Commonhold and Leasehold Bill [Lords]

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Dr. Iddon: I have considered it, and the hon. Gentleman is ahead of my summary of my current position on the issue. I have listened to his arguments that there are other cases for forfeiture. I was dealing just now solely with forfeiture for breaches of covenant connected with failure to pay service charges or ground rent. Landlords have taken action against people for paltry sums; this morning I mentioned a sum of £200—less, in fact—in respect of a property worth more than £70,000. There are other mechanisms for retrieving such sums. Hon. Members mentioned a charge on the property and the hon. Member for Stone gave other options. The Government need to consider those options before Report.

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Dr. Julian Lewis (New Forest, East): Is not part of the problem the fact that the freeholder can be judge, jury and executioner in his own right? He can set a cost to the leaseholder at a rate that is manifestly unfair, but then wave this nuclear option of forfeiture in the face of the leaseholder if the leaseholder protests. I am sure that that happens all the time. The fact that forfeiture is not used very often does not signify anything—nuclear weapons are not used very often, but many of us feel that that is because they serve their purpose of deterring mischief in the first place.

Dr. Iddon: I have listened to the hon. Gentleman comments and of course I understand. At the very least, the Government should deal with the question of compensation. It is most unfair that a person can have taken from him a house that has gained in value in the many years that he has lived there, but he does not gain a penny when forfeiture is used. I am reluctant to drop the new clause, but I am prepared to defer its consideration until Report, which will give the Government time to come up with some commonsense proposals, preferably by way of Government amendments. I beg to ask leave to with withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 13

Low rent test: extension of rights

    .'. In Schedule 9 to the Housing Act 1996 (low rent test: extension of rights), after subsection (3)(c) of paragraph 1 (1AA) insert '', and

    (d) the freeholder satisfies a leasehold valuation tribunal that the house is integral to the management of the estate concerned and has been leased on terms relating to that purpose.

    (4) An application to a leasehold valuation tribunal in accordance with paragraph (d) above shall be made by the freeholder within two months of his receipt of the relevant notice of the leaseholder's claim to enfranchise under the terms of this Act''.'.—[Shona McIsaac.]

Brought up, and read the First time.

Shona McIsaac: I beg to move, That the clause be read a Second time.

This is a fairly simple clause relating to rural properties. It deals with estate houses. There is a loophole that unfairly discriminates against former estate houses that have been sold on leasehold; because they are on estate land—not council estate, but estate in the landed gentry sense—their owners cannot enfranchise under current law. In the new clause, I suggest that the owners of any properties other than those that are integral to the management of the estate should be entitled to enfranchise. I hope that my hon. Friend will consider accepting my new clause.

Ms Keeble: The rural exemption exists to prevent the break-up of country estates. When the right to enfranchise was first extended to leaseholders who could not pass the low rent test, it caused great concern among some rural landowners. They argued that they would not have leased houses that were an integral part of their rural estate had they thought that there was a risk of the properties being permanently detached from the estate. The Government accepted that argument.

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We have some sympathy for the suggestion that the rural exemption should be amended so that it is better targeted on the properties that we want to exempt. The reasoning behind the exemption is, however, not linked to the way in which a rural estate is managed and has more to do with the long historic association between certain houses and rural estates. Moreover, it would not be right to amend the rural exemption without first consulting the interested parties. We cannot, therefore, realistically resolve the issue in time to deal with it during the passage of this Bill.

Shona McIsaac: I thank my hon. Friend for that explanation, and I am glad that she acknowledges that there is a loophole that needs to be sorted out. I hope that she will consult and introduce proposals in future. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 14

Tenants of houses on long lease to have first right of refusal on disposal

    '.—(1) Section 1 of the Landlord and Tenant Act 1987 is amended as follows—

    (2) In subsection (2), before paragraph (a) insert—

    ''(za) they consist of an individual house;''.'.—[Shona McIsaac.]

Brought up, and read the First time.

Shona McIsaac: I beg to move, That the clause be read a Second time.

Compared with valuation price, original valuation and marriage value, the philosophy behind the new clause proposal is pure and simple: the right to purchase a freehold of which the landowner voluntarily disposes should be offered first to the leaseholders in houses before going on to the open market. Such a right exists for leaseholders in flats.

I have another excellent departmental booklet, entitled ''Right of first refusal for long leaseholders and other tenants in privately owned flats''—I find intriguing the use of the words ''privately owned'' in this context. The introduction states that such tenants have a right of first refusal and that a landlord who does not allow them that right commits a criminal offence. Leaseholders in houses do not have that right and, although I have been through the relevant debates, I can find no objections to their being given it. The Government's response to the consultation process, as set out in the DETR leaflet of January 2000, refers to the right of first refusal, saying:

    ''We propose to extend the right to houses. The current definition of qualifying tenant applies to regulated tenants as well as long leaseholders. We propose to further extend it to assured tenants, who have a similar long-term interest in the building, but not assured shorthold tenants.''

I should like the Minister to agree that that is sensible and would create a level playing field between houses and flats.

If we offer the right of first refusal to leaseholders in houses, we shall avoid some of the abuses and sharp practices that many hon. Members have detailed. For example, if a landowner wanted to sell off a whole estate or a block of streets—that is not unusual—he would have to tell the freeholder. Neither the special

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valuation basis nor marriage value would be relevant if there were right of first refusal. New landlords would not have the ability, as they have now in respect of houses, to write to all the tenants to explain who they are and to try to set new ground rents. In their attempts to get money, they go over the covenants with a fine-toothed comb to see whether there are any breaches.

The right of first refusal would help to avoid scams, especially the insurance scams that we talked about on Second Reading, so I hope that the Government will accept the simple new clause. It would merely create a level playing field between flats and houses.

3.45 pm

Ms Keeble: The new clause is an admirable attempt to extend the right of first refusal to houses but, unfortunately, the issue is more complex than it might seem on the face of it. The Landlord and Tenant Act 1987 was designed with flats in mind, and we would need to make many complex amendments to it to apply it to houses. Indeed, it might be simpler to start afresh—after all, we have two different Acts for enfranchisement, one for houses and one for flats. I do not mean start afresh with the Bill, which has already been debated twice elsewhere and once in this House. If we threw it out, it would try the patience of a House full of saints, which this House is not.

In principle, we agree that it would be desirable to extend the right of first refusal to houses. Realistically, however, there is only so much that we can do in a single Bill. We cannot deal with that matter in this Bill. We have reluctantly concluded that we will have to leave the matter for another day, so I urge my hon. Friend to withdraw the motion.

Shona McIsaac: I thank my hon. Friend for that explanation. I said that the matter was simple but I accept that it would be tricky to amend the 1987 Act, which was designed for flats. The provisions on the subject are far simpler than many of the issues that we have debated, certainly in comparison to the rest of leasehold legislation. That is not to say that anything to do with leasehold is necessarily simple.

I am glad that my hon. Friend agrees in principle that the right of first refusal should be extended to houses. She states that legislation might be introduced to deal with the matter specifically, as it cannot be included in the Bill. If we were to do that, what time scale is likely?

Ms Keeble: It would be completely impossible to give a time scale. We cannot predict what will be in a Queen's Speech.

Shona McIsaac: I thank my hon. Friend for that answer. I did not expect her to say that she thought that we could do it next week, but I think that we must create a level playing field as soon as possible. It would be desirable to give people in leasehold houses the same rights as those in flats. I shall reserve judgment until Third Reading, when I may return to the subject. I shall not press the new clause now, but I hope that

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my hon. Friend will say on Third Reading that she agrees in principle with the right of first refusal.

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