Commonhold and Leasehold Reform Bill [Lords]

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Ms Keeble: I will not go too far down that road, although, as I said, there is an important difference between short-term and long-term leases, in that long-term leases have a capital value, and people pay a capital value for them. To deal with the point raised by my hon. Friend the Member for Cleethorpes, one difficulty with the form of tenure that we are discussing is that the asset's value declines. People with a short-term lease have difficulties because the capital value of their lease has declined over the years, which, in some ways, appears to be a contradiction in terms.

A further complication, which explains why the Council of Mortgage Lenders and others take the attitude that they do, is that their security rests in the capital value of the lease. Even a short-term tenancy will have value, but there is a difference between the leases.

Mr. Wiggin: If the mortgage companies have a claim over the lease, as the Minister suggests, we need not await the Law Commission's draft legislation. The law surely already allows companies to repossess a property for failure to pay. We do not need forfeiture in the form that it takes in the Bill; we must simply adopt the present structure, which gives companies the relevant rights.

Ms Keeble: Again, I do not want to stray too far into a discussion of that issue. The nature of the security and the interest are different. The freeholder owns the freehold of the property, which is different from being a mortgage holder. I do not want to get too far into the difficulties because I would probably box in the Law Commission, the Council of Mortgage Lenders and the House. The issue is complex, and we need to put in place workable provisions—not ones that merely appear to work to the outside world. That explains why it is important to wait for the Law Commission to work everything through and make proposals, and we have, indeed, been given important assurances on time.

Having said all that, I appreciate the strength of feeling on the issue. I know that hon. Members feel that the Bill contains important measures to tighten up provisions for leaseholders, and clause 160 is a step forward, not a step backwards for leaseholders' rights. Equally, however, I understand why hon. Members want further safeguards to deliver better protection for leaseholders now and do not want to wait to hear what the Law Commission has to say. I assure hon. Members that I shall reflect carefully on their arguments, with a view to considering further amendments on Report.

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Shona McIsaac: Will my hon. Friend give way?

Ms Keeble: No, I am just finishing. We shall consider amendments to meet hon. Members' concerns.

Mr. Taylor: Will the hon. Lady deal with my question?

Ms Keeble: Yes, I am sorry—I should have done so ages ago. The wording should be ''or'', ''or''. One of the three conditions must be met.

Mr. Taylor: In that case, I must beg the Minister to give way.

The Chairman: Order. Is the Minister giving way?

11 am

Ms Keeble: No. I was on my last sentence. I apologise for not having clarified the point earlier.

We shall consider amendments to provide further safeguards. We urge hon. Members to support the measure, which is a step forward, not backwards for leaseholders.

Mr. Taylor: I cannot leave the issue at that. Unless the Minister makes the position very clear, I shall seek to adjourn the Committee until we get an answer. The whole point about clause 160 is that paragraph (1) is the operative provision. Paragraph (2) explains when paragraph (1) is satisfied. There are three paragraphs, (a), (b) and (c). Paragraphs (b) and (c) are linked by the word ''or'', but (a) and (b) are linked neither by the word ''and'' nor by the word ''or''. The Minister tentatively said that there should be an ''or'', and I want her to make that absolutely clear. Can I have an assurance that an amendment to that effect will be tabled on Report?

Ms Keeble: I am sorry that I did not intervene earlier, as I intended. I give an absolute assurance that there should be an ''or'' after paragraphs (a) and (b) and that only one of the three conditions must be satisfied.

Mr. Taylor: No, not after (a) and (b), but between (a) and (b).

Ms Keeble: Sorry, the ''or'' should come after (a) and before (b). The clause should read, ''(a) it has finally determined on an application under subsection (4) that the breach has occurred, or (b) the tenant has admitted the breach, or''.

Mr. Taylor: I am very much obliged.

Mr. Cash: We are reaching the end of this important debate, and I want to make one or two points that have not been mentioned.

During the consultation process, the British Property Federation had several additional thoughts about how to resolve matters. It accepted that forfeiture was an inequitable right, but said that landlords should have an effective remedy for breaches of covenant. It went further, however, as regards the level of arrears. None of my comments are intended to prejudice our consideration of these issues, as we move towards Report stage. No one doubts what issues are

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at stake—the importance of proportionality, achieving a balance with social justice and so forth. We must, however, be practical. The BPF said that it would support the introduction of a minimum level of arrears and/or a minimum time for which arrears must be outstanding before proceedings could be taken. That is another thought to throw into the pot.

The BPF suggested that a series of procedures could be developed to enable property managers to take quick and effective action to enforce covenants in a lease.

It has not yet been said what would happen if premises were being used for criminal activity. Leases have covenants against criminal activity or causing injury or nuisance, and environmental questions could arise. A whole stack of serious questions could arise. For instance, a person could be engaged in activities contrary to the provisions of the lease that were blatantly criminal, such as drug use on a massive scale—or on any scale—or child abuse. That must all be taken into account.

Shona McIsaac: We could send them to prison.

Mr. Cash: The hon. Lady says that we could sent them to prison, but that would not prevent someone else from moving in and continuing the practice. We must consider such questions, because the bottom line of forfeiture is whether, in extremis, people can be removed because they have broken their promises. A covenant is a promise that a person will pay a certain sum in a certain manner in certain circumstances. The criminal law would certainly apply against freeholders in possession—I agree with that—and leaseholders.

It is rather encouraging that we should have discussed those questions transparently and objectively, but we must take account of the fact that going further down that line and tightening up the arrangements will take us into the sort of territory that I have mentioned.

Mr. Sanders: Two issues are becoming confused. One is eviction, and the other is the confiscation of assets. We should be concerned about the first, not the second. That is what we want to see removed.

Mr. Cash: I do not dispute that, but I am making the general point that the question of eviction can depend on the behaviour of the person on the premises. Let us not go further into that question. The confiscation of assets, taking away the drugs, the money and so on is, of course, one aspect of the problem; but we are also dealing with the question of whether, in relation to blocks of flats, leasehold houses or other premises, others in the neighbourhood are being severely prejudiced by the fact that some people in the premises are behaving in a manner that is totally out of court. I do not want to develop the argument further. I put that point in merely as a back stop.

The Association of Residential Managing Agents and the Royal Institution of Chartered Surveyors suggest a forced sale—I am sure that the Minister is familiar with the idea—that would allow the landlord

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to recover the full entitlement for breach of contractual obligations and the leaseholder to remain in possession of the balance of the equity.

Shona McIsaac: Has the hon. Gentleman looked at the DETR guidance issued in January 2000 on the Government's proposal for this part of the Bill? It states:

    ''We accept the need for effective sanctions against defaulters. But we do not believe it is right that a landlord can gain a windfall profit by obtaining absolute possession at the expense of the leaseholder. Instead, we propose that where the landlord obtains possession, the leaseholder should be compensated for the loss of his interest after deducting monies owed to the landlord.''

Has the hon. Gentleman seen such a provision in the Bill?

Mr. Cash: The hon. Lady has had ample opportunity to direct that point where it could be most effectively directed, which is to the Minister. That is the purpose of the exercise. However, I am glad that she has used me vicariously to make the point. If it bounces off me to the Minister, I am sure that she will take it into account.

We do not need to enlarge on the subject. We can debate it further on new clause 12. I have heard a lot of very interesting propositions. Opposition Members are giving sympathetic consideration to shifting the argument to a point that will be within the realms of proportionality, but also will ensure that proper social justice goes with the arrangements. I believe that that is the sense of the whole Committee.

Question put and agreed to.

Clause 160 ordered to stand part of the Bill.

Clauses 161 to 165 ordered to stand part of the Bill.

Schedule 12

Leasehold valuation tribunals: procedure

Mr. Cash: I beg to move, amendment No. 114, in page 124, line 31, after 'tribunal', insert

    'and to any such other party as the leasehold valuation tribunal may direct'.

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