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Having arrived in this place not long before the Landlord and Tenant Act 1985 was enacted, I have the sense that people were not given good advice on the implications of leases from the beginning. As the Minister for Housing knows—I apologise for not welcoming her earlier not only to the Front Bench, but to her new responsibilities—leases have changed and councils have evolved. Although leases are now standard word-processed forms, they have changed as issues have been identified. For example, the important point that the word “reasonable” in the lease means “reasonable” as perceived by the local authority within a wide range of possibilities, as opposed to what the
tenant buying the flat might perceive to be reasonable, was often not explained to prospective purchasers.
I want to deal with the general situation before turning to the main proposals in the Bill. The Bill seeks to put leaseholders at the heart of the decision-making process for major works on their properties. For the first time, it offers leaseholders a significant chance of having a real say in who does such work and how and when it is done, and I will return to the implications of that statement in a second.
The Bill tries to deal with the fact that people are often given bills amounting to £1,000 a month or more, once works have been agreed. People feel that they have little say over that process. That is a bigger issue in the context of a perfectly reasonable Government policy, which is to insist that all social rented property conforms to the decent homes standard by the end of this decade. That is a perfectly good policy. As you know from your constituency, Madam Deputy Speaker, and as we all know from ours, the consequence of that policy is that councils review all their housing stock and decide on major programmes of work to get to the decent homes standard by the end of this decade. If the occupants are tenants, they are protected, because their weekly rental cost will not change fundamentally and the money for works will come from the council’s housing account, which is ring-fenced. However, the council has a duty to the council tax payer, the housing revenue account and its tenants to make sure that the leaseholders pay their fair share, so it must collect the money from them, and— whether the work involves roofing, a new water tank, plumbing, central heating, radiators or windows—it cannot in law differentiate between tenants and leaseholders. The council therefore cannot easily use a contract that states, “Only do the tenants. Do not do the leaseholders.” Sometimes, it decides under the decent homes initiative that it will install new windows and new doors for the whole block, but some of the people who have bought their property have just replaced their windows and doors. Not surprisingly, such people say, “Hang on a minute. I have just spent a lot of money, thank you very much. Why should I now have to spend money on something that I do not need?” That is the context.
Since the decent homes policy was implemented, those bills have become higher. Some important evidence was presented to the Communities and Local Government Committee one-day hearing on 5 March last year, not least by Mr. Tony Essien of the Leasehold Advisory Service, whom I have met—he is extremely impressive and well informed—to confirm the fact that the issue has become much more financially acute since the decent homes standard has been on the agenda. The issue is as much about the question, “Can I afford the bill?”, as it is about the nature of the work.
Ways have been developed to assist leaseholders with financing such bills. If the council has the money to buy back the property, it may do so, but there is no legal possibility of, for example, the council buying back half the property, which would allow people to become shared owners in the same way as other people are shared owners in the private sector, which would mean that people would carry half the burden rather than the whole burden. Again, people are acutely aware that that is an option that they would like to have.
The Bill also specifically seeks to place a limit on the monthly charge that someone could be required to pay to their local authority for works to be done. I realise that that means that the council might not get its money back as quickly as it would like, but it is reasonable to have an upper monthly limit. People who buy now or have bought in the past would know what their potential maximum outgoings would be. With the best will in the world, when people are suddenly hit by a proposal for major works and a huge bill that runs into five figures, the likelihood of some of them—single people, the unemployed or a retired couple—being able to find the necessary capital funds or borrowing might be very reduced indeed. The older one is, the more difficult it is to do that. The same applies if someone is not earning.
The other specific proposal relates to what in the Bill are called “sinking funds”. Sinking funds used quite commonly to be held by councils. Someone would buy a council place and they paid into a fund. A court case involving my borough some years ago effectively put an end to general sinking funds, which enabled people to anticipate costs and put the money in up front so it would be available for a rainy day. I would like us to be able to set up in law an individual sinking fund or individual deposit account. When someone buys, they will be able to have a fund to do with their property and on which they can draw if that becomes necessary. It is much easier to put something by for 10 years so that one can meet at least half the cost than it is suddenly to find that one does not have any funds at all.
Ms Dari Taylor (Stockton, South) (Lab): This is an extremely complex issue, and the hon. Gentleman’s speech has made clear just how great the complexities are. I am quite shaky about supporting the Bill because it is such a complex issue. He spoke about halving the burden and examining how share ownership could become a factor so that tenants would own half and the local authority would own half a property. That sounds a sensible way forward, but my concern is that having a 50 per cent. buy-out on potentially 13,000 leasehold properties would require a staggering amount of money. Where is that finance going to come from?
Simon Hughes: Many of the hon. Lady’s constituents will have bought their own property. Knowing the housing stock in her part of the world, I believe that there may be relatively more freeholders than there are in London, and the answer to her question is that most people will not avail themselves of the provision. I have been very careful to keep the propositions in the Bill as simple as possible, and where necessary to make them outline—in other words, to give the Government the power to introduce detailed regulations after consultation with everybody. That is to deal with the complexities and technicalities. The law is difficult and there has been law in this area since the early 1980s. I accept entirely that the practice is quite complicated.
It is helpful to respond to the hon. Lady’s points, so I shall list the issues that people have brought to me recently and that I seek to deal with in the Bill. I will do that so that everybody here and outside can understand what the proposals are. They can then come to a judgment on them. I have collected the comments made to me in the past few months about the unfairnesses of the
current system. Those comments were made by people who have bought from my local authority—it tries to do the job well, and the man in charge, Mr. Green, is an excellent and competent local government officer to whom I pay tribute—or by those who are tenants of the City of London, which also has a well-run housing department.
A family from the Dickens estate made the point that there should be a limit to the increase in annual service charges. A family from the Rouel road estate in Bermondsey said that there should be some sort of means-testing or discounted service charges for single occupants. Again, they were worried about the cost. A family living on the Jamaica road in the middle of Bermondsey said that there should be a discount on service charges for pensioners and people on low incomes—again, that was a worry about costs. Another family on the Dickens estate said that consultation should be meaningful, rather than a process of just issuing letters. That is a common theme, and people say, “If you’re going to consult us, act on what we tell you.” That family made the further important point, which is covered in the Bill, that a quick, local arbitration service for leasehold disputes would be welcome. They say that the leasehold valuation tribunal—it does a good job nationally, and while it can work regionally, it is a national body—is
“expensive and takes too much time, effort and legal knowledge”.
A family on the Old Kent road said:
“Councils should be obliged to publish their annual service charges...The definition of consultation is not clear and normally becomes ‘information’ rather than ‘consultation’. There doesn’t seem to be an obligation to take into account leaseholders’ responses other than to respond in writing...Councils should have to prove that they have got the best deals rather than the onus being on the leaseholder to find a better deal...This is not just about tendering as the actual specification that the council gives for work needs to be as basic as possible in the first place (a Ford Mondeo rather than a Rolls Royce specification).”
A family living in an estate off the Old Kent road whom I have dealt with throughout my time as an MP say that councils should have to keep records of agreements, services and works that affect leaseholders, because one often has to go back to check the work of six, seven or eight years ago to know whether further work suggested by the council is justified. A family up by the Elephant and Castle said that consultation was still not effective enough, while a family from outside my constituency who had heard about the Bill said that it would be really good if decisions of the leasehold valuation tribunal were binding on the local authority affected by them, so that people would not have to argue the case all over again.
I have tried to set out a response to such comments in four substantive clauses. Clause 1, “Involvement of tenants in decisions on works”, is a replacement provision, so this clause is not all new law. It replaces section 20ZA(5) of the Landlord and Tenant Act 1985. Proposed new subsection (5)(d) is a new provision that would require consultation on specifications in addition to tenders.
Richard Younger-Ross (Teignbridge) (LD):
My hon. Friend makes a good point. He is highlighting a problem that affects even rural Devon, where we have a small number of flats. Maintenance, including planned
maintenance, seems to be a key problem. My background is in architecture, and I know that we now look at maintenance programmes over five years. Should not local authorities be negotiating with tenants on a long-term rolling programme so that people not only understand that a lift or roof might need replacing in five years’ time, but have an idea of future costs, rather than just the costs for the following year?
Simon Hughes: That is an extremely good idea. Since the Minister for Housing took up her job, she might have become aware that this big issue needs to be addressed. At the moment, local authorities can seek dispensation from the requirements of consulting on specific works when they have a long-term contract with somebody who has worked on a estate for a long time. More and more cases are subject to requests for dispensation. They are not covered by the normal process of consultation on works and there is no framework to cover them. Many local authorities prefer to enter into such long-term contracts, but we have as yet no legal framework to make them work well for the leaseholder. My hon. Friend is absolutely right that it would be better if people knew about the likely work over 10 or 20 years so that they could budget accordingly.
Clause 2 would amend the Housing Act 1985 to provide that consultation should take place with tenants on not only a local council’s idea—replacing a roof, for example—but a proposed Government policy, such as that on decent homes. It is no good being consulted only after Government policy has been decided. People need to take a view when the Government are formulating a policy that might require local authorities to do lots more work than they might have planned.
Richard Younger-Ross: A further problem that people may face is that if an authority is stuck for cash in a year, it could try to defer maintenance works. If a property is not maintained properly, the costs can be greater later. Proper consultation would allow tenants to ensure that their property was properly maintained and not left to rot because the local authority was a bit strapped for cash.
Simon Hughes: That is another perfectly proper observation. Again, the Minister will know that the big debate is the context of the housing and revenue account and the money available, but there is also the question of how the council manages its dual obligation to ensure that property is maintained, as it is required to do for a tenant, which is in the tenancy agreement, and to fulfil its obligation to the leaseholder, as it is required to do when someone buys a flat, maisonette or house. If the council does not, for example, ensure that the tank in the roof holds water rather than leaks water, it is in breach of its obligation and can be taken to court. That would be a bigger bill for the council and would come out of the same pot.
Proposed new subsection (5)(e) in clause 1 is a new proposal that would give more power to tenants. When the council comes along and says, “This is what we want to do,” the proposal would allow leaseholders to make a counter-proposal if 25 per cent. of them get their act together sufficiently to agree on one. A ballot could then be held—provided, obviously, that the counter-proposal passed the technical tests of the
specification of the tender—on whether people in the block wanted the counter-proposal or the original proposal. That would be determined by a majority.
Mr. Christopher Chope (Christchurch) (Con): Would consultation take place after the tender had been received? I can see the case for it before the tender, when there is the specification, and I can see the case for it if there is a proposal not to accept the lowest tender, but I cannot see the need for it otherwise.
Simon Hughes: It would clearly logically be before the tender. The hon. Gentleman is right. That is why it is described as being
“in respect of proposed works”.
To put it in simple terms, the council might say, “This is what we are proposing to do. We are going to replace all the windows and doors and the roof.” It would be nonsense if a single tenant could force a ballot on an alternative, but it would be different if a quarter of the residents—a small number in a small block, a big number in a big block—could say, “We don’t need the windows or doors done. Yes, we need the roof and the other element done, and this is our proposal.” If that counter-proposal won the day, we would be allowing people in the block to decide what work needed to be done, having heard the argument.
The hon. Gentleman, like all colleagues in this place, makes judgments about what should be done in his home. Somebody who wants to buy his place might not make the same judgment. We all sometimes defer decisions on house maintenance because it is more convenient to do it later and we do not have the ready cash. That is normal human behaviour and applies just as much to people outside the House as inside it. We should all have the freedom to decide. I want to give people the power to drive the decision, rather than have it driven at them and imposed by the council, with no ability to do anything but make their observations and have the decision forced on them irrespective of their views.
Proposed new subsection (5)(f) contains the proposal for the ballot. Paragraph (f)(iii) would allow the majority to decide the outcome. Proposed new paragraph (g) would require documents to be kept for 10 years. That is a practical issue. As I understand it, it is not the obligation at the moment. As a result of the cycle of major works, documents should be kept that long because they have to be available for a reasonable time.
Proposed new paragraph (h) would allow for a local arbitration tribunal. Southwark has a good arbitration process for tenants, but we do not do leasehold arbitration. Under the Arbitration Act 1996, it should be possible to have local arbitration if everyone agrees to it. The point has been made to me strongly that it should be an independent arbitration tribunal. It should not be a local authority tribunal, but one on which the local authority and the leaseholder agree.
Proposed new subsection (3) would limit the monthly instalments. I have said how important that is to residents in my constituency. If the bill is £12,000 or more, people should be able to insist on paying it in instalments. I had a discussion with the people who advised me—people in Southwark, Lease UK, and so on—and in the end I decided that it should be £250 a month maximum. Councils may say that we need more
than that, but for many people, that is a considerable amount. There is no theology about that sum, but it is my best proposal.
Mr. Dismore: I am following the hon. Gentleman’s analysis with interest. However, it is troubling, because it could saddle someone with a debt for four years and prevent them from moving on. Would it not be better to make provision in regulations, because if the measure were amended from time to time by regulation, we could take account of inflation, property prices and so on?
Simon Hughes: I would be happy with that arrangement. Stepping back from the detail of the measure, I had a brief word with the Minister yesterday. I am open to the notion that the debate should achieve the best outcome, and I am conscious that the Housing and Regeneration Bill, which runs in parallel, as it were, with my measure, is proceeding through Parliament. I urge the House to allow my Bill to go into Committee, so that we can develop that exchange. I am willing to accept that the matter would be better handled in regulations than in the Bill.
Finally, clauses 3 and 4 provide for regulations, for that very reason. Clause 3 provides for a power to buy back under regulation. It could be a buy-back of 50 per cent., or of varying amounts. The system should not be complicated, as that is not what councils want. My instinct is that a buy-back of 50 per cent. is something with which councils would be willing to live, whereas a buy-back of varying proportions would be more difficult for them.
Shona McIsaac (Cleethorpes) (Lab): Grimsby and Cleethorpes have an enormous number of leasehold properties, but mainly houses. I served on the Committee that considered the Commonhold and Leasehold Reform Act 2002. My understanding—and I hope that the hon. Gentleman can clarify this—is that in law, a leaseholder is another category of tenant. When he discusses the concept of buy-back, what is being bought back? I have grave reservations about leasehold as a form of tenure, and would rather get rid of it. People think that they are buying their home, but they are only buying the right to live in that property for a certain period of time. How does the Bill fit in with that arrangement? He has only discussed local authorities. How does his Bill cross over to people living in private blocks of flats where major works are undertaken?
Simon Hughes: The hon. Lady has opened a can of worms. I know more about housing in Cleethorpes and Grimsby than she might expect, because my recently deceased good mother was born and brought up in Lincolnshire. My grandmother moved her family of five daughters around what seems like 25 properties when they were growing up in Cleethorpes and Grimsby. We once went on holiday to visit them all—they are still there.
The Bill is not intended to deal with private leaseholds. I thought that it was enough to take on council leaseholds. The hon. Lady is right: people think that they are buying the property, but in fact they are buying an interest in the property, which falls short of ownership. If it is a house, they buy the freehold.
Simon Hughes: Indeed—they do not always do so. If it is a flat or maisonette, or sometimes a house, they buy a lesser interest—a leasehold. The law calls them tenants: the existing legislation refers to them as qualifying tenants. In ordinary language, people think of them as council leaseholders. The Bill seeks to deal with council leaseholders or leaseholders of social landlords—people who have bought from the Peabody Trust, the Guinness Trust, the Samuel Lewis Trust and so on. Technically, buy-back would occur when someone sold their interest back to the council, which would then give them a 50 per cent. interest. They would end up being a half-owner of the leasehold. The council or the social landlord would be the other half-owner, but it would keep the freehold, so that at the end of 125 years the property would go back to it in theory.
I understand the worries about other leasehold, but I do not want to open that Pandora’s box now, because it is with regard to council leaseholders and social landlord leaseholders that I have experienced the most pressure. I speak as someone who represents more council tenants than, I think, any other English colleague, and that is the issue that people want me to do something about.
To pick up the point made by the hon. Member for Hendon (Mr. Dismore), I hope that the Minister, even though she does not like the Bill as it is, might be willing to let it go into Committee where we could work together, and what cannot go into the Housing Bill, which is due to return on Report, could be dealt with here in a way that commands cross-party support. I do not seek to do something that does not have cross-party support. I want us to respond to the problems experienced by the hon. Member for Beckenham (Mrs. Lait) in her part of London, the hon. Member for Hendon in his part of London, the hon. Member for Cleethorpes (Shona McIsaac) in the north-east, and my hon. Friends in the south-west. This is not a matter on which the Member of Parliament has a party view; we as Parliament need to get it right.
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