Mr. Cash: On Second Reading, I said that I thought that a powerful case could be made for consolidating the law on leasehold and all that goes with it. I am not generally in favour of consolidation Bills with amendments, but for the reasons given by the Minister, that is a salutary example. However what may seem to be a good idea can create mayhem in relation to legislation. They say that the House of Commons in the only lunatic asylum run by the inmates. If we were to attempt to disentangle legislation for the purpose of this provision, we would probably stand guilty of the charge.
Shona McIsaac: I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
New clause 15
Insurance provision under a lease
'(1) Any provision in a lease of a dwellinghouse to which this Act applies, whensoever created, requiring a tenant to insure with a nominated company and through the agency of a lessor (or both) or any other person, firm or company shall be void.
(2) Such provision shall continue to be in force so far as it relates to the insurance of a dwellinghouse against the usual household risks for the full reinstatement value and index-linked with any reputable insurance company.
(3) Where there is included in a lease of a dwellinghouse (other than a flat) to which this Act applies whensoever cleared a covenant by the Lessor to insure with right of recovery from the Lessee by way of additional rent or otherwise of the cost then the Lessee shall be entitled to give notice in a form prescribed and in accordance with regulations made by the Secretary of State whereupon the lease shall from the date specified in such notice be read and construed as if there were a covenant by the Lessee to insure in accordance with the terms of the covenant henceforth to be performed by the Lessee who shall produce on reasonable notice to the Lessor or his agent the policy of insurance and the receipt for the current premium paid, the covenant to insure by the Lessor no longer being of effect.'.—[Mr. Sanders.]
Brought up, and read the First time.
Mr. Sanders: I beg to move, That the clause be read a Second time.
The Chairman: With this it will be convenient to discuss Government new clause 17—Insurance otherwise than with nominated insurer.
Mr. Sanders: We thought it important to table the new clause because of the insurance-related abuses that have come to our notice. It is good to see that the Government have tabled a similar new clause. I shall speak first to new clause 15.
The problems experienced by leaseholders include having to use insurance companies nominated for leases granted many years—companies that no longer exist, or whose names are difficult to identify due to amalgamation, merger or reconstruction. The strict terms of the covenant in respect of nominated insurers are not always in force, and in some instances the rules are not applied; but if they are, it can seriously disadvantage the leaseholder. For example, a new landlord, by purchase of a ground rent, can bully, cajole and hassle tenants by seeking to enforce the strict terms of a covenant, and disrupt long-standing arrangements to gain commission.
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Sometimes, double insurance is the result, with the complication of not knowing which company is providing cover in the event of a claim. Furthermore, changing insurer can cause serious loss to a lessee who has established a good record with an insurer. For example, something previously insured, such as subsidence—a common problem in some parts of the country—may not be covered by a new insurer. The lessee may feel aggrieved if the new insurer does not offer such comprehensive cover as the previous insurer.
Existing legislation provides for a lessee to refer the matter of insurance to a local LVT on the grounds that the insurance policy is unsatisfactory or the premium is excessive. However, that will not assist a lessee who wants the existing insurance cover to continue if the new landlord, by purchase, seeks to disrupt the arrangement. Most lessees will not wish to incur the expense of a reference to the tribunal. In a written reply on 10 July 2001, the Minister disclosed that since September 1997, when tribunals first gained jurisdiction, about 60 cases had been referred to them by lessees concerned about insurance.
The new clause is in keeping with modern consumer choice. It would give people a preference. Their choice of insurer should not be dictated by the freeholder. The intense competition in the insurance market means that it pays to shop around; why should lessees be denied the opportunity to do so? It ought to be everyone's right. The clause is designed to give lessees the power to choose their insurer. I would be interested to hear the Minister's reply on why our new clause is less effective than the Government's. I think that we both want to achieve the same objective.
Gareth Thomas (Clwyd, West): I agree entirely with the sentiments behind the Government amendment and I support it. I would like the Minister to address this issue, because it arises from my own constituency interests and those of the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd). We both represent seaside resorts on the north Wales coast. He represents Llandudno, that jewel of north Wales resorts. In that part of the country, there is a major landlord, Mostyn Estates, which owns the freehold of a considerable number of very nice and grand hotels on the seafront.
For those hon. Members who have not been to Llandudno, I recommend it as an excellent holiday destination. I would also like to commend the Wales Tourist Board, whose representatives were here yesterday giving a presentation on its new promotion of Wales, for which the slogan is ''The Big Country''. Wales is very small, but people might be surprised to learn that if its mountains were flattened out, it would be the size of Texas—
The Chairman: Order. I am grateful for the geography lesson, but the hon. Member should stick to the terms of the clause.
Gareth Thomas: I am grateful for that gentle reprimand, Mr. Hurst, which I accept in the spirit in which it was intended.
Why should the welcome concession in the Government's new clause be confined to private
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dwelling houses? My understanding is that many hotel owners, probably not only those on the north Wales coast, are required by the freeholder to use a nominated insurer. That is certainly the case in Llandudno. They often discover, having researched the matter, that it is possible to obtain far cheaper insurance with cover just as extensive as that provided by the nominated insurer.
Will the Government consider extending the scope of new clause 17, which is very welcome, so as to include business leases? The grievance clearly applies to dwelling houses and private leaseholders—we know that there is abuse there—but the same problems arise in a business context, particularly as far as a certain hotel chain in north Wales is concerned.
Mr. Cash: I shall speak briefly to the Government's proposals. It seems to me that there is a good case for ensuring that there is proper competition and that people have an option to apply for an alternative means of insurance when they are, as it were, a captive audience in their own premises. A landlord is entitled to be sure that the insurance is not placed with a bucket shop insurance company. After all, if there is a fire in a single unit in a block of flats, the whole place could go up, with tragic consequences. A degree of self-discipline is needed, but if necessary it should be enforced.
I take the point made by the hon. Member for Clwyd, West (Gareth Thomas) about extending the scope of the provision. We need more competition. I do not know whether the Office of Fair Trading has discussed the matter with the Minister or with other Departments. However, as a matter of principle, and so long as one gets the balance right, lessees should not, any more than any other group, be obliged to accept specific insurance arrangements—provided, of course, that they do not put the property or other people living in the same block of flats at risk.
I generally welcome the idea that these proposals should be included in the Bill. I would add that one of the threats issued to people who are not prepared to take on nominated insurers is the threat of forfeiture, so it pops into that context as well. Some rather dubious insurance companies enter into arrangements with landlords, which can result in a situation that is gravely damaging to the interests of residents.
Mr. David Crausby (Bolton, North-East): I thank the Government for having the wisdom to introduce new clause 17. We have not said much in support of the Government, but this is clearly an example of Ministers listening to what was said on Second Reading and taking note of it. I am grateful for that, as will be the hundreds of my constituents who will benefit. It may be an early example of the statecraft mentioned by the hon. Member for Solihull (Mr. Taylor). Let us hope so.
New clause 15 has exactly the same wording as Baroness Hanham's proposed amendment the predecessor Bill, which she moved in another place in March 2001 by. In rejecting the amendment, Lord Whitty described it as a sledgehammer. I have some sympathy with that amendment, but new clause 17 is
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not so crude. It will deliver what is required much more effectively, and ensure that the freeholder is protected.
In the midst of all this, we must not lose sight of the fact that insurance is important and that people should effectively be pushed into insuring their properties. It is important that houses are insured, especially terraced houses; insurance in such properties is just as important as in flats in high-rise developments, because there is a shared risk.
More important, new clause 17 protects leaseholders, many of whom have written to me about the intimidation that they have suffered. As we have heard, the ridiculous threat of forfeiture has forced people, particularly the elderly, to change their insurer and take out policies with a nominated insurer. That practice is not only an infringement of civil liberties and a denial of the freedom of choice, but an anti-competitive practice that we should all abhor. Insurance companies who participate in that practice should be ashamed. New clause 17 would clearly deny them the opportunity to trade in such a way, and it is welcome.
I have one question. Subsection (10) states:
'' 'house' has the same meaning as for the purposes of Part I of the 1967 Act''.
I want to be sure that that description is not limiting and that all dwellings will be covered, regardless of their value.