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Commonhold and Leasehold Bill [Lords]

Commonhold and Leasehold Bill [Lords]

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Standing Committee D

Thursday 24 January 2002


[Mr. Alan Hurst in the Chair]

Commonhold and Leasehold Reform Bill [Lords]

Schedule 12

Leasehold valuation tribunals: procedure

Question proposed, That this schedule be the Twelfth schedule to the Bill.

2.30 pm

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Ms Sally Keeble): It may help if I explain that the schedule is about the powers of leasehold valuation tribunals and how they can be used. I shall also tackle the main concerns of the hon. Member for Stone (Mr. Cash), expressed through his amendments, which were directions, written representation and power to award costs.

Amendments Nos. 118 to 120 would have amended the provisions of the schedule that deal with the ability of the LVTs to make directions. The Government share the hon. Gentleman's concern that LVTs should be given sufficient teeth to ensure that their directions to parties are obeyed. Again, however, we believe that the Bill already makes adequate provision for that. The amendments would have allowed LVTs to issue directions at a directions hearing. However, it is the usual practice of LVTs to use pre-trial review hearings to issue any necessary directions and, if they see a need, they can also use the review to try to find common ground between the parties. We think that it would only confuse matters to create the concept of a directions hearing as something separate from the pre-trial review.

Amendment No. 120 would have provided that the procedure regulations included provisions that enabled LVTs to enforce their directions by dismissing applications or excluding the whole or part of a party's case if a party failed to comply with them. The Government agree that LVTs greatly need such powers. The lack of them until now has been a constant hindrance to their work and a major factor in the disappointingly long time that it can take for LVT cases to be dealt with.

However, I am advised that the powers in the Bill to make procedure regulations are wide enough to allow us to provide that the LVT may exclude the whole or part of any party's case where that party has failed to comply with directions. Moreover, introducing such a provision might lead courts to interpret paragraph 1 of schedule 12 more narrowly than we would want. I hope that that reassures the hon. Gentleman in terms of directions.

Mr. William Cash (Stone): So many aspects of the Bill bring us close to one another. I do not suggest that the Minister is backing off, as she has expressed her

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view that the proposals should have more teeth. However, I wonder whether the subject is another that should be considered on Report. An article in The Sunday Telegraph showed the feelings outside the House among people who follow such matters when it stated that

    ''Even if the LVT rules in your favour, it has no powers to enforce its rulings and you may be obliged to pursue your freeholder to redress through a county court.''

Such are the prevalent views sculling round the system.

When the salt and clear water get together, it is important that the Minister takes a further step, acknowledges the complications of the problem and none the less ensures that directions will be carried through and enforced. In the spirit of co-operation, with which I hope we can continue, I would be grateful if the Minister considered the matter further.

Ms Keeble: The hon. Gentleman made it clear that he wanted to return to the subject on Report, and we will have a long Report stage during which he can do so.

We have some sympathy with the hon. Gentleman's intentions in tabling amendments to the schedule's provisions on written representations. It is not our intention to deny either party their right to an oral hearing where natural justice requires such a hearing. However, we also do not wish to open the way for Machiavellian landlords to prevent leaseholders from using the written representations route as a way to push up costs and thus discourage leaseholders from exercising their rights.

It may help if I explain our reasons for creating a written representations route, the circumstances under which we consider that it should be used, and how we might encourage that. The written route is primarily aimed at simple cases involving small sums. In such cases, the fees payable for challenging unreasonable service charges may be disproportionate to the sum at issue. For example, disputes about administration charges may involve only relatively small sums. It is not worth spending £300 or more to take a case to the LVT unless substantially more than that is at stake.

In any event, we are considering changes to the LVT fee structure through procedure regulations, so that the fees payable are related to the sum in dispute. That would mirror the approach adopted in the county court. However, LVTs are publicly funded bodies and we have to consider the interests of the general taxpayer when deciding the level of fees. The cost of a full hearing, with three LVT members in attendance, may simply not be justified where only small sums are at stake. One purpose of the hearing fee, which does not begin to cover the full cost of a hearing, is to discourage parties from wasting public funds on cases with little merit or ones that are de minimis.

Many such small cases could easily be resolved by making written representations to a single member with relevant expertise. That approach would reduce the cost of providing the LVT service and enable more cases to be dealt with in a shorter time. We therefore wish to change the fee structure to encourage it. All applicants would still be required to pay an application

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fee, but a further fee would be payable only if the matter was dealt with at a full hearing. The written representation route would therefore be a more cost-effective way to deal with disputes over small sums from the perspective of the Government and that of the parties themselves.

We do not seek to deny either party the opportunity for a full hearing before the tribunal in cases where justice demands it. In some cases, an important principle may be involved even though the amount at issue is modest. However, we see a danger that some landlords may insist on a full hearing simply to push up the costs to a disproportionate level and thus discourage the leaseholder from proceeding. To deal with those conflicting concerns, the procedure regulations will need to set out rules to govern the use of the written representations route. For example, we might provide that the LVT should determine whether the written representations route would be appropriate for a specific case. We would be happy to consider any alternative suggestions that might be made when we consulted on the procedure regulations, however. The hon. Member for Stone will have plenty of opportunity for involvement at that stage.

It is also worth noting that both parties would, of course, have the right to seek leave to appeal to the Lands Tribunal against the decision, whether a full hearing was held or not. The system would be open to abuse if we were simply to make use of the written representations route dependent on the agreement of both parties, so the Government feel that the proposals in the schedule provide the best way forward.

My brief final point is on the power to award costs. Amendments Nos. 123 to 126 would have related to the new power for LVTs to award costs where one party had acted frivolously, vexatiously, abusively, disruptively or otherwise unreasonably, subject to a maximum award of £500. We heard plenty this morning about the possibility of that. LVTs sometimes find it difficult to deal with parties who refuse to comply with directions or who act abusively at a hearing. The new powers provided by paragraph 10 would help them to control the parties more effectively. The maximum sum payable could be increased through regulation, but only with the approval of both Houses. The grounds on which costs might be awarded are deliberately expressed in very broad terms.

In amendment No. 124, the hon. Member for Stone has tried to particularise the circumstances. There are certainly good examples of the sort of behaviour that we would wish to subject to a cost penalty. However, we believe that the provisions encompass all the grounds that the amendment would seek to introduce. Moreover, introducing such detailed grounds might lead courts to interpret paragraph 10 more narrowly than we would wish. Our proposals represent the best way forward.

Hon. Members have sought to empower LVTs to award costs without limits. That would disadvantage leaseholders. When service charge disputes were still a

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matter for the county courts, landlords could intimidate leaseholders with the threat of large bills for costs, as landlords were generally able to afford the best legal advice. Leaseholders doubted their ability to win their cases, even when they felt that they were clearly justified in their challenge, and they often decided not to take their cases to court. That is why the Bill provides for a cap on the maximum sum payable—I would argue that that deals with some of the issues that were raised this morning.

If the cap did not apply, leaseholders might fear that even an innocent mistake in interpreting directions or failure to meet a deadline through some mishap or confusion would lead to a very large costs bill. Those fears would be exaggerated by their lack of previous experience of LVT proceedings. Unscrupulous landlords would encourage such fears and use them to discourage leaseholders from exercising their rights. When the issue was debated in the other place, it was suggested that that concern was not justified, as the proposed amendment would also require the LVTs to consider the financial resources of the offending party when deciding on the award of costs. We do not agree that such an ambiguous limitation would provide sufficient reassurance, nor do we think that it would be better to fetter the discretion of the LVTs in that way. We would not want LVTs to feel inhibited from punishing unreasonable behaviour merely because it might cause a little hardship.

The final amendment in the group was aimed at making it clear that costs can be awarded in accordance with clause 86. When a similar amendment was tabled in the other place, we realised the potential for conflict between clause 86 and paragraph 10 of the schedule, and amended the Bill accordingly. Paragraph 10 now states that costs may be awarded in accordance with specific provisions made under any enactment. That would include the provisions made under clause 86. I hope that that provides the arguments that are needed to persuade hon. Members that the schedule will play an important part in making the LVTs workable and ensuring that leaseholders and freeholders can get proper justice through them, and that it should, therefore, be included in the Bill.


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