Commonhold and Leasehold Reform Bill [Lords]

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Mr. Cash: Would the Minister concede that there was an intermediary position in such circumstances? The question is not merely whether one party or the other should decide that there has been a breach. There ought to be an intermediary opportunity—a stepping-stone operation—to determine the reasonableness of whether a breach has occurred. If she can satisfy us that there is such an opportunity, that will take us further down the route that we want.

Ms Keeble: I think that I can give that assurance, although it is always hard to work out exactly what is in someone's mind. We have a two-stage procedure in which the freeholder has to go to an LVT or a court, with the intention clearly that he should go to tribunal to establish whether there had been a breach before going to the court for the forfeiture. The initial phase

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would act as a stepping stone, and there is a provision under which it will not be possible to issue forfeiture notices without giving the leaseholder an opportunity to rectify the breach. That is a substantial safeguard of the sort that the hon. Gentleman wants. I will return to the other matters that he raises.

Gareth Thomas: My hon. Friend is making important points. The mechanism that she refers to is an improvement on the law as it stands, as it provides an important sifting process. It is intriguing that, provided that the freeholder or landlord can establish that a breach has occurred simpliciter, he does not have to establish the seriousness or nature of the breach. That does not come into the equation. Is that how she understands the requirements of clause 162?

Ms Keeble: The courts would still have to consider proportionality on the application of forfeiture. The first step would be a determination of whether there had been a breach, so there will be an extra step and safeguard for the leaseholder.

I shall take the opportunity to deal with the issue that my hon. Friend raised about unfair contract terms regulations. The regulations may be relevant, but they would apply only to leases granted after they came into force. Bearing in mind that we are producing a new form of tenure—commonhold—one might reasonably expect the bulk of leasehold tenures to exist already. The needs of all leaseholders would not be dealt with. The point has repeatedly been made in the Committee that the most vulnerable leaseholders are older people who have had their leases for some time. That point has been taken on board, and that is the position on the regulations. The measures that I have set out will dramatically reduce the scope for unscrupulous landlords to exploit leaseholders' fears.

10.45 am

The point has frequently been made that it is difficult for leaseholders, particularly vulnerable leaseholders, to exercise their rights. To ensure that leaseholders are fully aware of their rights, it is our intention to amend the Bill on Report to provide a power to prescribe the form and content of a demand for service or administration charges. That will enable us to require that demands spell out leaseholders' rights should they feel that the charges demanded are unwarranted or unreasonable. We will have to come back to that, but it represents a further tightening up to ensure that we do not provide rights that nobody knows anything about. We must make every effort to ensure that people are able to exercise their rights.

However, I accept that there is concern that even those measures do not go far enough. There is a danger that some leaseholders may slip through the net of the safeguards. The only way to ensure that that does not happen would be to get rid of forfeiture completely. We will debate that when we come to consider new clause 12.

I wanted to deal with the points raised by the hon. Member for Stone about the Law Commission, which is one of the agencies that are examining the matter. The commission has been wrestling with the problem of forfeiture for many years. It has been suggested that

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we should include in the Bill a power to make regulations setting out a new regime, allowing us to sort out the details at a later stage. That is not realistic. Among other things, the details of a replacement regime would be controversial—

Mr. Taylor: On a point of order, Mr. Hurst. It is right that the Committee should be unaware of anybody else who may be present in the Room—we are Members, and anybody else is a stranger. However, I have just taken the liberty of sitting in the public seats. The Committee's proceedings are public and open, but it is almost impossible to hear what is going on here from that distance.

The Chairman: That is not strictly a point of order, but I think that we all understand the hon. Gentleman. We must endeavour to ensure that everybody can hear what any Member says.

Ms Keeble: As I was about to say, we have already left several measures to secondary legislation, but to do so in this case would be a step too far. The Law Commission's work has reached quite an advanced stage. It has been developing proposals to abolish forfeiture across the board. One of the major objections to forfeiture is that, in those rare cases where a lease is forfeited, the leaseholder is left with nothing. That is the draconian nature of the penalty.

Shona McIsaac: Will the Minister give way?

Ms Keeble: Allow me to finish what I am saying about the Law Commission in response to the point raised by the hon. Member for Stone. To avoid the leaseholder being left with nothing, the Law Commission is considering the scope for providing for the long lease to be assigned to a third party and for its value to be shared out, which would deal with the points that have been raised about a fairer division of the proceeds. That would remove the unfairness of a system in which all the value of the lease passes to the landlord. The commission is also considering the scope for imposing penalties on landlords who act improperly.

Andrew Selous: On a point of order, Mr. Hurst. I am sorry to interrupt the Minister, but it is clear that people in the Public Gallery still cannot hear. Will you allow them to come up to the green rope, Mr. Hurst?

The Chairman: Order. That is a matter for hon. Members. We should be mindful of our predecessors, who did not have microphones and were able to project their voices. The microphones are being adjusted, and that may resolve any problems of hearing.

Mr. Taylor: Further to that point of order, Mr. Hurst. My hon. Friend the Member for South-West Bedfordshire (Andrew Selous) sought your guidance on whether members of the public could come up as far as the green rope. It occurs to me that the rope is there for a proper purpose. It is a sort of cordon between the Committee and such audience as it may have. I will keep talking as you seek inspiration, which comes in many different, sometimes miraculous ways. The

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substance of my hesitating and shambolic point of order is to inquire of you, Mr. Hurst, whether the public can come forward as far as the rope. I think that they should be allowed to.

The Chairman: If that is the view of members of the Committee, and I sense that it is, strangers may approach the rope, but may not come beyond it.

Ms Keeble: Hon. Members feel torn between the convention that we are not supposed to turn our back on the Chair, as we are supposed to be addressing it, and the requirement to be heard by the public, who happen to be at the other end of a very large room. If you do not mind, Mr. Hurst, I will project my voice away from you and turn my back on you from time to time. I hope that that will also help the hon. Member for Solihull, who I suspect cannot hear me very well either.

Mr. Taylor: I can hear the hon. Lady very well.

Ms Keeble: Good.

The hon. Member for Stone raised the difference between the sanction for leaseholders and that for council tenants. He also asked whether the Law Commission was considering that issue. The issue is the sanctions for non-payment of rent and other breaches of the terms of a lease. That is a vexed question, because there is a difference between a long lease and a short lease. There is also a difference, and this is the rub in this area of leasehold, between a lease with a capital value and one without such a value. Those differences give rise to some of the real problems with leasehold tenure. We are seeking to tackle those problems through reform and appropriate sanctions.

You would probably rule me out of order, Mr. Hurst, if I started to talk about the tactics used by local authorities to deal with debt collection, and I would be reluctant to do so, save to say that where authorities have had a problem with debt collection, they have also used robust tactics.

There is a real difference in the nature of the various leases that we are talking about. I understand that although, from the legal perspective, it is satisfactory to describe both long and short-term leaseholders as tenants, that goes against the grain for people with long leaseholds, who regard themselves as home owners, despite the fact that they do not own the freehold of their property. Those differences have determined the nature of the debate and that is why we have had such robust discussions in the Committee.

I appreciate that the Law Commission has been working on the project for a long time, and that there are concerns about how much longer it might take it to come up with some proposed legislation. However, work on the issue is now well advanced, and the commission plans to introduce revised proposals for consultation in late spring or early summer, with a view to the preparation of a draft Bill during the 2002-03 Session. I hope that that will produce a fairer and more workable solution in the longer term, while preserving the property rights of freeholders and leaseholders.

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Andrew Selous: Will the Minister comment on an anomaly? The law regards leaseholders as tenants because of their terms of tenure, but when it comes to assessing their assets for residential care purposes, the law regards them as possessing wealth through their property. We are, therefore, on difficult ground because the law and the regulations are applied in two different ways. On the one hand, people are tenants, but on the other hand, they are not, because they have an asset the value of which will be taken into account when state provision is decided.

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Prepared 24 January 2002