioned clause 159. Under that clause, notification has to be given of when ground rent is due, but does she agree that that does not get round the problem whereby the freeholder can say that the leaseholder has breached his covenant, even if the ground rent is only a day late?

Ms Keeble: I will not get into a great discussion of clause 159, because we have dealt with it. When we deal with regulations, we will carefully consider the form of a notice. We intend to include a requirement to spell out leaseholders' rights. The Bill improves those rights considerably.

That brings me back to clauses 160 and 161. They prevent the commencement of forfeiture proceedings, including the issuing of notices under section 146 of the Law of Property Act 1925 that are often phrased in threatening terms, for breaches of covenant unless a leasehold valuation tribunal or court has determined that a leaseholder is in breach of their lease and has been given a period to rectify the matter. Clause 162 similarly prevents commencement of proceedings for non-payment of service charges or administration charges, unless an LVT or court has determined that the sums claimed are legally payable and reasonable.

I was asked about proportionality, which courts would have to take into account. There has been some discussion about the sequence of events, and the fact that someone could be tipped into forfeiture without any chance to put the matter right and that costs might be involved. Under the Bill, it will not be possible any more for people to issue forfeiture notices without giving the leaseholder an opportunity to rectify the breach. Therefore, the cost of issuing a forfeiture notice will not be incurred until after the leaseholder has had an opportunity to put matters right or to challenge the breach. It is not as though the leaseholder will not have a chance to deal with the matter without a by your leave, which is an issue that many hon. Members have raised. That is an important safeguard.

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Prepared 24 January 2002