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All of us recognise and have sympathy with what in some cases are, as many hon. Members have outlined, long-standing and difficult problems that leaseholders face with high service charges. That is clearly a particular difficulty in London, as was obvious from the contributions
from London Members. I also agree that there needs to be sufficient and appropriate consultation between landlords and their leaseholders on service charges. I will come on to describe the existing consultation requirements a little later.
We all want to ensure that leaseholders have a fair deal on service charges, and I am aware of the effect that high bills can have on those receiving them. That is why we have tried to put in place a system of safeguards and measures that make people aware of what they are taking on when they buy a property. Both my hon. Friends the Members for Hendon and for Brent, North referred to certain advice that they were always keen to pass on to people entering into leasehold arrangements.
Service charges should be transparent and reasonable, and my Department is working on ways to improve that. We are all aware of leaseholders’ important role in, and responsibility for, contributing to the upkeep and maintenance of the common parts of the buildings and communities in which they and other tenants live. That responsibility should be spelt out in the terms of their lease.
It is also important to recognise that local authorities, in particular, are charged with bringing their housing stock up to a decent standard by 2010 and already have wide powers to assist those leaseholders who face difficulties paying their service charges. That assistance can take a number of forms and be tailored to suit individuals’ circumstances, which of course can vary considerably.
Leaseholders who pay service charges also have statutory rights that they can exercise where service charges and their property’s management are concerned. It would help if I put on the record those rights, the assistance that is available to support leaseholders when they find themselves in difficulties and the improvements that the Government have tried to make so far.
I hope that I shall be able to illustrate that, since the Government came to office, we have shown a commitment to develop the rights and protections that are available to leaseholders, and that we have delivered on that commitment. However, we are of course looking at what more can be done, particularly to reflect some of the points that have been made.
We published a Bill, to which hon. Members have referred, setting out a wide range of proposals for improved leaseholder rights. We consulted widely on the proposals, and the result was the Commonhold and Leasehold Reform Act 2002, which significantly improved on the previous position of leaseholders—although I note hon. Members’ reservations today about the Act. The improvements do demonstrate, however, that leaseholder rights have been and remain important to the Government.
Mrs. Lait: As the right hon. Lady moves through her speech, will she differentiate between the rights that are given to private sector leaseholders and public sector leaseholders? The problems that I have raised occurred well before the 2002 Act and have continued since its introduction. The legislation certainly helped with the problems of the private sector leaseholder. If she would differentiate, I would be grateful.
Ms Winterton: I shall certainly make every effort to do so.
On the question that the hon. Member for Bromley and Chislehurst raised, the legislation applies to both public and private sectors, and amendments in the Housing and Regeneration Act 2008 also provide for some flexibility. In particular, it ensures that all leaseholders receive useful and relevant accounting information about the service charges, taking into account the other financial rules to which landlords, such as local authorities, are subject. It is important to state that clarification.
Robert Neill: I am grateful to the Minister for her reference to the concerns about the 2002 Act, and I acknowledge what she says about some of the amendments and the issues that have arisen. Does she also concede that, whatever the good intentions, there is a concern among many within the public leasehold sector that the systems under the 2002 Act have proved bureaucratic and complex? There is a specific concern that the statutory consultation procedures are essentially incompatible with the public sector procurement of services. They do not fit in with some of the requirements in respect of the volatility of the market, the bulk buying of materials and the need to meet European Community requirements, as reflected in the consultation procedures. I hope to be provided with more detail in due course. Whatever the intention, there seems to be a mismatch in practice. That needs to be considered.
Ms Winterton: I would certainly be grateful for any further information that the hon. Gentleman can supply.
I should mention two things. The hon. Member for Beckenham asked about the Tenant Services Authority, and I assure her that we intend to extend its remit. We hope to start consultation on that in July this year and to have regulations in place in April 2010, subject to that consultation. We intend to extend the authority’s remit so that local authority social housing is included within its regulatory scope. I could write to her with further details when we start the consultation process.
Mrs. Lait: What the Minister just said was carefully worded. Did she mean that the Tenant Services Authority will also be invited to take into consideration the interests of public sector leaseholders in both council housing and the housing associations?
Ms Winterton: Our proposal is that the Tenant Services Authority should regulate property within the definition of social housing under the 2008 Act. I hope that that clarifies the issue for the hon. Lady. However, I shall certainly write to her with more details about the consultation as it develops.
Mrs. Lait: I am hugely grateful to the Minister for giving way, and obviously I do not want to turn this debate into a dialogue, but a public sector leaseholder who bought their home would not regard themselves as living in social housing. That is the crux of my point.
Ms Winterton: I understand the hon. Lady’s point, and I shall write to her with further details. Obviously, there are issues about the overall regulatory burden, and we want to aim the consultation and the new regulations at the most appropriate sector to provide the maximum help. I take into account what she has said and will write to her with further clarification.
The 2002 Act gave leaseholders a far greater say in how the money that they pay in service charges is spent and it improved their right to challenge the amount that they are asked to pay in addition to any rent. Since the introduction in October 2003 of the consultation provisions in the Act, and in regulations made under powers conferred in it, far greater consultation with leaseholders must take place before a landlord can spend service charge monies. That consultation is required before a landlord commits to contracts for works that will require any leaseholder to pay more than £250. Meaningful consultation must also take place before a landlord enters into an agreement for works, or for services of more than 12 months, where the costs to any leaseholder would exceed £100 in any relevant accounting period.
I shall briefly set out what that consultation consists of. The landlord must give notice of their intention to carry out qualifying works. Those are works costing more than £250, or £100 in respect of long-term agreements, in any accounting period. That must be done in writing to leaseholders and to any recognised tenants association. The notice must summarise the proposals, including the reasons why the work is necessary, and seek the views of the leaseholders and associations. The landlord must have regard to any observations that he receives and invite the leaseholder and any associations to nominate suitable contractors.
Barry Gardiner: Can my right hon. Friend elaborate, not for the benefit of the House but for the benefit of leaseholders, on what precisely “must have regard to” means?
Ms Winterton: As I understand it, if there were a challenge the landlord would have to show that he had taken the views of leaseholders into account before proceeding in a way that went against those views. If that is not correct, I will write to my hon. Friend, but I understand that that is usually what happens when the words “have regard to” are inserted in legislation. It is so that in any subsequent challenge, including a judicial review, the onus is on the landlord to show that regard has been taken of the points made by individuals who objected to a proposal.
Barry Gardiner: My right hon. Friend is most courteous in giving way again. I do not wish to press the matter, but it needs to be emphasised that it is easy for a landlord to say, “Yes, we took the objection into account, but we dismissed it. We read it and took on board the fact that the leaseholders wanted a different contractor or a different method of doing something, but it was not the method that we favoured and we thought it better to press ahead.” The fundamental question is whose home it is. It is the leaseholder’s home, and the problem is that leaseholders who have paid for a property feel that they have rights over it, yet someone else can impose their will on them.
Ms Winterton: I certainly hear what my hon. Friend says, and I understand that there can sometimes be that difficulty of interpretation.
The hon. Member for Beckenham mentioned regulation by the Tenant Services Authority. I am assured that the TSA already regulates RSLs, and that the consultation will be on the extension of regulation to local authorities.
In assessing the performance of a local authority or RSL, we would take account of the way in which it managed the relationship with its leaseholders, but we would not seek to regulate the legal relationship between the leaseholder and the freeholder—the local authority or RSL—which is covered by existing statute.
Although in general a landlord must invite the leaseholder and any associations to nominate suitable contractors, there are exceptions. For instance, that does not apply when the works are to be carried out under a long-term agreement that has been subject to full consultation in the past. Leaseholders and any recognised tenants associations have 30 days in which to nominate as many contractors as they wish.
Mr. Dismore: My right hon. Friend has referred to big contracts, which I mentioned earlier. Barnet Homes has an enormous contract across the borough, worth £88.5 million, with Balfour Beatty in connection with the decent homes initiative. As far as I can see there was no consultation, but how on earth could any consultation on a major contract be of any relevance to the people on the receiving end of the small contracts for their block?
Ms Winterton: I understand my hon. Friend’s point, and, as I have said, I will consider it. I presume that when a specific project is involved, it may be possible for leaseholders to say that they do not believe that full consultation has taken place in the past, and that they wish to nominate a different contractor. That would lead to consideration of whether the landlord had had regard to the points that had been made, and perhaps to future consultation and regulations. More generally, there is a move to ensure that local government takes account of the way in which contracts are delivered and of procurement practices, and to ensure that smaller local companies—I know that this interests my hon. Friend—can benefit from those practices.
Barry Gardiner: I am grateful to my right hon. Friend for giving way to me again. She will appreciate that in the case of a very large contract such as the one cited by my hon. Friend the Member for Hendon (Mr. Dismore) the contract that specifically affects the leaseholder’s block is often a sub-contract, but the main contractor does not have the same obligation as the registered social landlord to consult the leaseholder. That is a real problem, and it needs to be addressed.
Ms Winterton: My hon. Friend’s point follows on from the point made by my hon. Friend the Member for Hendon, which relates to the procurement practices of local authorities, as well as some of the rights in existing legislation.
Mr. Dismore:
It is not just a question of local authorities. We could consider the matter in the context of the warm homes initiative, for example, under which the Government have given an enormous national contract to the eaga partnership, which relates to the point that my right hon. Friend made about using local contractors. The costs of installing a new boiler are astronomically inflated under the eaga arrangement, yet the work could be done far more cheaply if individuals paid for it
themselves and then charged the scheme. That is not just a local authority problem, however; it is a general problem, and we have to get away from it. In part, I accept her earlier point, but we need to find a way of allowing people more control over the work done in their own homes.
Ms Winterton: I am sure that my right hon. and hon. Friends in the Department of Energy and Climate Change will listen carefully to the points that have been made about how we proceed with the Warm Front contracts.
The leaseholders and any recognised tenants associations have 30 days within which to nominate as many contractors as they wish. The landlord must then try to obtain an estimate from at least one person nominated by a leaseholder and at least one nominated by a residents association. The landlord must then supply a statement, free of charge, to every leaseholder and any recognised tenants association setting out the amount specified in at least two of the estimates as the estimated cost of the proposed works, as well as a summary of any observations that the landlord has received in relation to the proposed works or the estimated expenditure from any tenant or recognised tenants association, along with the tenant’s response to those observations. If the landlord selects neither the lowest estimate nor a contractor who has been nominated, he must explain his decision in writing. If the landlord fails to consult properly or does not acquire a dispensation from the need to consult from a leasehold valuation tribunal, he cannot recover any more than the amounts that I have already mentioned: £250 or £100.
Mrs. Lait: Can the right hon. Lady explain how the leaseholder’s right to obtain other quotations or other contractors’ names, which she has described, sits with the five-year contract for whole of the works, and whether the contractor would have a legal right to compensation should one of the leaseholder’s contractors be given the job? Also, as I said, one of the gateways used by RSLs and local authorities is to say that contractors have to be on their approved list or meet their system of approval. That instantly brings delay into the system, so can she explain how that would work?
Ms Winterton: I will attempt to. I know that there are, for example, exceptions for large-scale contracts that are already subject to competitive tendering under EU requirements. Therefore, as the hon. Lady says, some of the bigger contracts would fall under those arrangements.
I want to clarify a point raised by my hon. Friend the Member for Brent, North about the meaning of “must have regard to”. It means that landlords must consider the responses and take what they say into account, and that they should be able to give a reason if they are not going to follow them. Magnificently, I think that that is what I said before.
The Commonhold and Leasehold Reform Act 2002 built on the rights of leaseholders to challenge service charges. Those rights enable them to challenge the reasonableness of service charges through an independent leasehold valuation tribunal. LVTs offer leaseholders a relatively informal and inexpensive way of challenging the service charges that they are asked to pay. Previously,
such disputes had to be determined by a court. Service charges were, and continue to be, payable only to the extent that they are reasonably incurred. When they are incurred for the provision of services or the carrying out of work, they are payable only if those services or works are of a reasonable standard.
Leaseholders can now challenge before an LVT service charges payable for the costs of services, repairs, maintenance, improvements or insurance, or for the landlord’s costs, including overheads of management. The fact that they can also now challenge the service charges that they are asked to pay in relation to improvements has benefited local authority leaseholders in particular. Leaseholders can now ask an LVT to determine whether service charges are payable, as well as to determine their reasonableness. They no longer need to go to court to determine such matters.
Mrs. Lait: The Minister might remember my reading out the experience of the leaseholders of Orbit South, whose management charges have increased by 100 per cent. over recent years. She really needs to consider what is happening in the real world, as opposed to what is happening in the legislative world. Many public sector leaseholders experience a total disregard for any of the rights that she is reading out; she must bear in mind that what she is reading out is not what happens to public sector leaseholders.
Ms Winterton: I hope that some of the changes that I have outlined will help to improve the position.
Barry Gardiner: My right hon. Friend has been most generous in engaging in debate, and I hope that our interventions will be constructive. All that she has said is absolutely right, and I know that the hon. Member for Beckenham (Mrs. Lait) and I accept that these provisions exist in the legislation. However, let me cite a case as an example.
There is a block of flats in my constituency whose windows had needed doing for many years. Eventually, one leaseholder got so fed up with their not being done that he paid a private contractor to do the work. A year later, the landlord decided to do all the work, but then billed that leaseholder for fitting new windows even though he had already paid to have the work done the year before. The leaseholder took the landlord to a leasehold valuation tribunal. The Minister is right to say that LVTs are supposed to be a quick and effective means of getting justice without having to go to court, but the landlord turned up with five QCs. The leaseholder was blown out of the water—in legal terms—and ended up with a bill for the landlord’s legal costs for the five QCs on top of the bill for the windows. The LVTs, which were supposed to provide a quick and easy means of redress, are not working, and we need to address that.
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